If you feel in over your head when it comes to understanding the legal requirements for starting a business, you’re not alone. 

It can feel like there are a million steps. A gazillion boxes to tick.

And you’re terrified that if you miss one of them, something terrible will happen. Like getting sued or having the IRS come after you.

*Cue panic*

😰

Legal Requirements For Starting A Business

Your mind is most likely swirling with questions. 

Ones like:

When should I apply for my trademark?

Do I need a copyright registration?

Should I register my business?

What’s an EIN and do I need it? If so, when should I get it? 

Do I need contracts and who do I need them with?

If you’re completely lost when it comes to legally setting up your business, you’re in the right place, friend.

We’re going to give you a step-by-step overview, without making it complicated. In a few minutes, you’ll know exactly what you must do to legally set up your small business. (And when to do it, too!)

What We’ll Cover:

  • Create Written Contracts
  • Set Up A Business Entity
  • Separate Your Finances
  • Avoid Trademark Infringement

Let’s get started. 👇

How Much Does It Cost to Legally Set Up Your Business? 

First things first, let’s talk about what’s probably on your mind.

How much is this going to cost me? 

One of the biggest fears many small business owners have is that the legal costs associated with starting a business are going to break the bank. 

If you’re just starting your business, you need to be able to assess what you’re able to financially invest. If you’re working a job right now, then while you put the pieces in place for your business, begin to save up some funds.

You want to have as much saved up as possible so you can have a safety net in place. This way, you can confidently say you’ll be able to cover your minimum living expenses while you’re in growth mode. 💪

Ultimately, when it comes to your legal foundation, you want to have at minimum between $1-2k saved to cover the legal requirements of starting your business. However, you should keep in mind that it depends on your type of business.

That will cover both your contracts and setting up a business entity, which are two must-have pieces of the legal puzzle!

Now, let’s take a closer look at the puzzle.

There is a ton more you can do to (legally) set your business up for success. Like, obtaining your business licenses and permits, employment taxes, getting professional liability insurance, or receiving your employer identification number (EIN).

These are all things you may need when starting your business, but it all depends on your business structure.

But we don’t want to overwhelm you! 

By sticking to these four core legal requirements, you’ll make sure you’re meeting the bare minimum basics so that your business is legally legit.

(And you can say goodbye to nightmares about getting sued once and for all 😅👋)

Legal Requirement #1: Create Written Contracts

Remember the golden rule of business.

You must have a written agreement in place with anybody that you enter into a professional relationship with.

  • If you’re doing business with someone
  • If there’s a transaction taking place
  • If you’re exchanging money or services

Just like the other two legal requirements, you want to have written contracts ready to go before a client says “yes” to your offer. Trust us, the last thing you want is a potential client waiting in your inbox because you’re scrambling to legally protect your business.

💡 Side note: This isn’t about working with clients you can’t trust. It’s about structuring your business in a way that keeps everyone clear, honest, and feeling good about the work relationship.

While most people realize they need an agreement with their clients, they might not realize they need a contract for podcast guests or affiliates.

No matter who you’re entering into a business relationship with, get the terms of the relationship in writing.

You want to make sure there’s a contract in place so both parties are *crystal clear* on what everyone’s obligations and expectations are. 

Never skip this important step!

Are you an online coach? Check out this post for 13 must-have clauses in your coaching contract.

Legal Requirement #2: Set Up A Business Entity

The next step to protect your new business is to set up a business entity.

This helps provide separation and liability protection of your personal life

This means that if things ever go sideways in your business, your personal assets won’t be on the hook! 🤗

Setting up a business entity (usually either an LLC or corporation) is relatively easy to do, and can be done online for just a few hundred dollars. 

Unsure of what business structure you need? Learn about the main differences between an LLC and a corporation here. 

Setting up your LLC or corporation can easily be done on your secretary of state’s website or your local jurisdiction’s website.

Legal Requirement #3: Separate Your Finances

Once you officially form your business entity, the next step is retrieving an EIN, which stands for an employer identification number. 

The details about your entity formation and your EIN are key to opening a business checking account, so that you can create financial separation. 

It’s not enough to simply create a separate business entity. You have to treat them as totally separate entities as well, and the way you can do that is by avoiding any co-mingling of finances.

That means no more dipping into your personal account for business expenses and vice-versa! 🙅‍♀️

Legal Requirement #4: Don’t Infringe on Someone’s Trademark

Your trademark is your brand name or the name of your signature program or offer. 

If you’re just starting your business, you might not quite be ready to register your trademark.

Regardless of having your own trademark or not, you absolutely can’t forget this: Make sure you’re not infringing on anyone else’s trademark.

The last thing you want to do is put all this work into building a brand, only to have to rebrand years later because you’ve infringed on another business’s legally filed trademark. And potentially owe thousands in legal fees, too. 😬

To make sure you’re in the clear with your brand name, you can do a quick search on the US patent trademark office’s website.

All you need to do is head to the search bar and enter, “basic trademark search” to avoid any potentially messy legal situations.

Now that we’ve covered your top four legal requirements, you might be wondering when you should make this all happen.

How Soon Should I Start Planning the Legal Stuff Before Launching My Business?

First of all, if you haven’t launched your business yet, then you’ve met us at the right time! (Nice to meet you! We’re your new legal besties! 🥰)

Since you’re wondering about timelines, we want to emphasize this: The legal side of your business ties right into your business plan.

What we mean is that as soon as you come up with an offer you want to deliver to the public, you should start thinking about the legal requirements of delivering that offer. Just like you would dedicate time to designing your brand before launching your website, it’s also important to make time for the legal stuff…without rushing it! ⌛

Ready for a more specific answer?

It’s a good idea to give yourself about two months for business planning, especially because you’ll need time to conduct research, file documents, create contracts, and open your business bank account.

Remember how we talked about saving $1-2k for legal requirements? Look at the amount of time you need to save that money, and add on about two months for business planning.

Bonus Tip: If you’re starting your business while working a full-time job, then you may want to increase this timeline, so nothing about your business launch feels scattered.

What We Covered

We are super excited about your new entrepreneurial path! Before making it official, be sure to meet these top legal requirements for starting a business:

  • Save $1-2k for the legal requirements of starting your business.
  • Create written contracts before starting new business relationships.
  • Set up a business entity so you can separate your personal and business finances.
  • Separate your finances by opening a business checking account.
  • Name your business and your offers in a way that avoids trademark infringement.
  • Begin this process at least two months before you want to launch your business.

Regulations may vary from state to state, so remember to double-check the laws within your state or contact a local attorney for more information!


Check out our ready-to-use, lawyer-approved, plug-and-play legal contract templates, so you can upgrade your client contract while staying Protected & Profitable™✨

Not sure where to begin? We’ve got you. Grab our FREE Legally Launch Guide to get the legal lowdown on everything in entrepreneurship, without the confusing mumbo jumbo. We’re serving it up straight and to the point. (Heads up: It’ll forever transform the way you view your client relationships!) Grab your copy now!

*The information presented in this blog post is for educational & informational purposes only. This should not be a substitute for customized legal advice from a licensed professional in a private setting. If you need legal advice, please consult with an attorney. This is not a law firm.

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