Legal Terms That Entrepreneurs Need to Know

When it comes to entrepreneurship, it is not enough to know about or have experience in marketing and accounting. There is another area that requires even more attention and that is business law and legal terminology. While becoming a lawyer isn’t mandatory for entrepreneurs, it is nevertheless very important to understand the basics of business law and legal terms. The more you learn about it, the more likely you are to proceed without worrying about facing any legal woes.

Here are some of the main legal terms that entrepreneurs need to know:


This is one of the most widely known legal terms and for good reason. An NDA is a legally binding contract, in which the party or parties sign an agreement to keep sensitive information private. It establishes a confidential relationship that safeguards trade secrets, business plans, marketing strategy, manufacturing process, and proprietary software or hardware. 

Any information you deem confidential can be protected by an NDA. This is crucial in order to maintain market dominance and ensure employees maintain confidentiality. 

When it comes to new employees, there is another type of contract they are sometimes required to sign which is: The Non-Mutual Agreement. This is similar to an NDA, but the one difference being that the employee is the only party signing the agreement.


A Memorandum of Understanding, which is the same as a Letter of Intent, is a written agreement that essentially represents the first step in the creation of a formal contract. It outlines the terms, requirements and responsibilities both parties plan to meet, as well as the identity of all parties involved.

Even though an MOU is an informal and not legally binding agreement, it does carry significant value as it is better than a vocal agreement and can be used as evidence in court should someone fail to deliver on its terms.


There are a variety of clauses found in contracts, and while it is always advisable to have a lawyer present before signing a contract, knowing what some of these clauses mean goes a long way in keeping you aware of what is going on.

Jurisdiction: is the power a court holds in order to enforce laws. In contracts, parties can insert a clause that provides exclusive jurisdiction to a particular state or country. Knowing the jurisdiction that governs the contract is of the utmost importance.

Arbitration: is a form of dispute resolution that does not involve going to court where an arbitrator, a third-party representative, appointed by both parties or a court of law is tasked with settling a dispute.

Force Majeure: meaning superior force, refers to a clause that accounts for any man-made or natural event beyond the control of the parties involved. It ensures that neither party will be held liable if there is a disruption in the contract caused by a force majeure event.

Mediation: is similar to arbitration in that a third-party representative is assigned to settle a dispute. However, in mediations the resolution is not legally binding unless it is signed by a judge.

Hopefully this serves as a useful primer on some of the legal terms you need to know. As entrepreneurs, understanding the basics of business law is not only important but also very useful both when dealing with contracts and handling your business.