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Subject: |
Three Contracts Every Self-Employed Person Needs |
| Date: |
2009-02-22
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Three Contracts Every Self-Employed Person Needs
By Cliff Ennico
www.creators.com
"I was recently laid off from a job in corporate America. Until
something comes up in my field, I've decided to make some extra money
by doing bookkeeping services for some local businesses. Do you have
any thoughts on what my contracts with customers should look like?"
First of all, congratulations on realizing that you need to have a
written contract with each of your customers. Too many people in your
situation would try doing business on a handshake basis, and, as the
famous investment banker J.P. Morgan once said, "a verbal contract
isn't worth anything more than the paper it's written on."
I don't think, though, that hiring a fancy lawyer to have a "perfect"
contract drafted is a good idea. First of all, it will cost hundreds of
dollars. Second, it will be written in complex "legalese" that will
scare off your small business clients.
Instead, I would suggest you try to draft the contract yourself, in
your own words, then hand it to a local lawyer with a request that she
spend "not more than one or two hours" making it look like a real
contract. Then, when she hands it back to you, review it and change
anything you think will make the contract more "user friendly."
Finally, ask the lawyer to give the contract one "last pass" just to
make sure you didn't give away the store.
So what should be in your client contract? Here are the basics.
(1) A description of the services you will render for the client, along
with a list of services you will not render. This can be in a
"schedule" that you attach to your standard contract — that way you can
change it each time you take on a new client without having to go back
to your lawyer.
(2) A statement that all QuickBooks files and other client data belong
to you until such time as you have received payment in full for
services.
(3) A description of the fees you will charge for services rendered,
when invoices will be rendered, and (most importantly) when payment is
due.
(4) A statement that sales taxes and other taxes will be added to your
fees (some state and local governments impose sales taxes on
bookkeeping services — check with your tax advisor to find out the law
in your state).
(5) A statement that interest at 18 percent per annum "or the lowest
rate allowed by law" will be charged on overdue invoices, along with a
statement allowing you to discontinue services and retain client files
if ANY invoice is not paid on time.
(6) Your agreement to keep all client information strictly confidential
at all times.
(7) A statement that you are acting as an "independent contractor," not
an employee of the client.
(8) A statement requiring the client to submit data that is "true,
accurate and complete in all material respects" and indemnifying you
for any mistakes you may make because you relied on bad data from the
client - we lawyers call this the "garbage in, garbage out" clause.
(9) A statement limiting your liability for errors and omissions to the
total amount of fees the client has paid you "or $100, whichever is
greater."
(10) If the client is located in another state, a statement that any
lawsuits or claims under the agreement must be brought in the city and
state where your office is located, not where the client's offices are
located.
Since you are planning to return to the corporate world at some point
in time, you probably should also add a clause allowing you to
terminate the contract at any time upon X day's prior written notice to
the client. This clause should also clearly state (1) that if you
terminate the contract, the client is liable only for fees incurred up
to the termination date, and (2) that your only responsibility is to
"use your reasonable best efforts" to find another bookkeeper for the
client.
Once you have a solid contract for your clients, there are two other
agreements you should draft (or have someone draft for you):
— A short (no more than two pages) agreement for a temporary employee
or student intern — this agreement should state clearly that employment
is "at will" and may be terminated by you at any time, with or without
a reason; and
— A subcontractor agreement between you and another bookkeeper or
professional you bring on board in order to satisfy a particular
client's needs — this agreement needs to state clearly (1) that the
subcontractor is required to pay any Social Security, FUTA and Medicare
taxes due on the amounts you pay her, and (2) that you are not required
to pay the subcontractor for her services until you yourself have
received payment from the client.
The Bookkeeper's Referral Network (www.bkpr-network.com) offers sample
contracts and other resources for people interesting in the bookkeeping
profession.
Cliff Ennico (cennico@legalcareer.com)
is a syndicated columnist, author and former host of the PBS television
series 'Money Hunt'. This column is no substitute for legal, tax or
financial advice, which can be furnished only by a qualified
professional licensed in your state. To find out more about Cliff
Ennico and other Creators Syndicate writers and cartoonists, visit our
Web page at www.creators.com.
COPYRIGHT 2009 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE,
INC. Permission granted for use on DrLaura.com.
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