by Kathryn A. Glissman
Have you retired from your full-time job but been asked to provide consulting services on a project or part-time basis to your previous employer or other businesses? Or, are you providing consulting services as your career job? If so, here are a few things to consider.
First, consider forming a limited liability entity like a corporation or LLC. Not only will an entity provide you (and your personal assets) with liability protection if used properly, but you may also receive tax benefits depending on what type of entity you form. Remember, you will be compensated as an independent contractor and not as an employee, so you will want to get your accountant involved early.
Second, you should get a written agreement in place with each business that engages you (your “Client”). In addition to describing the scope of work you are to provide, the agreement may include some or all of the following terms:
(a) Payment Terms. Be sure the agreement clearly states how you will be paid. Will you be paid on an hourly basis or a set fee? Will any of your expenses be reimbursed? When will you be paid?
(b) Non-Compete.Your client may request that you agree not to provide consulting services or be employed by a competitor. If you are willing to agree to some form of non-compete, make certain it is consistent with your goals. For example, even if you are willing to agree not to work with a competitor of your client while working for your client, you may want the ability to work for one of its competitors after your relationship with your client ends. Your obligation not to compete, then, should be limited to the term of your agreement with your client. In other cases, you may not be willing to agree to any non-compete provisions.
(c) Work Product. The work product you produce as part of your services should, in some cases, become your client’s property. In other cases, however, because of the nature of your work, you may want to retain the ownership rights to the work product and give your client only a license to use the work product for its business purposes. Understand what your client expects and what you are willing to provide.
(d) Limits of Liability. Negotiate for provisions like disclaimers of warranty, caps on liability, and consequential damages exclusions that limit your overall liability under the agreement.
The above list is just a small sample of provisions commonly contemplated in connection with an agreement for consulting services. Be sure to carefully review and understand all of the terms in your agreement.
If you have questions regarding an entity or agreement for your consulting practice, please contact an experienced business law attorney.