The Importance of Service Agreements for Service-Based Businesses

As a small business owner, you’re likely busy running your business. And when you’re focused on serving clients and growing your business, it can be easy to overlook important legal protections for your business, such as executing a service agreement with clients before providing services. Below are five reasons why a service-based business should use a service agreement.

Establishing Scope of Services

By clearly defining the scope of services, a service agreement sets the boundaries of what your business will and will not do. This clarity helps prevent clients from making unreasonable demands or expecting services beyond what you agreed to do.

Clarifying Rights and Obligations

A well-drafted service agreement clearly states each party’s rights and obligations. This includes your rights to define your process, payment and delivery terms, timelines, and preferred methods of communication.

If you’re providing creative work, like logos, design materials, or written content, it’s important to clarify who will own those materials once the project is complete. Without a service agreement that addresses intellectual property, clients might assume they own everything you produce, even if they haven’t paid in full or you intended to retain certain usage rights.

Limiting Liability

A service agreement can include provisions that may limit your liability for the services you provide. This may help you protect your business from liability for issues outside of your control, such as delays caused by third parties or unforeseen circumstances.

Professional Image

Using a service agreement also reinforces your professionalism. It shows clients that you take your business seriously and are organized, thorough, and committed to protecting both parties.

Avoiding Disputes

One of the primary benefits of a service agreement is its ability to prevent misunderstandings and disputes with clients. A service agreement helps ensure both your business and the client understand their rights and obligations, which reduces the likelihood of a dispute arising from a misunderstanding. And if there is a disagreement, the service agreement can serve as a reference point to resolve issues amicably and efficiently.

The text above is intended for informational purposes only and is not legal advice. For advice tailored to your situation, please consult with an attorney.