When your startup begins signing customers or vendors, two acronyms quickly become part of the conversation: MSA and SOW. These agreements are more than just legal language - they provide the structure that supports many B2B relationships.
Used correctly, a Master Services Agreement (MSA) and Statement of Work (SOW) save time, protect your company’s interests, and streamline the contracting process.
What’s an MSA?
A Master Services Agreement is a foundational contract that governs the overall relationship between two parties—typically for a series of projects or ongoing services.
It lays out the “boilerplate” legal terms that will apply to future engagements, including:
- Payment terms
- Confidentiality
- IP ownership
- Indemnification
- Termination rights
- Limitation of liability
- Governing law
What’s an SOW?
A Statement of Work is a more specific document that outlines the details of a particular project or engagement under the MSA. It covers:
- Deliverables
- Timeline
- Pricing and billing structure
- Project milestones
- Responsibilities of each party
You can think of the MSA as the umbrella agreement and the SOW as the specific order form or scope under that umbrella.
Why Use Both?
If you’re doing repeat work with the same customer, or hiring the same vendor for different projects, using an MSA + SOW structure helps:
- Speed up future deals: No need to negotiate legal terms every time.
- Avoid confusion: Legal stuff lives in the MSA; project details live in the SOW.
- Ensure consistency: IP, liability, and confidentiality terms stay standardized.
Key Issues to Watch
- IP Ownership: Does the customer own the work product, or does your startup retain ownership? Clearly define who owns what and when.
- Termination Clauses: Who can end the relationship, and under what conditions? Avoid open-ended liability.
- Payment Triggers: Make sure your SOW defines how and when payments are due - especially for milestone-based projects.
- Change Orders: Projects evolve. Your SOW should explain how changes to scope or pricing will be handled.
Final Thoughts
Don’t let acronyms scare you off - MSAs and SOWs are powerful tools for startups to formalize and scale client and vendor relationships. We help founders structure these agreements to protect their IP, limit risk, and keep things moving fast.
Frequently Asked Questions
FAQs
What is the main difference between an MSA and an SOW?
An MSA sets the overall legal terms of the relationship, while an SOW outlines the specifics of an individual project.
Do all startups need an MSA?
Not always, but if you plan to work with a customer or vendor on more than one project, an MSA saves significant time and prevents repeated negotiation.
Can an SOW exist without an MSA?
Yes, but it is less efficient. Without an MSA, every project must include all legal terms, which can slow down deals and create inconsistencies.
How do MSAs and SOWs protect intellectual property?
These agreements clearly define who owns the work product, whether ownership transfers to the customer, or if your startup retains certain rights. This clarity helps prevent disputes later.
Don't DIY your legal anymore
Leave it to the pros.