Starting and running a small business is exciting—but skipping key legal steps can lead to issues down the road. Whether you’re launching a side hustle or building a long-term venture, protecting your business legally from day one is critical. Here are 10 legal steps every business should take to set a strong foundation and avoid potential mistakes.

1. Choose the Right Business Structure

Your legal structure affects your taxes, personal liability, and how you raise money. Common options include:

• Sole Proprietorship – Simple, but offers no personal liability protection.

• LLC (Limited Liability Company) – Offers liability protection with flexible tax options.

• Corporation (C or S Corp) – Best for attracting investors and long-term scaling.

Consult an attorney or accountant to determine the best structure for your goals.

2. Register Your Business Name

If you’re not operating under your personal name, you may need to register a “Doing Business As” (DBA) name with your state or county. You’ll also want to check that your desired business name is available and not trademarked by someone else.

3. Obtain an EIN

An Employer Identification Number (EIN) from the IRS is essentially a Social Security number for your business. You’ll need it to:

• Open a business bank account

• Hire employees

• File business taxes

You can apply for free on the IRS website.

4. Open a Business Bank Account

Never mix personal and business finances. A separate business account helps with:

• Bookkeeping

• Tax filing

• Liability protection

It also makes your business look more professional to customers and vendors.

5. Get the Proper Licenses and Permit

Requirements vary by industry, location, and business type. You may need:

• A general business license

• Sales tax permits

• Health department permits (for food-related businesses)

• Professional or occupational licenses

Failure to comply can lead to fines or additional business issues.

6. Draft Key Contracts

Even if you’re working with friends or family, always put agreements in writing. Essential contracts include:

• Client service agreements

• Independent contractor agreements

• Partnership or operating agreements (for multi-owner businesses)

• Terms and conditions/privacy policy (for websites)

Written contracts prevent misunderstandings and are enforceable in court.

7. Protect Your Intellectual Property

Think about your business’s name, logo, content, and inventions. You may need to:

• Register trademarks for brand names or logos

• Copyright original content (books, designs, software)

• Patent inventions or unique products

Early protection keeps others from profiting off your ideas.

8. Understand Employment Laws

If you hire employees or independent contractors, you must comply with federal and state labor laws. Key areas include:

• Minimum wage and overtime

• Employee classification (W-2 vs. 1099)

• Anti-discrimination laws

• Workers’ compensation and unemployment insurance

Violating labor laws can lead to penalties or lawsuits.

9. Create a Record-Keeping System

Organized records protect you in the event of an audit or lawsuit. Keep track of:

• Contracts and agreements

• Licenses and permits

• Financial records and receipts

• Tax filings and employment documents

Cloud-based tools can help automate and secure this process.

10. Maintain Legal Compliance

Your legal responsibilities don’t end once your business is up and running. Stay compliant by:

• Filing annual reports or franchise taxes (if required)

• Renewing licenses and permits

• Updating contracts as laws or operations change

• Staying informed on new legal developments affecting your industry

A small investment in legal upkeep can save you from massive problems later.

Final Thoughts

The law can feel overwhelming when you’re running a small business—but it doesn’t have to be. Start with these steps, and consider working with a business attorney to tailor protections to your specific needs. The right legal foundation empowers you to focus on what you do best: growing your business.

(This article is provided for general information purposes and is not considered legal advice. Please contact our office if you would like counsel specific to your matter.)