Legal Matters You Need to Know When Starting a Business

Starting a business is no small task. You need to know many legal matters to make sure your company is set up and running legally. Not complying with legal requirements or not even knowing what to comply with can put your business at risk.

One of the most crucial things you must do when planning to start a business is find an experienced commercial lawyer to advise you. You will need to work with this lawyer throughout the life of your business to ensure that you meet all your legal responsibilities. You also need legal assistance in ensuring that all your rights are protected.

This article will discuss some of the most important legal matters you need to be aware of when starting a business and for which you need legal guidance.

Legal Structure

One of the most important legal aspects of starting a business is choosing the proper business structure. This will determine how much tax you pay, your personal liability, and the amount of paperwork you have to do. The most common structures for small businesses are sole proprietorships, partnerships, limited liability companies.

Sole Proprietorship

This is the simplest and most common type of business structure. A sole proprietor is someone who owns and operates a business by themselves. The owner has complete control over the company and is solely responsible for its debts and liabilities.


A partnership is a business owned by two or more people. Partners share responsibility for the company’s debts and liabilities, as well as profits and losses.

There are two types of partnerships: general partnerships and limited partnerships. In a general partnership, all partners have equal management rights and responsibilities. In a limited partnership, there is at least one partner with limited liability who does not take an active role in running the business.


A corporation is a legal entity that is separate from its owners. The owners, called shareholders, have limited liability, meaning they are not personally responsible for the debts and liabilities of the company.

There are two types of corporations: C corporations and S corporations. C corporations are the most common type of corporation. They are subject to double taxation, meaning the company’s profits are taxed first, and then shareholders are taxed on their dividends. S corporations are not subject to double taxation.

Limited Liability Company (LLC)

An LLC is a business structure that combines features of both partnerships and corporations. LLCs have the limited liability protection of a corporation, but they are taxed like partnerships. Owners of an LLC are called members.

Choosing the right business structure is a complex decision that depends on many factors, including the size and type of business, the number of owners, and how the business will be managed. You should consult with a lawyer to decide which business structure is best for your company.

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Employment Laws

Employment law is another area you need to be familiar with when starting a business. Employment laws regulate the relationship between employers and employees. These laws cover things like hiring, firing, wages, hours, and working conditions.

Federal and state governments both have employment laws. The federal government’s main employment law is the Fair Labor Standards Act (FLSA). The FLSA sets standards on minimum and overtime wages and child labor. Some states have their own employment laws that provide additional protections for employees.

When starting a business, you need to make sure you comply with all applicable employment laws. Failure to do so can result in costly penalties. You should consult with a lawyer to make sure you are in compliance with all relevant laws.

Intellectual Property

Intellectual property covers mental outputs like inventions, creative works, images, symbols, and unique names used in business. There are four types of intellectual property covered by intellectual property laws: trademarks, copyrights, patents, and trade secrets.


A trademark identifies and distinguishes the source of goods or services through a symbol, design, word, or phrase. Trademarks can be registered with the federal government. Registration gives the owner exclusive rights to use the trademark in connection with their goods or services.


Copyrights protect original works of authorship, such as books, movies, music, and artwork. Copyright registration is not required, but it does give the owner certain legal advantages.


Patents protect inventions and allow the owner to exclude others from making, using, or selling the invention for a limited time. There are three types of patents: utility patents, design patents, and plant patents.

Trade Secrets

A trade secret is any information that has commercial value and is not generally known to the public. Trade secrets can include things like formulas, patterns, compilations, programs, devices, methods, techniques, and processes.

To protect a trade secret, you must take steps to keep it secret. This includes things like restricting access to the information and requiring employees to sign nondisclosure agreements.

Businesses need to be aware of intellectual property laws to avoid infringing on the rights of others and to protect their own creations. You should consult with a lawyer to make sure you are in compliance with all relevant laws.

There are many other legal considerations when starting a business. This is just a brief overview of some of the most important ones. For more information, consult with a lawyer or visit the Small Business Administration’s website.