Legal Must-Dos When Starting a Small Business

Though starting a small business can be filled with opportunities, it also comes with important legal responsibilities. Whether you’re launching a solo venture or building a startup with partners, overlooking key legal steps can lead to costly setbacks down the road.

To set yourself up for long-term success and to ensure compliance with all applicable laws and regulations, there important legal issues you should understand when getting started.

What You Must Do When Starting a Business

1. Choose the Right Legal Structurep

One of the first—and most important—decisions you’ll make is selecting the right legal entity for your business. Your choice impacts everything from personal liability and tax treatment to management flexibility and regulatory compliance.

The most common structures include:

• Sole Proprietorship: Simple to set up, but offers no liability protection
• Partnership: Shared ownership, but each partner may be personally liable for business debts
• Limited Liability Company (LLC): A balance of liability protection and pass-through taxation
• Corporation: More complex, with stricter compliance and potential double taxation, but ideal for businesses seeking outside investment

2. Register Your Business Name

You’ll need to select and register your business name. This step ensures you have the legal right to operate under your chosen name and helps protect your brand identity.

In most states, if your business is using a name other than your personal name or legal entity (LLC, corporation) name, you must file a “Doing Business As” (DBA) form or otherwise register your business name with your state or county.

Before filing, conduct a search to ensure the name isn’t already in use or trademarked by another entity. A trademark search through the U.S. Patent and Trademark Office (USPTO) can help avoid future infringement issues. Additionally, your state should have a database of business names already being used.

3. Obtain Necessary Licenses and Permits

Many businesses require some form of licensing or permitting to operate legally. The specific requirements depend on your industry, business activities, and location.

For example:

• A restaurant typically needs permits from the health department.
• Daycare operations customarily require licensing and/or permit

4. Understand Your Tax Obligations

Compliance with tax laws is non-negotiable for any legitimate business. At the federal level, most businesses must obtain an Employer Identification Number (EIN) from the IRS, even if they don’t have employees.

Beyond that, you may be responsible for:

• Sales tax collection and reporting (depending on your state)
• Self-employment taxes
• Estimated quarterly tax payments
• Payroll taxes if you hire employees

5. Comply With Employment Laws

Bringing on staff—whether full-time employees or independent contractors—requires a clear understanding of federal and state labor laws that govern classification, compensation, and workplace rights. Key issues include the following:

• Understanding how employment law defines employees versus independent contractors, as misclassifications can expose your business to audits, back taxes, and legal disputes.
• Knowing about required benefits, wage notices, and the rules regarding overtime pay
• Following regulations for maintaining a safe workplace environment and complying with OSHA standards
• Carrying workers’ compensation insurance, even for a single employee

Federal laws, such as the Fair Labor Standards Act (FLSA), apply nationwide; however, additional state-specific regulations often provide further protections—consult an employment law attorney to ensure full compliance.

6. Protect Your Intellectual Property

Safeguarding your brand and creations early on is vital. Intellectual property (IP) law provides legal tools to protect your business from imitation and theft.

• Trademarks protect business names, logos, and slogans.
• Copyrights safeguard original content, including websites, written materials, and designs.
• Patents protect inventions and technical processes.

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