How to Start a Small Business: 8 Basic Legal Requirements

Many people would tell you that “In order to succeed, you need to take some risks.” But putting your business legalities on the line isn’t ideal. It might even cost you a fortune to recuperate the loss.

Moving into this competitive market without adequate knowledge of the legal obligations of running a business may overthrow the company’s fundamental foundation. Also, a large portion of the regulations involved will be determined by the nature of your business, and some industries are more policy-constrained than others. Therefore, you must ensure that you meet all legal requirements for your new endeavor so that you can concentrate on business growth. Fortunately, businesses of all types can now access a wealth of legal information through hired legal counsel and online sources.

Take this guide as an example for learning about the necessary legal requirements for starting a business. Checking these eight requirements off your to-do list will help you avoid breaking any laws. The sooner you take care of these details, the sooner you can get back to doing your best: selling your service.

So, let’s get into it.


First off, hire competent legal help

It’s always wise to hire and work with lawyers for such complex legal issues. But unfortunately, startups are almost always so concerned with costs that they ignore the value of sound legal advice. However, the truth is that hiring legal help from day one could help you save thousands, if not millions, of dollars in the long run. Ideally, you should hire a qualified attorney who specializes in employment law, contract law, securities law, and other types of law. For instance, if you operate a construction business, seek legal help to discuss the repercussions of using harmful construction materials (such as asbestos) on employees’ well-being and your reputation. It’s always best to approach nearby attorneys to have such matters sorted out.

Furthermore, you could hire a “general counsel” on your staff. But you can always distribute the work among different attorneys and firms, and the expense will be well worth avoiding legal trouble.

Don’t ever forget to register your business

Planning corporate strategy, structure, and other aspects will not yield results unless your company is registered. So, pick a name that resonates with your company’s services and is distinct, as it will be reflected in your brand. Check if your business/company name has already been claimed; otherwise, you may face legal consequences.

There are four main ways to name your company, each with advantages and disadvantages.

  • A domain name is a method of claiming your company’s web address.
  • Then there’s the trademark, which legally protects businesses on a federal level.
  • A valid entity name honestly helps protect your business at the state level.
  • DBA (Doing Business As)doesn’t offer your startup legal protection.

Get insured

Once you’ve registered your business, you must safeguard it if something goes wrong. Employer liability insurance is mandatory by law for all companies (unless you have no workers or only hire family members). It helps cover any compensation costs if an employee is injured or falls ill. Commercial auto insurance is also necessary if employees will be driving. You may need to apply for permits if you will be playing music or serving food.

Furthermore, professional indemnity insurance is a legal requirement for businesses such as architects, solicitors, and some healthcare professionals. It covers the cost of any remuneration paid to customers due to any damage or loss caused by negligent behavior. Some insurance policies are optional, such as cyber insurance (to guard against data breaches or hackers) and commercial property insurance.

Overlook documentation

Based on the nature of your service and its location, you may require specific business permits and licenses from your country, city, or state. There are numerous types of claims, permits, and registrations. Examples are building permits, local business licenses, permits for home-based businesses, industry-related permits, fire permits, liquor licenses, and other permits.

Health and security 

Businesses with six or more employees must have a documented safety and health policy. It should outline your goals for sustaining a safe workplace, how you plan to achieve them, and who is willing to take responsibility. You will also need to conduct a risk assessment to define any potential sources of injury or harm in your place of work. Also, consider the more vulnerable employees, such as those with disabilities, as they may be more susceptible to injury.

Create a business bank account

From a legal standpoint, finance is an essential component of the business. Hence, creating a business account is not only necessary but also convenient. Furthermore, it is critical to keep business and personal income separate. Provide the following information to open a business account for your startup:

  • EIN (Employer Identification Number)
  • Business license
  • Business formation document
  • Ownership agreement document

Safeguard your intellectual property (IP)

Many businesses rely heavily on intellectual property. Copyrights, trade secrets, patents, and trademarks are all examples of intellectual property. Ensure to file any patents as soon as possible, as the process can take five years. Defending your intellectual property will appeal to investors, and it will also allow you to sleep better at night. Having preferential rights to highlight your work will make your life much easier in the long run. It will also ensure that no one tries to pull the rug out from under you regarding intellectual property.

Abide by all the laws and regulations

Even as a startup owner, you are subject to some of the same laws and regulations as huge companies. These include laws governing marketing, finance, privacy, and advertising. Additional federal and state restrictions may apply to businesses with employees, depending on the circumstances. Examine and comprehend which of these laws may apply to your company. Furthermore, all startup businesses must ensure that they are free of contractor misclassification issues. That is a danger not only to small businesses but also to their customers.


That concludes our list of essential legal requirements you must consider when starting a business. Once you’ve met the legal requirements for forming your business entity, you’re ready to go. Even if you know someone who might be able to cut you some slack with the legal stuff, you still won’t be able to run your business smoothly for long. Remember that your most valuable asset is preparation—the better prepared you are for launch, the more likely your business will flourish.


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