Legally Enforceable

How Smart Operators Use Contracts to Protect - and Build - their Business

April 1, 2026

TL;DR: Make sure you have a fully signed agreement setting out the work to be accomplished and the compensation to be paid. Otherwise, it will be very hard to use the legal system to enforce your rights if the other party does not perform, because you will have to prove what you were promised as well as that they did not deliver. Getting the details in writing also helps you get on the same page as your counterparty as you begin work, and lets you allocate risk, control dispute resolution, and include attorney fee provisions.

In the early days of building a business, a lot runs on trust.

You meet someone who seems aligned. You talk through a deal. You get to work.

And for a while, that’s enough—until it isn’t.

At some point, every business relationship is tested. When that happens, the difference between a painful setback and a manageable problem often comes down to one thing:

Did you get it in writing—and did everyone sign it?

What a Contract Actually Does

At a basic level, a signed contract does two things:

1. It gives you a legal right to enforce the deal.

   If the other party doesn’t hold up their end, a signed agreement gives you the ability to pursue remedies—up to and including a lawsuit.
   

2. It documents the “meeting of the minds.”

   A contract captures what both parties agreed to, in a way the law recognizes as enforceable. It records what you both agreed you were going to do.

Without that? You’re left trying to reconstruct intent after the fact—which is expensive, uncertain, and often unsuccessful.

The Core Contracts Most Startups Need

Most early-stage businesses will encounter a handful of key agreements:

• Leases (for your space)

• Operating Agreements (for LLCs with more than one owner)

• Service Agreements (either hiring or being hired)

• Supply Agreements (buying inputs or selling product—sometimes before it even exists)

Each of these does more than formalize a relationship—they allocate risk.

A Note on Cannabis Leases

If you’re in the cannabis industry, you’ll need to negotiate the normal “lawful use” clauses that often appear in leases. Because cannabis remains illegal under federal law, that language can create real problems.

You’ll also want to pay close attention to:

• Tenant improvement (TI) allowance: Will your landlord help with the cost to build out your space? How are those structured?

• Termination rights: Can you get out of the lease if you have to close your business? Or will you get stuck paying for 5 years?

Operating Agreements: Your Business’s Constitution

If you have partners, your operating agreement is the most important contract you’ll sign.

The capitalization table on Exhibit A of an Operating Agreement lists the equity owners of a company and their percentages. That’s the most authoritative record for who owns your company, and it’s what investors, your bank, and regulators will want to see.

An Operating Agreement also sets out how decisions will get made in this company. Is it manager-managed, or member-managed? If member-managed, do the members each have one vote in important decisions, or is it according to their ownership percentages? Are there especially important decisions that require a super-majority (which protects minority investors)?

But one of the most overlooked—and most critical—sections are the buy-sell provisions.

This is where you answer the uncomfortable questions in advance:

• What happens if a partner wants out? Or the other partners want someone out?

• What if someone dies?

Without clear answers, you can end up in disputes between remaining partners and heirs, often at the worst possible time.

Even married co-founders should take this seriously. Personal estate planning documents (like wills or trusts) don’t replace a business agreement—especially if there are outside investors or partners involved.

The Most Expensive Mistake: Not Getting It Signed

Here’s a hard truth:

A draft agreement is not a contract.

A conversation is not a contract.

If a relationship breaks down and you need to enforce your rights, you will struggle—sometimes unsuccessfully—without a fully executed agreement.

I’ve seen this cost entrepreneurs real money. I’ve seen it lead to drawn-out disputes that could have been avoided with a single step:

Make sure every party signs. Share the fully-signed, final version. Then save it somewhere you can find it years down the road.

It sounds simple. It is simple. And it’s often overlooked.

How Contracts Actually Get Done

There’s a common misconception that contracts start with lawyers.

Usually, they don’t.

A typical process looks like this:

1. The parties talk through the deal

2. One side puts together a draft (using a lawyer or a template)

3. The other side reviews and proposes changes (lawyers call this “commenting”)

4. The parties negotiate—accepting, rejecting, and compromising—until they agree

5. A final version is agreed upon and signed

And here’s the key: that final, signed version should be circulated to everyone and saved.

Also worth remembering: contracts aren’t static. They can be amended later—if everyone agrees.

Contracts Are About Risk Allocation

At their core, contracts answer a simple question: What happens if something goes wrong?

They do this in a few ways:

• Defining breach (e.g., failing to deliver product by a certain date)

• Excusing performance (e.g., “Acts of God” or other uncontrollable events)

• Allocating responsibility (through provisions like indemnification)

• Controlling dispute resolution (arbitration vs. litigation, venue, jury waivers)

In other words, a contract is a pre-negotiated plan for conflict.

That’s not pessimistic—it’s practical.

One Clause That Can Change the Power Dynamics

If you’re a smaller business working with a larger, better-capitalized partner, I recommend using forms of contracts that include attorney fee provisions (sometimes called “fee shifting”).

These clauses require the losing party in a dispute to pay the winning party’s legal fees.

Why does that matter?

Because without it, a larger company or deep-pocketed investor can sometimes rely on the cost of litigation to avoid being challenged, even when they are clearly in breach of contract. With it, the playing field becomes more balanced.

Final Thought: Clarity Now, or Conflict Later

Contracts don’t create conflict.

They prevent it—or at least contain it.

Every agreement you sign is an opportunity to get aligned, define expectations, and decide in advance how you’ll handle the hard moments.

Because those moments will come.

The question is whether you’ll be guessing your way through them—or working from a document you intentionally built.

Get it in writing. Get it signed. And keep a copy.

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