Building a Strong Legal Foundation for Your Business: A Checklist for Entrepreneurs (In the US)
Starting a business in the United States is an exciting and rewarding venture, but it also comes with a significant amount of responsibility. As an entrepreneur, it’s crucial to lay a solid legal foundation from the very beginning to protect your business and avoid costly legal mistakes down the road. From choosing the right business structure to registering your trademarks, the legal steps you take now can set you up for long-term success.
In this post, we at Borderless Counsel have put together a checklist of essential legal steps every entrepreneur should consider when launching a new business in the United States. Whether you’re just starting or are already up and running, this guide will help you ensure that your legal bases are covered.
1. Choose the Right Business Structure
The first step in establishing your business is deciding on its legal structure. Your choice will affect everything from how you file taxes to your personal liability. Common options include:
Sole Proprietorship: Simple to set up and gives you full control, but you’re personally liable for any debts or legal issues.
Limited Liability Company (LLC): Provides liability protection for owners (members) and is more flexible than a corporation.
Corporation (C-Corp or S-Corp): Ideal for businesses that plan to grow quickly, seek investment, or issue shares. A corporation offers strong liability protection but comes with more regulations and administrative work.
Partnership: If you’re starting a business with others, this option divides responsibilities and profits among partners, but personal liability may still apply unless structured as an LLP (Limited Liability Partnership).
Tip: Consult with Borderless Counsel or accountant to choose the structure that best fits your business goals and personal situation.
2. Register Your Business Name
Your business name is one of your most valuable assets, so it’s important to choose and protect it. Register your business name with the appropriate state agency to ensure no one else is using it. Additionally, consider registering a trademark to protect your brand on a national level.
Tip: Conduct a trademark search to make sure your business name isn’t already in use. If it’s available, register your trademark to protect your brand identity.
3. Obtain Necessary Licenses and Permits
Depending on the type of business you’re starting and where you operate, you may need various licenses and permits to legally run your business. These could include:
Local Business License: Required for most businesses operating within a city or county.
Sales Tax Permit: If you’re selling products, you’ll need to register for sales tax collection.
Professional Licenses: Certain professions (e.g., lawyers, doctors, contractors) require specific licenses to operate.
Employer Identification Number (EIN): If you’re hiring employees or operating as a corporation or LLC, you’ll need an EIN from the IRS for tax purposes.
Tip: Check with your state, county, and city to ensure you’ve obtained all necessary licenses and permits. Failing to do so can result in fines and penalties.
4. Draft Operating Agreements and Contracts
Clear and legally binding agreements are essential to avoid misunderstandings and disputes in your business relationships. Here are a few key contracts and agreements to consider:
Operating Agreement (for LLCs): This document outlines the ownership structure, duties, and responsibilities of LLC members. It can also specify how profits and losses are distributed.
Partnership Agreement: If you have business partners, this agreement will clarify everyone’s roles and responsibilities.
Employment Contracts: If you’re hiring employees, ensure you have clear contracts in place that specify job responsibilities, compensation, benefits, and termination conditions.
Non-Disclosure Agreements (NDAs): These agreements protect your confidential business information, particularly if you’re sharing it with contractors, employees, or potential investors.
Tip: Always have an attorney draft or review your contracts to ensure they are legally sound and protect your interests.
5. Set Up Your Accounting and Tax Systems
Establishing a reliable accounting system from the start will help you manage your business finances, stay compliant with tax laws, and avoid legal issues later on. You'll need to:
Choose accounting software or hire a professional to track your income and expenses.
Set up a business bank account to separate your personal and business finances.
Understand your tax obligations (federal, state, and local) and keep accurate records for tax filings.
Tip: Work with an accountant or tax professional to ensure you’re meeting all tax requirements and maximizing your deductions.
6. Protect Your Intellectual Property (IP)
Your intellectual property—such as trademarks, copyrights, and patents—is one of your most valuable assets. Protecting your IP ensures that others can’t use or copy your ideas. Here’s how to secure your IP:
Trademark your business name, logo, and tagline to prevent others from using similar marks in your industry.
Copyright your creative works like written content, designs, and software.
File for patents if you have an innovative product or invention that needs legal protection.
Tip: Consult with an Borderless Counsel to determine the best way to protect your business’s unique assets.
7. Understand Your Legal Obligations as an Employer
If you plan to hire employees, it’s important to understand your legal responsibilities as an employer. Some of the key obligations include:
Complying with employment laws related to minimum wage, overtime, and workplace safety.
Withholding taxes and paying employer contributions for Social Security, Medicare, and unemployment insurance.
Ensuring a safe, non-discriminatory work environment by following equal employment opportunity laws.
Tip: Work with Borderless Counsel to ensure your company’s employee policies are legally compliant.
8. Create a Privacy Policy and Terms of Service (if applicable)
If you operate online or collect personal information from customers, it’s essential to have a Privacy Policy and Terms of Service that outline how you collect, use, and protect user data. These documents help you stay compliant with privacy regulations like the GDPR (General Data Protection Regulation) or CCPA (California Consumer Privacy Act).
Tip: Have your Privacy Policy and Terms of Service reviewed by Borderless Counsel to ensure they comply with all applicable laws.
9. Prepare for Potential Legal Disputes
No one wants to think about legal disputes, but it’s wise to be prepared. Consider setting aside funds for potential legal expenses and establish a process for resolving conflicts, whether internally or through mediation or arbitration.
Tip: Make sure your contracts include dispute resolution clauses to minimize the risk of costly litigation.
10. Keep Your Business Records Organized
Good record-keeping is essential for both legal and tax purposes. Maintain organized records of your contracts, financial documents, tax filings, and communications with clients and employees. This will not only help you stay compliant, but it will also protect your business in case of an audit or legal dispute.
Tip: Use digital tools or hire a professional to ensure your records are kept accurate and up-to-date.
11. Consult with a Business Attorney
As a business owner, having a trusted legal advisor on your side can save you time, money, and headaches. Whether you need help drafting contracts, filing trademarks, or navigating complex corporate laws, a business attorney can provide expert guidance and support as you build and grow your business.
Tip: Consider scheduling a free consultation with Borderless Counsel to discuss your legal needs and ensure your business is on the right track.
Conclusion
Starting a business involves much more than having a great idea—it requires careful planning, attention to detail, and ensuring that your legal foundations are in place. By following this checklist and consulting with professionals, you can protect your business, avoid legal pitfalls, and set yourself up for success.
Need help getting your business legally sound?
At Borderless Counsel, we specialize in helping entrepreneurs and new business owners navigate the complex legal landscape. Contact us today for a free consultation or document review to make sure your legal foundation is strong!