.Document! Document! Document! It is important for a business to keep everything in writing – from contracts with customers (e.g. service agreements), agreements with business partners, lease or rental agreements, purchase orders or contracts for goods worth more than a couple hundred dollars, employment policies and employee files.
If you are starting a business with a partner, be sure to have a document in writing governing the partnership. Include a “buy-sell” provision to address what happens to the partnership in the event of a partner’s death, divorce, disability, bankruptcy, resignation or retirement.
When you work with customers, keep everything documented and signed especially for services contracts. Clarify what is expected of you, the terms of work, and the payment required. The last thing you want is for a customer to stiff you because all you had is a verbal agreement sealed with a handshake. Worse, you take the customer to court for non-payment and you still lose because there was no signed contract!
Documentation is also important if you have employees, especially if something goes wrong and you have to terminate the employment. Don’t just issue verbal notices for instances of poor performance, but provide written notices every time. If you fire that employee, and he/she in turn files for unemployment benefits from the State, this could potentially impact your unemployment insurance premiums. To prevent this, you need to challenge false claims for unemployment benefits and you can only successfully do that if you have proper documentation.
Nolo.com makes a very good case for keeping your contracts in writing:
Does a contract have to be in writing? In a few situations, contracts must be in writing to be valid. State laws often require written contracts for real estate transactions or agreements that will last for more than one year. You’ll need to check your state’s laws to determine exactly which contracts must be in writing. But even if it’s not legally required, it’s always a good idea to put business agreements in writing, because oral contracts can be difficult or impossible to prove.