Essential Legal Steps You Need To Know When Starting a Business

Starting a business is exciting—but it’s crucial to build a solid legal foundation from day one. Here’s a step-by-step guide to set you on the right path:

Choose the Right Business Structure

Selecting your legal structure affects liability, taxation, and compliance:

Sole Proprietorship: Simple and low-cost—but offers no separation between personal and business liabilities
Partnership: Shared ownership—they share profits and legal responsibility
LLC: Offers limited liability and flexible taxation—widely favored by small-business owners.
Corporation (C or S): Suitable for larger ventures or those seeking investor funding, offering robust liability protection

Tip: Consult a lawyer or accountant to determine which structure fits your goals.

Pick & Register Your Business Name

Your name is your brand identity—get it right:

Check name availability at the state level and conduct a trademark search to avoid legal conflicts
File a DBA (Doing Business As) if operating under a different name
Consider registering a trademark with the USPTO for nationwide protection.
Secure the corresponding domain name early to protect your brand online

Register Your Business & Obtain Tax IDs

Make it official with proper registrations:

File your business with state authorities (typically the Secretary of State) for LLCs, corporations, or partnerships
Apply for a federal EIN from the IRS—required for hiring, filing taxes, and opening bank accounts
Obtain any required state-level tax IDs for sales tax, unemployment, or payroll

Obtain Required Licenses & Permits

Compliance varies by location and industry:

Most businesses need a general city/county business license
Additional permits may include health, zoning, environmental, or professional licenses
Certain industries demand federal permissions (e.g., alcohol, firearms, transportation)

Skip this, and your business could face closure or hefty fines.

Open a Business Bank Account & Set Up Accounting

Keep your finances clear and organized:

Separating personal and business accounts reinforces LLC/corporation protections
Open a business bank account—banks often require your EIN and formation documents
Implement an accounting system to track income, expenses, and facilitate tax filing.

Draft Foundational Legal Documents & Contracts

Protect your internal and external relationships:

For partnerships or LLCs, draft comprehensive operating or partnership agreements outlining roles, rights, and exit strategies.
Use clear contracts for clients, vendors, and employees to define obligations, terms, and dispute resolution.
For employees, include non-compete or confidentiality agreements as needed.

Protect Intellectual Property (IP)

Safeguard your brand and innovations:

Conduct a trademark search and apply for registration for your business name, logo, or slogan
Consider patents for inventions or proprietary processes; consult an IP attorney
Secure copyrights for original content (e.g. marketing materials, software) and implement trade-secret protections.

Get Business Insurance

Cover your risks with suitable policies:

Basic policies like general liability and commercial property insurance are essential
If you offer professional services, consider professional liability insurance
Workers’ compensation is usually mandatory if you hire staff
Explore additional coverage like data-breach or business interruption insurance

Understand Legal & Regulatory Obligations

Stay compliant across the board:

Comply with tax, payroll, and labor laws—consult a tax professional to avoid missteps
Follow advertising regulations and avoid deceptive practices
If you handle customer data, ensure compliance with privacy laws like GDPR or CCPA.
Verify zoning rules and environmental regulations applicable to your operations.

Consult Professionals Regularly

Build your strategic advisory team:

A business attorney and accountant can help you avoid mistakes and align your legal structure and tax strategy
An IP specialist can guide filings and enforcement for your trademarks, patents, or copyrights
An insurance broker can assess risk and recommend proper coverage.

Quick Legal Startup Checklist

Choose your business structure
Pick and register a name (plus DBA/trademark)
Register the business + obtain EIN and state tax IDs
Secure licenses & permits
Open a business bank account + accounting setup
Draft operating/partnership agreements
Create client, vendor, and employee contracts
Protect IP assets
Purchase appropriate insurance
Stay compliant with laws & consult professionals

Final Thoughts

By following these legal steps, you ensure your business is not only compliant—but also well-prepared for growth and investment. Taking the time now to set up strong foundations helps prevent costly legal issues and positions you for long-term success.