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Regardless of whether your small business is hiring a consulting company or you are a consultant with a new client, it makes sense to use a contract to formalize the consulting relationship between the consultant and the client.

When creating a contract for consulting services, consider the following items for inclusion:

Background Information

Basic information about the consultant and the client should be included in the consulting contract:

• If the contract is with an individual consultant, provide a description of the consultant's background and area of expertise
• If the contract is with a consulting company, identify the lead consultant, his or her background, and names or qualifications of other consultants who will be working on the project
• Describe the scope of the work to be performed by the consultant or consulting company; if the description is lengthy, consider attaching it as an exhibit

Services and Payments

Including the terms for the performance of the consultant's services and the payment of fees in the consulting contract can help the consulting project go smoothly and avoid problems over bills later, so consider including the following terms:

• How long will the consulting project last, and what are the dates, times and hours that the consultant will work for the company?
• Where will the work be performed?
• Describe the consulting fees, expressed in either an hourly rate or flat fee
• Include the timetable for paying the consulting fees
• What information must be included on each bill, and are there specific instructions for submitting bills?
• Will the client reimburse the consultant for expenses, and which expenses are specifically covered?
• Does the client need to pre-approve expenses?

Conflicts of Interest

Conflicts of interest should be addressed in the consulting contract:

• Describe how conflicts of interest will be resolved
• Can the consulting company or consultant reuse non-confidential information for other clients?
• Can the consulting company or consultant do work for competing companies within a certain time period?

Confidentiality

Confidentiality needs to be addressed in a consulting contract, as the consultant will likely have access to important information about your business:

• Describe how confidential information must be treated, and include a definition of information that is considered confidential
• If the company has a separate confidentiality agreement, it can be attached as an exhibit

Intellectual Property

Be aware of issues related to intellectual property, and address them in the consulting contract:

• Who owns any patents, copyrights or trademarks that arise out of the consulting work for the company

Other Provisions

Other areas to consider when preparing a consulting contract include:

• Reiterate that each consultant is an independent contractor
• State the length of the contract
• Describe the records that the consulting company or consultant must keep in connection with the work for the client, and the length of time that the consultant must keep the records
• What needs to be done if either party wants to terminate the contract early?
• Discuss whether the consulting company or consultant can subcontract work to another individual or assign the contract to another consultant
• Can the consulting company or consultant solicit or recommend company employees for employment at either the consultant's company or elsewhere? If solicitation is banned, for what time period?
• Can the consulting company/consultant solicit the company's clients and customers? If solicitation is banned, for what time period?

Questions for Your Attorney

Your lawyer can help write or review a consulting contract to ensure that it treats you and your company fairly. Among the questions to consider asking your attorney:

• What terms and conditions should we include in the contract?
• Can this contract be legally enforced?
• Are there sections of the contract that strongly favor the other party?

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