BC is an amazing place to start and grow a business. From coffee shops and retail stores to tech startups and professional service firms, the possibilities are endless. 

But before you dive into your exciting new venture, it’s important to do some thinking and planning—especially when it comes to any potential legal risks. These can be costly, frustrating, and time-consuming. One way to avoid them is by putting solid, well-drafted agreements in place. The right contracts can effectively protect your business.

So whether you’re launching a new business or expanding an existing one, here are five essential agreements every BC business needs.

1. Shareholder Agreement

A corporation is created when two or more people go into business together, creating an entity separate from its owners. A shareholder agreement is a crucial legal document for corporations. This document sets out the rights, powers, and responsibilities of each shareholder, i.e., the person, company, or institution that owns the shares of a corporation.

Without a shareholder agreement, there can be major conflicts over money, control, or strategy. Some of the key issues that a shareholder agreement deals with include:

  • Ownership and share structure: Who can own shares? How do shares get allocated? 
  • Profit sharing: How do the business’s profits get distributed?
  • Management and governance: What’s the process for adding and removing directors?
  • Decision-making: Who gets a say in major business decisions? How do shareholders exercise their voting rights?
  • Dispute resolution: How will disagreements be handled?

Having a clear, fair shareholder agreement is one of the best ways to maintain trust with your stakeholders and ensure your business runs smoothly. 

2. Employment Agreement

Another key agreement for businesses to understand is the employment agreement. Hiring your first employee is a big milestone. But without a strong employment agreement in place, you could face unexpected and unwelcome legal consequences. One way to prevent this is by creating a comprehensive written employment agreement. The object of the employment agreement is to ensure that all parties understand their rights and obligations, particularly in the context of BC’s Employment Standards Act, the legislation that governs employment law in BC.

While your employment contract will be specific to the nature of your business, it often includes the following: 

  • Role and duties: What tasks are the employee expected to perform?
  • Compensation and benefits: What will the employee receive in terms of salary, bonuses, and benefits?
  • Termination: Under what conditions can the employee be terminated?
  • Non-compete: Prevents the employee from working for competitors or starting a competing business for a specified period of time after leaving the company. 

Whether your business is large or small, a proper employment agreement helps prevent misunderstandings and protects you from wrongful dismissal claims, among others. Once you’ve drafted an employment agreement, it’s a good idea to review it on a regular basis, as employment standards and case law are constantly evolving.

3. Confidentiality Agreement 

A confidentiality agreement is another key document for any new or growing business in BC. The purpose of the agreement is to protect sensitive information about your business from being disclosed to the public. This information might consist of client lists, product ideas, or business plans. When you share that information with an employee or contractor, a confidentiality agreement can ensure that it won’t be used or disclosed to any external parties (without proper consent). 

So, when might you need a confidentiality agreement? Some of the more common situations include:

  • Discussing a new partnership or investment opportunity.
  • Hiring independent contractors or consultants.
  • Sharing trade secrets during product development.

As we covered in a recent blog focused on privacy law in BC, the province takes privacy and confidentiality very seriously. With a clear, well-drafted confidentiality agreement, you can demonstrate that your business is committed to protecting sensitive information.

4. Partnership Agreement 

A partnership is a business structure in which two or more people share ownership, profits, and liabilities. There are three types of partnerships: 

  1. General partnership: All partners share equally in the business’s profits, responsibilities, and liabilities.
  2. Limited partnership: Includes both general partners and limited partners.
  3. Limited liability partnership: Some or all of the partners have limited liability. 

In BC, these are governed by the Partnership Act. If you’re going into business with one or more partners, you’ll need a solid partnership agreement that sets out how profits are shared, how decisions are made, and what happens if a partner exits the business. 

A good partnership agreement will cover:

  • Ownership: How is ownership divided among the partners?
  • Capital contributions: How much of a financial commitment will each of the partners make?
  • Decision-making: What’s the process for making decisions within the business?
  • Profit and loss allocation: How will profits and losses be distributed among the partners? 
  • Dispute resolution: What method will you use to resolve conflicts?
  • Dissolution or exit procedures: What happens if a partner leaves the business?

Carefully considering and documenting these items creates transparency and helps to ensure a strong, fruitful partnership.

5. Service or Supplier Agreement

If your business involves providing services or purchasing materials, a written service or supplier agreement is essential. 

The contract should include:

  • Scope of work: What exactly will be delivered?
  • Timelines and milestones: When will work be completed?
  • Payment terms: How and when will payments be made?
  • Liability and warranties: Who’s responsible if something goes wrong?
  • Termination clauses: How can either party end the agreement?

This type of contract allows you to maintain professionalism while managing expectations and reducing the likelihood of future disputes. 

The Critical Role of Foundational Business Agreements

As you launch or expand your business, having these core agreements in place will help you build credibility with employees, partners, clients, and suppliers. More importantly, they’ll give you peace of mind that your business is protected from legal risks, allowing you to focus on what matters most: growing and thriving as a business owner in BC. 

Contact CM Lawyers in Vernon & Salmon Arm for Help Drafting or Updating Your Business Contracts

At CM Lawyers, our team of skilled business lawyers can draft business agreements that reflect your goals, comply with BC law, and provide the best possible legal protection. Whether you’re in a sole proprietorship, a partnership, or a corporation, we’ll ensure your contracts are clear, enforceable, and tailored to your specific needs. And our work doesn’t stop there; we’ll help you keep your agreements up to date as your business and the legal landscape continue to evolve. 

With convenient locations in Vernon and Salmon Arm, CM Lawyers provides trusted business law advice across the Northern Okanagan and Shuswap. To schedule a confidential consultation, call our Vernon office at (250) 308-0338 or Salmon Arm office at (250) 803-9171, or reach out online.