Legal basics
Business contract basics
A business contract is an agreement that sets the responsibilities of you and your clients.
The contract describes job duties such as delivery time, payment terms and legal terms of conducting business.For every transaction that requires you to conduct a different task for your client, you should have a written business contract. A business contract will make both you and your client feel more secure and will help address potential problems before they begin. They are easy to modify and can suit many business situations. Keep in mind that it is always a good idea to review your business contracts with a qualified attorney to make sure they are legally compliant. A few of the most common types of business contracts include:
- Employment Agreement
- Independent Contractor
- Confidentiality or Non-Disclosure
- Non-Compete
- Service Agreement
Tips for writing a business contract
When creating a business contract, be sure to:
- Describe all obligations each party is expected to fulfill
Limit any liabilities - Set parameters, such as a time frame, in which the terms
of the contract will be met - Set terms of a sale, lease, or rental
- Establish payment terms
- Clearly establish all of the risks and responsibilities of the parties
Tips for negotiating business contracts
Many people are open to negotiating the terms of a contract, so don’t worry if your clients want to discuss certain points with you. However, if you find the potential client difficult to work with while negotiating the terms, it may be a sign of things to come.
Always get the proper paperwork signed by the proper people. (Because not everybody has your best interests in mind, a business contract is important.)
Read business contracts very carefully, including the fine print. Discuss any questions that you have.
Legal entity types
When you form your business, you must classify it as a legal entity type. The most common types are:
- Sole Proprietorship
- General Partnership
- Limited Partnership
- Corporation
- Nonprofit Corporation
- Limited Liability Company (LLC)
As with entering into business contracts, it is always a good idea to consult a qualified attorney when selecting the legal type of your business. For advantages and disadvantages of each type of legal entity, see “Finding Your Identity” from the Small Business Development Center: http://www.nmsbdc.org/pdf/serv-legalidentity310.pdf.
Business licensing
In New Mexico:
For most businesses, it is fairly simple to complete your business registration and other regulations. You need to obtain a gross receipts tax registration for the State of New Mexico. There is no cost to obtain a tax number. Tax number applications can be found at www.state.nm.us/tax. Depending on your legal entity type and your area of business, you may need to file additional forms. You will also need a license or registration from the city or county in which you will do business. Local business licenses usually cost between $25-$35/year.
In Denver, Colorado: Anyone doing business in the City and
For state taxes and a Sales Tax ID number visit the Colorado Tax Information website. www.taxcolorado.com
All forms of legal structure, except sole proprietors with no employees, must obtain a Federal Employer Identification Number (FEIN). The FEIN is your federal tax ID number.Taxpayers can obtain an FEIN immediately by calling the Toll-Free Business & Specialty Tax Line (800) 829-4933. You may fax the completed Form SS-4 application to (215) 516-3990. If sender's fax number is provided, a fax will be sent back with the FEIN within fourbusiness days. You may mail form SS-4 to: IRS, Attn: EIN Operation,
UNM Law Clinic
ACCION has partnered with The University of New Mexico School of Law to provide access to the school’s Business and Tax Law Clinic. The clinic gives students practical legal training while providing important social services to those in need of legal and/or educational help related to business, estate planning, taxation issues, and financial crisis resolution. To learn more about the clinic, see http://lawschool.unm.edu/clinic/business-tax/index.php.