Why Home-Based Businesses Need Contracts, Too!

The alarm goes off at 6:00am. Fifteen minutes later, coffee in hand, you walk into your office and turn on your computer. You are clad in a Boston Red Sox T-shirt, your husband’s Fruit of the Loom® boxers, and a pair of AniMules fuzzy giraffe slippers. Is this the perennial nightmare that you’ve shown up to work in your pajamas? No! It’s part of the home office dream, where you can earn money without having to dress up or put on a pretty face.

But there’s one area where home based businesses and other independent professionals (who work from home) often go awry: letting casual attire translate into being casual with other areas of running the business. And nowhere does that crop up more often than in not having, and using, the right written contracts for your business.

Before you dismiss me as a legal fuddy-duddy, let’s look at the benefits:

1. The right agreements help you systematize your business. Many home-based business owners (or people working from home) fail to develop dependable systems for how their business runs. That may come from not viewing what they do as an ongoing business. I have met many solo professionals that are only concerned with working on client matter in front of them, after which, they’ll scramble trying to find the next piece of business. They don’t have a plan to put the pipelines in place to attract ongoing business. Similarly, they don’t have the agreements in place that clearly entitle them to payment. As a result, they’re in for a very bumpy ride. If you have other regular obligations nipping at your heels (toddler, dog, household management) while working from home, a clearly-defined agreement helps take the guesswork out of what you are supposed to provide and when you are entitled to receive your fair compensation.
2. The right agreements help avoid costly lawsuits. You’ve seen Law & Order and Boston Legal, right? There are few more difficult cases to prove (and win) than a “she said/he said” dispute. A written agreement helps let other parties (like a judge) know what your real intent was. Otherwise, you’re relying on the faint hope that the judge/jury will find you and your testimony more credible than the other side’s. Plus, you’ll have to pay for an attorney to litigate the issue. It’s a very expensive way to resolve a dispute . . . especially if you are operating your home business as a sole proprietorship (and not as a corporation or limited liability company), in which case, your personal assets are at risk if the judge decides against you.
3. The right agreements help you collect what you’re owed. Imagine being a sales rep with an undefined territory and compensation structure. How are you supposed to be paid? Which state’s law will apply to the dispute (it makes a difference, as some states, like New York and New Jersey are very rep-friendly)? And – horror of horrors – if you should die before being paid, how will your estate know who owes you money?

Whether your business is home-based or you just use your home as the base, it’s important to use the right agreements – that is, the right agreements for you. How can you find one? Talk to colleagues in your field to see what they use. That’s a great starting point. But make sure you consult a small business attorney who can bring a practiced (and objective) eye to the agreement so that you can adequately protect your home business in the way that’s right for you!

You deserve to be paid, protected, and prosperous. Kaufman Business Law can help get you there. Watch this short video to find out how.

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