8 Legal Tips When You Start a Business


So you’ve decided to start a new business, time to make a to-do list. There are several important steps to complete to ensure that your business is properly established and meets legal requirements. We’re here to help make sure you get all your boxes checked off correctly.

Here are 8 legal requirements to add to your to-do list when starting a business.

1. Create a legal business entity

The first responsibility of establishing your business is to determine your business structure. The most common options are to establish an LLC or corporation. There are advantages and disadvantages to both options.

  • LLC: A limited liability company protects its owners from personal liability. This means that if your business goes into debt, gets sued, or files for bankruptcy, your personal assets will not be at risk. An LLC allows you to file your business income as personal income.
  • Corporation: A corporation, on the other hand, is legally separate from its owners. They offer the greatest protection from personal liability but are more expensive and more difficult to form.

2. Register your business name

You should choose a name that reflects your business and brand. It should be something unique to you that is not already claimed by someone else. After all, it wouldn’t make sense for there to be two different tech brands named Apple. There are four ways to register your business name, each serving a different purpose.

  • Entity name: protects your business at a state level
  • Trademark: protects your business at a federal level
  • DBA (Doing Business As): allows a business to operate under a name different from its legal name
  • Domain name: claims your business’s website name

3. Apply for a federal tax ID number

Your federal tax ID number, also known as your Employer Identification Number (EIN), enables your business to pay taxes, hire employees, apply for a business license, and open a business bank account. You can apply for an EIN via the IRS site.

4. Determine if you need a state tax ID number

Whether or not you need a state tax ID number depends on what state your business is operating in. Tax obligations vary from state to state and determine whether your business may be responsible for paying state taxes. The best way to determine if your business needs a state tax ID number is to visit your state’s website.

5. Obtain business permits and licenses

You will need to apply for business licenses on a federal and state level regardless of your industry. But depending on the industry that you’re in you may need additional permits or licenses as well. The U.S. Small Business Administration has a list that details all industry-specific licenses that may apply to your business.

6. Protect your business assets with insurance

Your business structure will play a role in your level of personal liability but insurance takes it one step further to make certain that you’re protected when personal liability isn’t enough. Some types of insurance, like unemployment and disability insurance, are required by law. But others are just a good idea to protect yourself from risk. A few types of helpful business insurance include:

  • General liability insurance: provides insurance for general business risk including bodily injury, property damage, advertising injury, copyright infringement, and reputational harm
  • Product liability insurance: protects your business from financial and legal consequences as a result of bodily injury or property damage due to the use of your business’s sold goods or products
  • Commercial property insurance: protects your company's physical assets from fire, explosions, burst pipes, storms, theft, and vandalism

7. Open a business bank account and connect it to a bookkeeping software

Separating your personal and business finances from the get-go is beneficial from a legal perspective. You can choose a bank that meets your individual needs. Connecting your business bank account to a bookkeeping software will help track income, ensure statutory compliance, and provide investors, management, and government with detailed financial information to be used in business decisions.

8. Consult a professional

To ensure that you’ve covered all of your bases in establishing your business the right way, it’s a good idea to consult a professional for advice. Consider sitting down with a lawyer to confirm that your business is established correctly from a legal standpoint. It’s also a good idea to talk to an accountant to ensure your finances are in compliance with operating standards.

When starting a business it’s essential that all necessary steps are completed to ensure the legality of your business. Bringing on an attorney to help you through the process of establishing your business can help avoid the potential risk associated with building a business. Contact our experienced team at @VirtualCounsel for support in launching your business.


The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.

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