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A professional services agreement is established between an individual or company and a contractor providing services. Professional services span various industries, such as legal, electrical, carpentry, financial advising, and architecture, with providers typically holding specialized licenses or certificates. In contrast, consulting is generally not classified as a professional service. When hiring a professional contractor or gaining a new client, it is vital to create a solid contract to address key questions, hold parties accountable, and prevent misunderstandings throughout the business relationship. The video also offers a free template for creating an effective contract.