The Contracts Your Business Needs Before Something Goes Wrong
Many business owners put contracts in place when they start their company and then move on.
The problem is that the business does not stay the same.
You add partners. Hire employees. Offer equity. Take on larger clients. Work with new vendors. Develop intellectual property. Introduce new technology. And increasingly, business owners are using AI to help draft and review agreements.
Meanwhile, the operating agreement, client contract, or vendor agreement you created years ago may still be sitting untouched.
That was the focus of our September Athena Skill Lab with Becky Mancero, Partner and Chief People Officer at SPZ Legal.
Becky walked us through two areas every business owner should understand:
Corporate agreements that govern the relationship between owners and how the company operates.
Commercial agreements that govern relationships with clients, customers, and vendors.
Her message was not that business owners need to become attorneys.
It was that we need to understand what our agreements are supposed to do, know where the gaps may be, and make sure our contracts still reflect the business we are running today.
Corporate Agreements: The Contracts Behind the Business
Your operating agreement or shareholder agreement is easy to forget about when everything is going well.
But these documents become extremely important when something changes.
A partner wants to leave. A new owner comes in. The business takes on debt. Someone stops contributing. An owner dies or becomes disabled. The company is sold.
These agreements define how power, economics, ownership, and control work inside the company.
Becky encouraged owners to think about whether their agreements clearly answer some basic questions.
Who Has the Authority to Make Decisions?
Not every business decision should require a formal vote.
But some decisions are significant enough that the owners should agree before moving forward.
Those might include:
Taking on significant debt
Adding a new owner or shareholder
Issuing equity
Entering into a major contract
Changing an important part of the business
Selling the company
The agreement should also establish who gets to vote and what level of approval is required.
That becomes particularly important when ownership is not evenly divided.
A simple "majority vote" provision may not produce the outcome the founders intended once additional owners or investors enter the picture.
What Happens When Owners Disagree?
A 50/50 ownership structure can work very well until the two owners cannot agree on an important decision.
Then what?
Becky discussed the importance of having a process for resolving a deadlock before one actually happens.
Depending on the issue, that process may involve good-faith negotiation, mediation, bringing in a third party, or another predefined mechanism.
The important part is deciding how disagreements will be handled while everyone is still getting along.
Your Agreement Should Cover the Money Too
Corporate agreements are not only about control.
They also need to reflect the economics of the business.
That includes questions such as:
Who contributed cash, property, intellectual property, or services?
What happens if the company needs additional capital?
How and when will distributions be made?
How will owners be compensated?
What happens when new ownership is issued?
How will employee or service-provider equity work?
What happens to existing owners when the company raises outside capital?
These decisions can also create tax implications, which is why Becky emphasized coordinating legal agreements with the company's accounting and tax advisors.
The documents, cap table, tax treatment, and what is actually happening inside the business should tell the same story.
Plan for the Conversations Nobody Wants to Have
One of the most important parts of the session was Becky's discussion of buy-sell provisions.
Business owners rarely want to think about what happens if a founder dies, becomes disabled, gets divorced, files for bankruptcy, stops contributing, or simply decides it is time to leave.
But those events happen.
A strong agreement establishes the process before emotions and money are involved.
That may include:
What events trigger a potential buyout
Who has the right to purchase the ownership
How the company will be valued
How the purchase price will be determined
Whether payments can be made over time
What happens to ownership when someone leaves under different circumstances
Becky has seen situations where these agreements were in place when an owner passed away and situations where they were not.
Having the structure already established can make an incredibly difficult transition more manageable for the company, the remaining owners, and the owner's family.
Adding a Partner? Know What the Business Is Worth
One attendee asked a great question about bringing in a future partner who may eventually buy out the existing owner.
Do you need a valuation first?
Becky's answer was that it depends on the stage and structure of the transaction.
When a company is very early, there may be little value to establish. But as the business grows, bringing in new owners or issuing equity generally requires a clearer understanding of what the business is worth.
The larger takeaway for owners was important:
Do not casually give away ownership.
Understand the value being exchanged, what the new owner is contributing, what rights come with that ownership, and how the transaction affects everyone already on the cap table.
A Quick Corporate Agreement Audit
Becky gave attendees a practical checklist for reviewing their own corporate documents.
Start by asking:
Do we have a current, signed agreement?
Does it match our actual business entity?
Does it include every current owner?
Do our decision-making rights reflect how we actually operate?
Are voting thresholds appropriate for our ownership structure?
Do the economics and cap table match the agreement?
Do we have buy-sell provisions for major life and business events?
Have recent equity issuances and major decisions been properly documented?
If you answered "I don't know" to several of these, that is probably a good place to start.
Commercial Contracts: Where Your Business Meets the Outside World
The second half of the Skill Lab focused on agreements with customers, clients, and vendors.
For many of the professional service businesses in our community, these are the contracts we use every day.
And one of Becky's first recommendations was deceptively simple:
Make sure the contract you are using actually fits your business.
A professional services firm, SaaS company, consultant, agency, and technology company do not necessarily need the same type of agreement.
This has become even more important with AI.
AI Can Draft a Contract. That Does Not Mean It Is the Right Contract.
Business owners increasingly use AI to create or review agreements.
Becky pointed out a very real risk: a company can ask AI to "draft a customer agreement" and end up with a polished document that does not actually reflect the company's business model.
A professional services company might end up using provisions designed for a SaaS company. A technology company may receive language designed for professional services.
The document can look professional and still be wrong for the business.
AI can certainly be a useful starting point, but business owners still need to understand:
What type of agreement they actually need
What risks need to be addressed
What terms are negotiable
What provisions require professional review
A polished contract is not necessarily a good contract.
Scope Creep Often Starts With the Contract
This section should sound familiar to almost every service-based business owner.
What exactly are you delivering?
What is outside the scope?
What happens when the client asks for something different?
How does the client approve the work?
And what happens when the client does not provide what your team needs to move forward?
Becky recommended being very clear about:
Scope and deliverables. Define what is actually being provided.
Acceptance. Establish how and when the customer approves the work.
Change requests. Create a process for work that falls outside the original agreement.
Customer responsibilities. Document what the client needs to provide and what happens if client delays affect the project.
Good contracts do more than protect you in a dispute.
They create clearer expectations while the work is happening.
Get Clear About Getting Paid
Payment disputes are another area where unclear agreements create unnecessary problems.
Your contracts should clearly address:
How fees are calculated
When invoices are sent
When payment is due
Deposits or retainers
Late payments
Interest or late charges
Disputed invoices
Collection costs
When nonpayment allows you to stop work or terminate the agreement
These may seem like administrative details when the relationship is going well.
They become very important when it is not.
Understand Where the Risk Lives
Becky also walked through several provisions that business owners often skim past because they sound like legal language.
They deserve attention.
Representations and Warranties
What is each party promising to be true?
Indemnification
Who becomes responsible if a third party makes a claim?
Limitation of Liability
How much financial exposure can each party have under the agreement?
Insurance
Does the other party have enough insurance to support the obligations it is taking on?
These provisions often work together to determine who carries the risk when something goes wrong.
For businesses creating intellectual property, handling confidential information, processing customer data, or developing technology, these sections become particularly important.
Intellectual Property, Confidentiality, and Data
Who owns what?
It sounds simple until multiple companies are collaborating on something.
A business may enter a relationship with existing intellectual property, methods, tools, processes, or software. The engagement may then create new work product or intellectual property.
Your agreement should define the difference.
It should also address:
Ownership of work product
Licensing rights
Confidential information
How confidential information can be used
Who owns customer or company data
Who processes that data
Security responsibilities
What happens to information when the relationship ends
The contract needs to match how information and intellectual property actually move between the parties.
Signing the Contract Is Not the End of the Process
This may have been one of the simplest and most useful reminders from the entire session:
Make sure the signed contract is actually saved somewhere.
Companies can spend weeks negotiating an agreement and then struggle to find the final signed version two years later.
Becky recommended creating simple systems around contracts, including:
A standard place for signed agreements
Clear approval paths for contract exceptions
Negotiation guidelines for team members
Defined fallback positions for commonly negotiated terms
A process for determining when legal counsel needs to become involved
Contracts are not just documents.
They need a system around them.
Why This Matters to Enterprise Value
This is where the conversation connects directly to something we talk about often at Athena.
Good contracts are part of building a stronger, more transferable business.
If you eventually bring in an investor, sell the company, add a partner, or go through another transaction, your agreements will likely become part of due diligence.
Buyers and investors may look at whether:
Ownership was properly documented
Equity was properly issued
Major decisions received the required approval
Customer and vendor contracts are signed
Intellectual property ownership is clear
Agreements can be assigned or transferred
There are liabilities hiding inside existing contracts
Cleaning this up while the business is operating normally is much easier than trying to fix years of missing documents during a transaction.
Your legal infrastructure is part of your business infrastructure.
Your Next 30 Days
Becky ended the session with a very practical challenge.
Do not try to fix every contract in the company tomorrow.
Start with the agreement that is giving you the most heartburn.
Maybe it is an operating agreement that has not been updated since the company was formed.
Maybe you brought on another owner and never properly documented it.
Maybe your client agreement creates constant scope creep.
Maybe your payment terms are unclear.
Maybe your team negotiates contracts differently every time.
Pick one.
Then:
Identify the biggest gap or risk.
Determine what needs to change.
Assign someone to own the next step.
Work with the appropriate legal, tax, or financial advisor where needed.
Make sure the final signed agreement is stored somewhere your team can actually find it.
You do not have to solve everything at once.
But you do need to start.
The Gist
A few of the biggest lessons we took away from this Skill Lab:
Your contracts need to evolve with your business.
The agreements you created years ago may no longer reflect your ownership, operations, clients, or risks.
Decide what happens before something happens.
Founder exits, disagreements, ownership changes, and major decisions are much easier to navigate when the process already exists.
Clear scope protects both sides.
Good commercial agreements help prevent confusion before it turns into conflict.
AI is a tool, not legal judgment.
A contract can look polished and still be the wrong contract for your business.
Documentation matters.
A signed agreement that nobody can find is not a good system.
Clean contracts support business value.
The better organized and documented the company is today, the easier it is to grow, transition, raise capital, or eventually sell.
Catch the Full Skill Lab Replay
Becky covered significantly more detail than we can include in one recap, including voting thresholds, founder exits, valuations, equity, payment disputes, intellectual property, indemnification, liability, insurance, termination provisions, and more.
About Becky Mancero and SPZ Legal
Becky Mancero is a Partner and Chief People Officer at SPZ Legal, where she advises startups and growth companies from formation and fundraising through strategic transactions and exits. She has represented hundreds of companies across industries and is particularly passionate about working with creative, mission-driven founders and leadership teams.
SPZ Legal is a boutique law firm supporting startups and growth-stage companies with corporate governance, fundraising, commercial contracts, data privacy, employment law, intellectual property, and mergers and acquisitions.
Contracts tend to be one of those things business owners know are important but can easily push down the list when there are clients to serve, employees to manage, and a company to grow.
The goal is not to become your own attorney.
The goal is to understand what your agreements are supposed to accomplish and make sure they still match the business you are building.
Because the best time to find the gap in a contract is before you need the contract to protect you.
