5 Reasons Why Business Owners Avoid Formal Employment Agreements

Based on SRG’s recent survey of over 500 financial service businesses—ranging from small single-owner practices to larger multi-owner firms—we uncovered a surprising vulnerability: 17% reported having formal employment agreements in place, while 83% admitted they did not. If your business falls into the latter category, you may be exposing yourself to unnecessary risks and potentially diminishing the value of your firm.

Why Employment Agreements Matter

Your employees are the driving force behind your success and play a critical role in the long-term viability of any succession or growth strategy. Without proper agreements in place, your business could face challenges in protecting its interests and maintaining stability. Employment agreements help define expectations, protect confidential information, and secure the foundation of your firm’s future.

If you currently lack formal agreements or believe yours could be improved, Succession Resource Group can help. We provide essential employment resources to guide you in implementing best practices for team development while safeguarding your business.

Why Business Owners Avoid Formal Employment Agreements

  1. Informality and Trust: Small practices often rely on close-knit, informal environments. Employers may trust that mutual understanding negates the need for formal agreements.
  2. Cost and Complexity: Agreements are seen as costly and administratively burdensome.
  3. Lack of Awareness: Many owners are unaware of the benefits formal agreements can provide.
  4. Preference for Flexibility: Verbal or informal agreements feel more adaptable to changing needs.
  5. Short-Term Roles: Part-time or temporary roles may not seem to warrant a full employment agreement. 


Protecting Your Business with Formal Agreements

Formal agreements set clear expectations for roles and responsibilities, outline behavioral standards, and align employees with your company’s mission and vision.


They also protect intellectual property, ensure client confidentiality, and provide a critical layer of security for your business. Don’t leave your firm exposed. Let Succession Resource Group equip you with the tools to build a secure foundation for your team and your future success.

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This resource provided by Succession Resource Group, Inc. (“Provider”) is intended solely for informational purposes and general guidance on a variety of situations and may not be suitable for all advisors. This resource is provided “AS IS” and “AS AVAILABLE,” without warranty of any kind, express or implied, and should not be relied upon as legal, tax, financial, investment, or other professional advice. This resource cannot and does not account for the unique circumstances of each specific situation and must be reviewed by your own independent attorney, CPA, and other relevant professional advisors prior to beginning any due diligence process or taking any action in reliance on this resource. You acknowledge that no attorney-client relationship is created through the provision or use of this resource. Succession Resource Group, Inc. makes no claims, promises, representations, or guarantees whatsoever, whether express or implied, regarding the accuracy, completeness, timeliness, reliability, suitability, adequacy, or fitness for any particular purpose of the information contained herein, and expressly disclaims all such warranties to the maximum extent permitted by applicable law. Nothing in this resource should be construed as a recommendation. By utilizing these materials, you: (i) assume full responsibility for any loss, damage, liability, cost, or expense (including reasonable attorneys’ fees and costs) resulting from or in any way connected to the use of, or inability to use, this resource; and (ii) release, defend, indemnify and hold harmless Succession Resource Group, Inc., its affiliates, officers, directors, employees, authors, contributors, agents, licensees, successors, and assigns from any and all known or unknown claims, demands, damages, losses, liabilities, costs, or causes of action that may arise, at any time, out of or relating to your use of or reliance upon this resource.