From the May 2007 issue of Entrepreneur

Like any entrepreneur, you probably deal with freelancers and vendors who, depending on their roles, float around the edges of your company or work at the very heart of it.

Keep in mind, however, that these third parties present security issues that could really hurt your company, ranging from security lapses to data theft or misuse. "In today's world, a small-business owner has to have the same concerns as a Fortune 500 company," says Philip Gordon, national chair of Littler Mendelson's privacy and data protection group in Denver. Here are a few tips for handling contractor security issues.

Do a background check. Due diligence costs a bit, but it's worth it. Ask outsourcing firms to certify that the contractors they send you have undergone background checks. Ask for referrals and search Google for red flags, too.

Get it in writing. Write a contract that prohibits contractors from disclosing proprietary data to anyone else--subcontractors, for example--without your company's written authorization.

Check in with contractors. Ask for periodic updates on how they're accessing, storing and handling sensitive and proprietary information.

Work with the end in mind. Decide which information will be returned to your company or destroyed upon termination of the relationship. "You're drafting a contract anyway," Gordon says, "so putting in some terms addressing information security shouldn't be that costly."