Top 10 Legal Questions to Ask When Starting Your Business

1. What Business Structure Should I Choose?

This might be the most crucial question for you to answer. Your company structure dictates everything from the legal requirements for starting a business to your personal liability, tax implications, and how you manage your finances. Popular options include:

• Sole proprietorship—the simplest structure, but one that offers no liability protection–meaning your personal assets are on the line if the business incurs debt.

• Partnership—ideal for co-founders, but all partners share equal liability for company debts and obligations.

• Limited liability company (LLC)—offers a sweet spot of flexibility and liability protection by shielding your personal assets from business debts, and provides you with more management freedom than a corporation.

• Corporation—the most complex structure, with stricter formalities but offering significant liability protection and the potential to attract investors.

Consulting with a lawyer can help you choose the business structure that best aligns with your goals and risk tolerance.

2. What Permits and Licenses Do I Need?

The business world operates within a framework of regulations. You might need specific permits and licenses to operate legally, depending on your location and industry. These could range from local zoning permits to industry-specific licenses from state agencies. Conduct thorough research on the particular business requirements in your area through your local government's website or the Small Business Administration (SBA).

3. How Do I Safeguard My Intellectual Property?

Your intellectual property (IP) encompasses trademarks, copyrights, and patents. Safeguarding your unique brand name, logo, or product design is essential. Consider:

• Trademark registration—protects your brand name and logo from unauthorized use.

• Copyright registration—protects original creative works like writings, designs, or software.

• Patent registration—offers exclusive rights to your inventions for a limited time period.

Registering your intellectual property with the US Patent and Trademark Office (USPTO) can prevent unauthorized usage and safeguard your brand. A lawyer specializing in intellectual property law can guide you through the registration process and answer any questions.

4. What Contracts Do I Need in Place?

Building strong legal foundations requires well-drafted contracts. Standard contracts you might need include:

• Vendor agreements—outline payment, delivery, and product quality terms with suppliers or vendors.

• Non-disclosure agreements (NDAs)—protect confidential information shared with potential investors or partners.

• Employee contracts—establish clear expectations regarding job duties, compensation, and intellectual property ownership rights.

• Independent contractor agreements—specify the scope of work, payment terms, and independent contractor classification, which is necessary to avoid misclassification as employees.

Investing in well-crafted contracts prevents misunderstandings and protects your company's interests in the long run.

5. How Do I Comply with Employment Laws?

Employment laws govern your relationship with your employees. These include rules regarding minimum wage, overtime pay, discrimination, and workplace safety. Failing to comply with the following regulations can result in hefty fines and legal trouble:

• Minimum wage and overtime—ensure you pay employees according to federal and state minimum wage and overtime regulations.

• Anti-discrimination laws—these prohibit discrimination based on race, religion, gender, age, and other protected characteristics.

• Workplace safety regulations—provide a safe and healthy work environment for your employees.

Understanding and abiding by these federal and state employment laws reduces legal risks, guarantees fair treatment of your employees, and fosters a positive work environment.

6. What Insurance Options Should I Explore?

Business insurance provides a financial safety net in case of unforeseen circumstances. Common options include:

• General liability insurance—covers property damage, bodily injury claims from third parties, and legal expenses.

• Errors and omissions (E&O) insurance—also known as professional liability insurance, protects against negligence claims related to your services.

• Workers' compensation insurance—protects employees in case of work-related injuries or illnesses.

Tailoring your insurance coverage to your venture's needs is necessary to adequately protect you and your company.

7. What Tax Considerations Should I Be Aware Of?

Understanding your tax obligations is essential. Your company may be subject to federal, state, and local taxes. You'll need to determine which taxes you're responsible for, how much to set aside, and the filing deadlines. Consider consulting a tax professional for guidance.

8. What Data Privacy and Security Laws Apply to My Business?

Data privacy concerns are at the forefront in the digital age. Depending on the type of data you collect from customers (such as email addresses and credit card information), you may need to comply with data privacy and security laws, including:

• The General Data Protection Regulation (GDPR)—applies to businesses collecting data from European Union (EU) residents.

• The California Consumer Privacy Act (CCPA)—offers California residents certain rights regarding their personal data collected by businesses.

To gain customer trust, familiarize yourself with relevant data protection laws and implement robust security measures.

9. What Should I Do If I Get Sued?

While unpleasant to consider, lawsuits are a very real possibility in the business world. A contingency plan can help you navigate such situations effectively. This may involve incorporating an organizational structure that offers liability protection and considering business insurance policies that cover legal costs. Consider consulting with a lawyer to discuss risk mitigation strategies and understand your options in case of a lawsuit.

10. What Other Legal Considerations Should I Account For?

As your venture grows and evolves, new legal considerations may arise. Consider potential future scenarios, such as raising capital from investors, acquiring another company, or expanding to new locations. Understanding the legal implications of these situations will help you make informed decisions along your entrepreneurial journey.

Don't Ignore the Legal Aspect of Business Ownership

While these ten questions form a solid starting point, legal matters are complex. Seeking advice from a qualified business lawyer is invaluable. They can provide comprehensive advice tailored to your company model, industry, and location.

If you're wondering about your next steps, Bizee offers business tools to help you make informed decisions, protect your assets, and confidently enter the world of entrepreneurship.