10 legal considerations to make when starting your first business


Of all the considerations an entrepreneur has to make when starting a business – what to call it, how to price the products and more – the legal considerations are perhaps the most important. From determining a business structure to complying with local labor laws, to making sure you prepare and file your taxes correctly, forgetting any of these aspects can have disastrous legal consequences over time – which may be impossible to fix .

To ensure you don’t commit any legal missteps as you embark on your entrepreneurial journey, consider the advice of those experienced with the legalities of starting a business. Here, 10 members of Council for Young Entrepreneurs outline some of the most important legal considerations to make when starting a business and why performing these tasks should be at the top of your to-do list.


1. Accurate tax returns and documentation

Get accurate tax returns and documentation from the very first year. Missteps in this area could lead to significant fines, audits or even legal action in the future. Also, early errors can snowball over time, making them more difficult and costly to correct later on. Investing in a skilled accountant or tax advisor from the start can be a wise decision to avoid such potential problems. – Yuri Sokolov, Finazon

2. Registration for Data Protection and Privacy Compliance

For immigrant founders, it is very important to have the correct immigration status when starting your business and to own the company IP. Some founders register their company mainly in the US for sale and then develop offshore to protect the IP rights to the software. As you build a data-centric organization, go beyond the legal considerations and prioritize registration for data protection and privacy compliance. Validate your customer and product usage data rights and make sure your business is registered in a country or state where you can define data ownership as part of your terms of service. – Surbi Rathore, Symbl.ai

3. Clear, detailed contracts and agreements

When starting a business, it is very important to prepare clear and detailed contracts and agreements. These are legal documents that explain the rights and responsibilities of everyone involved in the business. Having good contracts helps prevent disagreements and protects everyone’s interests. It also shows that your company is reliable and professional. Contracts ensure that you comply with the law and help your business run smoothly. It’s a good idea to get help from a lawyer to tailor the contracts to your needs and review them regularly. By focusing on clear and comprehensive contracts, founders can keep their business safe and build good relationships with customers, partners and everyone else involved. – Kazi Mamun, CANSOFT

4. Your company’s legal structure

The first legal consideration that founders should consider when starting a business is the legal structure of the entity. Depending on your business type, desired activities and long-term vision, you need to decide whether to start an LLC, S Corporation, C Corporation or non-profit organization. This decision not only affects things like taxation and investors, but also your liability as an owner and founder. Always start by limiting your personal liability from the company’s liability. From there you can worry about getting legal advice, getting the right licenses and maintaining the right insurance. But protecting your personal liability should always be the first step. – Ian Blair, ConstructionFire

5. Proper Insurance Coverage

When new founders embark on an entrepreneurial journey, they must prioritize getting the right insurance coverage for their business. Starting a business involves known and unknown risks. Insurance acts as a safety net, protecting you against potential financial losses that may result from unexpected events or liabilities. By taking out the right insurance coverage, you limit risks and gain peace of mind. Some reasons why insurance should be high on the priority list are liability protection, property protection, business interruption and professional liability. It demonstrates your commitment to responsible and prudent business practices, building trust with stakeholders and potential partners. – Abhijeet Kaldate, Astra WordPress theme

6. Labor and Labor Laws

Labor and employment laws are absolutely vital considerations for any founder to take care of. You must protect the interests of all parties involved: your company, yourself, your employees and other stakeholders. You need to understand employee classification, overtime and more. You must also follow fair practices, ensure there is no discrimination, and protect your and your employees’ intellectual property and contributions. Make sure you hire the right people to help meet labor requirements from the start to avoid problems later on. – Syed Balky, WPB Beginner

7. Intellectual Property Protection

A critical legal consideration that new founders should prioritize is protecting their intellectual property (IP). This includes trademarks, copyrights and patents. Protecting IP assets is critical to gaining a competitive advantage, preventing others from using or copying your unique ideas, products or brand identity, and preserving the value of your business. It is advisable to consult an intellectual property attorney to identify and protect your IP assets through proper registrations, contracts, and confidentiality agreements. – Ishmael Wrixen, FE International

8. IP or patent violations

When starting a business, it’s important for founders to be wary of intellectual property and patent laws and make sure they’re not breaking any of them. Intellectual property laws can apply to even the most basic things that aspiring entrepreneurs are not aware of or don’t consider, such as the name of the company, the logo of the company, the design of the item, the content, and so forth. Not only would breaking these laws lead to the downfall of a company before it even started, but it could also cause the founders to face harsh penalties that will haunt them for a long time to come. Research is key to avoiding such legal complications and helping new founders successfully launch their businesses. – Stephanie Wells, Formidable shapes

9. Proper Industry Licenses

One of the most important things you need to do is get the right licenses for the industry you operate in. This is especially critical as having the correct licenses ensures that your business is operating legally and is not at risk of being shut down by the authorities. Plus, the added benefit is that you appear legit and more trustworthy to your audience and customers. You can demonstrate compliance with industry regulations and build a positive reputation, attracting more customers – something essential for success. – Blair Williams, MemberPress

10. Previous Non-Compete Agreements

Consider whether you are still covered by a previous non-compete agreement. Many entrepreneurs are inspired to start their business based on their past experiences; however, problems can arise if you violate a non-compete agreement you’ve signed in the past. Think carefully about whether or not your new company is in direct competition with a previous employer. Review the contracts you have executed to determine the exact bans and their expiration dates. If in doubt, seek legal advice or start another business instead. You don’t want to burden yourself or your company with such an avoidable issue early on. – Firas Kittaneh, Amerisleep mattress