Starting and running a successful business requires more than just a great idea, passion, and hard work. As an entrepreneur, you also need to have a solid grasp of the legal landscape if you want to avoid potentially costly mistakes. Though legal matters may seem dull or intimidating, understanding the basics can empower you to make smart decisions and confidently lead your venture forward.

In this article, we’ll explore three crucial areas of business law that all entrepreneurs should familiarize themselves with.

Understanding Business Legal Structures

One of the first legal decisions you’ll make as an entrepreneur is choosing what type of business entity to form. Each structure has its own set of pros, cons, and legal implications. Take the time to carefully consider each option before deciding which is best for your unique situation.

Sole Proprietorship

The simplest structure with the least paperwork is a sole proprietorship. You and your business are essentially one and the same. The upside is that you have complete control and get to keep all profits. The downside is you also assume unlimited personal liability for the business. This means your personal assets are at risk in the event of debts, lawsuits, or bankruptcy.


If you plan to co-own a business, you can form a partnership. General partnerships don’t provide liability protection – partners can be held responsible for each other’s actions. Limited partnerships allow some partners to have limited liability, but they require more administrative upkeep.

Partnerships can be complex from a legal perspective and usually require drafting an agreement spelling out ownership stakes, responsibilities, decision-making powers, and other details.

Limited Liability Company (LLC)

LLCs provide the liability protection of a corporation with the pass-through taxation of a partnership or sole proprietorship. Profits and losses pass through to the owners’ personal tax returns. Compared to corporations, there are fewer regulations and reporting requirements for LLCs, making them a popular choice for small businesses.

The downside is that LLCs offer less structure and credibility compared to corporations. They also provide less protection if someone claims you are personally liable for the company’s actions.


Corporations protect owners from personal liability and allow for greater access to financing options. However, corporations require extensive record keeping, reporting, and formalities to remain compliant (eg – holding board meetings, recording meeting minutes, issuing stock, filing annual reports).

C-corps pay taxes on corporate income and owners pay additional taxes on dividends. S-corps provide pass-through taxation without the strict formalities of a C-corp. Overall, corporations are best suited for larger, more complex businesses.

Protecting Your Intellectual Property (IP)

Your company’s IP, such as trademarks, copyrights, and patents, make up a valuable intangible asset you should take steps to legally protect. Here are some key methods:

  • Trademarks – Registering your business name, logo, and other brand identifiers as trademarks ensures others can’t use or benefit from your branding. Conduct trademark searches to identify potential conflicts early on.
  • Copyrights – Your written works, graphics, websites, photographs, videos, and other creative elements are copyrighted by default. However, you should still include copyright notices where applicable to give legal weight to claims in infringement lawsuits.
  • Non-disclosure Agreements (NDAs) – Require partners, employees, contractors and anyone else with access to sensitive information to sign these confidentiality contracts that prohibit them from sharing proprietary details, ideas, and trade secrets.
  • Patents – Patents provide exclusive rights to commercialize and profit from inventions and new technologies. The application process is complex, so seek legal assistance to avoid missteps.

Handling Day-to-Day Business Legalities

As your company grows, a whole new set of legal obligations emerges that you must handle properly. Here are some of the most common:

  • Contracts – Formal agreements with suppliers, clients, lenders, and other parties are at the heart of many business relationships. Pay close attention to the terms and never sign a contract before understanding the implications. Consider having an attorney review significant contracts.
  • Employment Law – There are many laws pertaining to hiring, compensation, benefits, termination, discrimination, safety, family leave, and more that must be followed. Consult with HR professionals or legal counsel to avoid noncompliance. Using solid employee agreements and policies shows you value legal protections.
  • Taxes – As a business owner, you must pay various federal, state, and local taxes. Hire an accountant to ensure you meet all filing, reporting, and payment obligations for taxes like payroll tax, sales tax, excise tax, and income tax.
  • Insurance – Certain policies like general liability insurance and errors and omissions insurance help cover legal costs in the event of mishaps like third-party bodily injury or professional mistakes. Work with an insurance broker to properly assess your risks.
  • Regulations – Your industry may be subject to special regulations surrounding issues like data privacy, environmental protection, workplace safety, quality standards, and more. Regulatory non-compliance can lead to hefty fines or business disruptions, so make compliance a priority.


While not necessarily glamorous, gaining a working knowledge of the key legal considerations in areas like business structures, intellectual property, and general compliance will help lay a strong foundation for your venture. Don’t let legal details intimidate you. Instead, approach them as empowering information to help you make shrewd decisions and take the right actions to move your business vision forward. With the right legal preparations, you can step into your entrepreneurial journey with greater confidence.

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