Starting a small business in 2025 offers incredible opportunities, but the legal checklist for starting a small business can feel overwhelming. Missing critical legal steps doesn’t just create headaches—it can result in expensive fines, lawsuits, or even force your business to close before it truly begins.
This comprehensive legal checklist for starting a small business walks you through every essential step, from choosing your business structure to protecting your intellectual property. Whether you’re launching a local service business, an online store, or a consulting practice, following this legal checklist for starting a small business ensures you build on a solid foundation from day one.
According to the U.S. Small Business Administration, proper legal setup is one of the top factors that determine whether a business survives its first five years. Let’s make sure yours does.
Why Legal Compliance Matters More Than Ever in 2025
The regulatory environment for small businesses continues to evolve. Data privacy laws are stricter, employment regulations are more complex, and consumer protection standards are higher than ever before. What worked for businesses ten years ago may no longer be sufficient—or even legal.
Ignoring the legal checklist for starting a small business can lead to:
- Civil penalties ranging from hundreds to tens of thousands of dollars
- Personal liability if your business structure doesn’t protect your assets
- Lawsuits from employees, customers, or competitors
- Business closure mandated by local or state authorities
- Difficulty securing funding when investors or lenders discover compliance gaps
The good news? Most legal requirements are straightforward when you know what to look for. This legal checklist for starting a small business breaks down everything into manageable steps.
Step 1: Choose Your Business Structure Carefully
Your business structure determines your tax obligations, personal liability exposure, and how you can raise capital. This decision affects everything from daily operations to long-term growth potential.
Common Business Structures Explained
Sole Proprietorship
- Simplest and least expensive to establish
- You and your business are legally the same entity
- All business income is taxed as personal income
- Major drawback: You’re personally liable for all business debts and legal issues
Partnership (General or Limited)
- Two or more people share ownership
- Profits and losses pass through to partners’ personal tax returns
- General partners have unlimited personal liability
- Limited partners have liability protection but less control
Limited Liability Company (LLC)
- Separates your personal assets from business liabilities
- Flexible tax treatment (can be taxed as sole proprietorship, partnership, or corporation)
- Less paperwork than corporations
- Best choice for most small businesses due to liability protection and tax flexibility
Corporation (C-Corp or S-Corp)
- Separate legal entity from owners
- C-Corps face double taxation (corporate and personal levels)
- S-Corps allow pass-through taxation with ownership restrictions
- Required for businesses seeking venture capital or planning to go public
- More complex regulations and ongoing compliance requirements
Making the Right Choice
For most small business owners in 2025, an LLC offers the best balance of protection, flexibility, and simplicity. However, your specific situation matters.
Consider an LLC if you want personal asset protection, prefer simpler taxes and paperwork, or you’re a solo entrepreneur with a few partners.
Consider a Corporation if you plan to raise significant investment capital, want to issue stock to employees, or you’re building a business you plan to sell or take public.
Pro Tip: Consult with a business attorney or CPA before finalizing your decision. The right structure can save you thousands in taxes and protect your personal wealth. A one-hour consultation now can prevent costly mistakes later.
Step 2: Register Your Business Properly
Once you’ve chosen your structure, you need to make it official. Business registration requirements vary by state, but the process generally follows these steps.
Essential Registration Steps
1. Choose and Verify Your Business Name
- Search your Secretary of State’s business name database to ensure availability
- Check if the domain name is available for your website
- Verify the name doesn’t infringe on existing trademarks
- Consider reserving the name if you’re not ready to file immediately
2. Register with Your State
- File Articles of Organization (for LLCs) or Articles of Incorporation (for corporations)
- Pay filing fees (typically $50-$500 depending on your state)
- Designate a registered agent to receive legal documents
- Complete registration online through your Secretary of State’s website
3. File a DBA (Doing Business As) if Needed
- Required if you operate under a name different from your legal business name
- Example: “Sarah Johnson LLC” doing business as “Johnson Marketing Solutions”
- Filed at the county or state level
- Costs typically $10-$100
4. Obtain Your EIN (Employer Identification Number)
- Free federal tax ID number from the IRS
- Required if you have employees, operate as a corporation or partnership, or meet other IRS criteria
- Apply online at the IRS website—takes about 15 minutes
- Necessary for opening business bank accounts and filing business taxes
The Internal Revenue Service provides detailed guidance on obtaining an EIN at https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online, which is essential for your legal checklist for starting a small business.
Timeline and Costs
Most business registrations are completed within one to two weeks, though some states offer expedited processing for additional fees. Budget $100-$800 for initial registration costs depending on your state and business structure.
Step 3: Secure All Required Licenses and Permits
Operating without proper licenses and permits is one of the fastest ways to get your business shut down. Requirements vary dramatically based on your industry, location, and business activities.
Types of Licenses and Permits
General Business License
- Required by most cities or counties
- Confirms you’re authorized to operate within that jurisdiction
- Annual renewal typically required
- Cost: $50-$400 depending on location
Professional or Occupational Licenses
- Required for specific professions (real estate agents, contractors, cosmetologists, accountants)
- Issued by state licensing boards
- May require education, exams, or experience verification
- Renewal periods and continuing education requirements vary
Sales Tax Permit
- Mandatory if you sell physical products or taxable services
- Allows you to collect and remit sales tax
- Obtained from your state’s tax agency
- Usually free or low-cost
Health Department Permits
- Required for food service, food production, or childcare businesses
- Involves facility inspections
- Strict compliance with health and safety codes
Zoning and Land Use Permits
- Ensures your business location is properly zoned for your activities
- Required before opening a physical location
- Home-based businesses often need home occupation permits
Building and Construction Permits
- Necessary for renovations, new construction, or significant modifications
- Ensures work meets building codes and safety standards
Environmental Permits
- Required if your business handles hazardous materials or could impact the environment
- Regulated at federal, state, and local levels
How to Find What You Need
The Small Business Administration offers comprehensive licensing resources at https://www.sba.gov/business-guide/launch-your-business/apply-licenses-permits, which should be part of every legal checklist for starting a small business. Simply enter your business type and location to get a customized list of required licenses and permits.
You can also contact your local Chamber of Commerce or Small Business Development Center for guidance specific to your area.
Warning: Operating without required licenses can result in fines, business closure, and difficulty obtaining licenses in the future. Some violations can even lead to criminal charges in extreme cases.
Step 4: Create Essential Legal Documents
Written agreements protect your business interests and prevent costly disputes. Even if you’re starting solo, certain documents are non-negotiable in your legal checklist for starting a small business.
Core Legal Documents Every Business Needs
Operating Agreement (for LLCs)
- Outlines ownership percentages and member responsibilities
- Details how profits and losses are distributed
- Establishes procedures for adding or removing members
- Defines decision-making processes
- Important: Even single-member LLCs should have one to maintain liability protection
Partnership Agreement
- Similar to an operating agreement but for partnerships
- Clarifies each partner’s capital contribution
- Specifies profit-sharing arrangements
- Addresses dispute resolution procedures
- Outlines exit strategies
Corporate Bylaws (for Corporations)
- Establishes corporate governance rules
- Defines officer and director roles
- Sets meeting requirements and voting procedures
- Required by most states for corporations
Employment Contracts and Offer Letters
- Specifies job duties, compensation, and benefits
- Includes termination conditions
- May contain non-compete or non-solicitation clauses
- Ensures both parties understand the employment relationship
Independent Contractor Agreements
- Critical for distinguishing contractors from employees
- Defines scope of work and deliverables
- Establishes payment terms
- Addresses intellectual property ownership
- Helps avoid misclassification penalties
Non-Disclosure Agreements (NDAs)
- Protects confidential business information
- Used with employees, contractors, and business partners
- Specifies what information is confidential
- Defines consequences of disclosure
Client Service Agreements
- Outlines services you’ll provide
- Sets clear expectations on deliverables and timelines
- Establishes payment terms and cancellation policies
- Limits your liability
- Includes dispute resolution procedures
DIY vs. Professional Help
Basic templates are available through various online legal services. However, having an attorney review or customize documents for your specific situation is often worth the investment, especially for multi-member LLCs, partnerships, businesses with complex ownership structures, high-risk industries, or agreements involving significant money or intellectual property.
A poorly drafted contract can cost far more than an attorney’s fees when disputes arise. This is a critical component of your legal checklist for starting a small business.
Step 5: Protect Your Intellectual Property
Your business name, logo, products, and creative content may be valuable intellectual property worth protecting. Failing to secure these assets can allow competitors to legally copy your hard work.
Types of Intellectual Property Protection
Trademarks
- Protect brand names, logos, slogans, and product names
- Prevent others from using confusingly similar marks in your industry
- Federal registration through the USPTO provides nationwide protection
- Cost: $250-$350 per class of goods or services
- Protection lasts 10 years with renewal options
Registration Process:
- Search the USPTO database to ensure your mark is available
- File an application with the USPTO
- Respond to any office actions or objections
- Receive registration certificate (typically 8-12 months)
Copyrights
- Automatically protect original creative works (writing, art, music, software, website content)
- Registration with the U.S. Copyright Office provides additional legal benefits
- Required before filing infringement lawsuits
- Cost: $45-$65 for basic registration
- Protection lasts lifetime of creator plus 70 years
Patents
- Protect inventions, processes, and product designs
- Utility patents cover functional inventions (20-year protection)
- Design patents cover ornamental designs (15-year protection)
- Most expensive and complex IP protection
- Cost: $5,000-$15,000+ including attorney fees
- Application process takes one to three years
Trade Secrets
- Protect confidential business information (formulas, processes, customer lists)
- No registration required
- Protection lasts as long as information remains secret
- Requires reasonable security measures
- Use NDAs and employee confidentiality agreements
When to Seek IP Protection
Protect immediately if your brand name is unique and central to your business, you’ve created proprietary products or processes, your business relies heavily on creative content, or you operate in a competitive industry where copying is common.
You can wait if you’re still testing your business concept, your brand name is generic or descriptive, or budget is extremely tight (prioritize registration once revenue is established).
Remember: You can’t trademark generic terms or descriptive phrases. “Best Pizza” won’t be protectable, but “Flaming Crust” might be.
Step 6: Understand Employment and Labor Law Compliance
Hiring employees triggers numerous legal obligations. Non-compliance with employment laws is one of the most common and expensive mistakes small businesses make. This is a crucial part of your legal checklist for starting a small business.
Federal Employment Law Requirements
Fair Labor Standards Act (FLSA)
- Sets minimum wage requirements (currently $7.25 federal, higher in many states)
- Establishes overtime rules (time-and-a-half for hours over 40 per week)
- Defines exempt vs. non-exempt employee classifications
- Regulates child labor
Anti-Discrimination Laws
- Title VII: Prohibits discrimination based on race, color, religion, sex, or national origin
- Age Discrimination in Employment Act (ADEA): Protects workers 40 and older
- Americans with Disabilities Act (ADA): Requires reasonable accommodations
- Pregnancy Discrimination Act: Protects pregnant workers
Occupational Safety and Health Act (OSHA)
- Requires safe working environments
- Mandates reporting of serious injuries
- Applies to businesses with one or more employees
Family and Medical Leave Act (FMLA)
- Applies to businesses with 50+ employees
- Provides up to 12 weeks unpaid leave for qualifying reasons
- Protects employee’s job during leave
The U.S. Department of Labor provides comprehensive employment law resources at https://www.dol.gov/general/topics, which every business owner should bookmark as part of their legal checklist for starting a small business.
Employee vs. Independent Contractor
Misclassifying workers is a costly mistake. The IRS and Department of Labor use these factors to determine classification:
Behavioral Control
- Does the company control how, when, and where work is done?
- Does the worker use their own methods and schedule?
Financial Control
- Who provides tools and equipment?
- Can the worker earn a profit or incur a loss?
- Are expenses reimbursed?
Relationship Type
- Is there a written contract?
- Are benefits provided?
- Is the relationship ongoing or project-based?
Penalties for misclassification:
- Back taxes and penalties
- Employee benefits owed retroactively
- Potential lawsuits from workers
- Fines from $5,000 to $25,000 per violation in some cases
When in doubt, classify workers as employees or consult an employment attorney.
State-Specific Requirements
Many states have additional requirements including higher minimum wages, mandatory paid sick leave, meal and rest break requirements, stricter overtime rules, and state disability insurance.
Check your state’s Department of Labor website for specific requirements as part of your legal checklist for starting a small business.
Step 7: Obtain Appropriate Business Insurance
Insurance protects your business from financial ruin due to accidents, lawsuits, natural disasters, or other unexpected events. While insurance may seem like an unnecessary expense when you’re starting out, one uninsured incident can destroy everything you’ve built.
Essential Business Insurance Types
General Liability Insurance
- Covers third-party bodily injury and property damage
- Protects against customer slip-and-fall claims
- Covers advertising injury claims
- Typical cost: $400-$1,500 annually for small businesses
- Highly recommended for virtually all businesses
Professional Liability Insurance (Errors and Omissions)
- Covers claims of negligence, mistakes, or failure to deliver promised services
- Essential for consultants, advisors, and service professionals
- Protects against lawsuits even when you’ve done nothing wrong
- Cost varies widely based on profession and coverage limits
Commercial Property Insurance
- Covers business property (building, equipment, inventory, furniture)
- Protects against fire, theft, vandalism, and certain natural disasters
- Required by most commercial landlords
- Essential if you have a physical location or significant equipment
Workers’ Compensation Insurance
- Mandatory in most states if you have employees
- Covers medical expenses and lost wages for work-related injuries
- Protects employers from employee lawsuits related to workplace injuries
- Cost based on payroll and industry risk level
- Penalties for non-compliance include fines and potential criminal charges
Business Interruption Insurance
- Replaces lost income if your business must temporarily close
- Covers ongoing expenses during closure (rent, payroll, loans)
- Often bundled with commercial property insurance
- Became highly relevant during COVID-19 pandemic
Cyber Liability Insurance
- Increasingly important as businesses handle more customer data
- Covers data breach costs, legal fees, and notification expenses
- Protects against ransomware attacks
- Essential if you process credit cards or store customer information
Commercial Auto Insurance
- Required if you use vehicles for business purposes
- Personal auto insurance typically won’t cover business use
- Covers both owned and leased vehicles
How Much Coverage Do You Need?
Work with a licensed insurance broker who understands small business needs. They can assess your specific risk profile, recommend appropriate coverage limits, find competitive quotes from multiple insurers, and bundle policies for cost savings.
Many industries have standard coverage recommendations. Professional associations often provide guidance on typical coverage amounts for your field.
Don’t skip insurance to save money. A single lawsuit or major loss can bankrupt an uninsured business. Insurance is one investment you hope never to use but can’t afford to go without. This is a non-negotiable item on your legal checklist for starting a small business.
Step 8: Set Up Proper Recordkeeping and Accounting Systems
Organized records aren’t just good practice—they’re legally required. The IRS mandates that businesses maintain adequate records to support income, deductions, and credits claimed on tax returns.
What Records to Keep
Financial Records (Keep for 7 years)
- Bank statements and cancelled checks
- Credit card statements
- Receipts for business expenses
- Invoices and sales records
- Payroll records
- Tax returns and supporting documents
Corporate Records (Keep permanently)
- Articles of organization or incorporation
- Operating agreements or bylaws
- Meeting minutes and resolutions
- Stock certificates and ownership records
- Business licenses and permits
Employment Records (Keep 3-7 years after termination)
- Employee files and applications
- I-9 forms
- W-4 forms
- Timecards and time sheets
- Performance reviews
- Termination documentation
Contracts and Legal Documents (Keep for duration plus 7 years)
- Client agreements
- Vendor contracts
- Lease agreements
- Loan documents
- Insurance policies
Accounting System Options
Cloud-Based Accounting Software (Recommended)
- QuickBooks Online
- Xero
- FreshBooks
- Wave (free option)
Benefits: Automatic backups, accessible anywhere, built-in reporting, often integrates with bank accounts
Hire a Bookkeeper or Accountant
- Part-time bookkeeper: $20-$50 per hour
- Monthly bookkeeping service: $200-$500 per month
- Full-service accountant: $150-$400 per hour
Worth the cost if you are uncomfortable with numbers, don’t have time for financial management, have complex finances or inventory, or want expert tax planning.
Best Practice: Use accounting software for day-to-day transactions and hire a CPA quarterly or annually for tax planning and filing.
Stay Organized From Day One
Open a separate business bank account immediately. Never mix personal and business expenses. Save all receipts (use apps like Expensify or Shoeboxed). Reconcile accounts monthly. Review financial statements regularly.
Good recordkeeping makes tax time easier, helps you track profitability, and protects you during audits. This is an essential component of your legal checklist for starting a small business.
Step 9: Understand Your Tax Obligations
Tax compliance is complex, but understanding the basics helps you avoid penalties and potentially save significant money. Every legal checklist for starting a small business must include comprehensive tax planning.
Federal Taxes You May Owe
Income Tax
- Sole proprietors and single-member LLCs report business income on Schedule C of personal tax return
- Partnerships and multi-member LLCs file Form 1065 and issue K-1s to partners
- Corporations file Form 1120 (C-Corp) or Form 1120S (S-Corp)
Self-Employment Tax
- Covers Social Security and Medicare (15.3% of net earnings)
- Applies to sole proprietors, partners, and LLC members
- Paid in addition to income tax
Employment Taxes (if you have employees)
- Federal income tax withholding
- Social Security and Medicare taxes (employer and employee portions)
- Federal unemployment tax (FUTA)
- Filed quarterly using Form 941
Estimated Quarterly Taxes
- Required if you expect to owe $1,000 or more in taxes
- Due April 15, June 15, September 15, and January 15
- Calculated using Form 1040-ES
- Underpayment can result in penalties
State and Local Taxes
State Income Tax
- Most states tax business income (seven states have no income tax)
- Rules vary by state and business structure
Sales Tax
- Must be collected on taxable sales in states where you have nexus
- Nexus rules have expanded significantly for online sellers
- Rates vary by state and locality
Property Tax
- Applies to business real estate and sometimes equipment
- Assessed and collected locally
Franchise or Privilege Tax
- Annual fee some states charge for the right to operate
- Amount based on revenue, net worth, or flat fee
Tax Deductions You Shouldn’t Miss
Common deductions include home office (if you qualify), vehicle expenses (actual costs or standard mileage), equipment and supplies, marketing and advertising, professional fees (legal, accounting), business insurance, employee salaries and benefits, contract labor, travel and meals (business-related), and education and training.
Pro Tip: Work with a CPA specializing in small businesses. They typically save clients far more in taxes than they cost in fees. A good CPA also helps with tax planning strategies that minimize your burden legally.
Step 10: Comply with Data Privacy and Cybersecurity Regulations
In 2025, data privacy compliance is no longer optional. Federal and state laws impose strict requirements on how businesses collect, store, and use customer information. This is an increasingly important part of your legal checklist for starting a small business.
Key Privacy Laws to Understand
California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA)
- Apply to businesses serving California residents, regardless of where you’re located
- Give consumers rights to know what data you collect, delete it, and opt out of sale
- Require privacy policies and data security measures
- Violations can cost $2,500-$7,500 per violation
Other State Privacy Laws
- Virginia, Colorado, Connecticut, and Utah have enacted comprehensive privacy laws
- More states are expected to follow
- Requirements generally similar to CCPA
Health Insurance Portability and Accountability Act (HIPAA)
- Applies to healthcare providers and businesses handling protected health information
- Extremely strict security and privacy requirements
- Violations carry severe penalties
Children’s Online Privacy Protection Act (COPPA)
- Applies to websites or apps directed at children under 13
- Requires parental consent before collecting children’s data
- FTC actively enforces with substantial fines
The Federal Trade Commission provides detailed guidance on privacy compliance at https://www.ftc.gov/business-guidance/privacy-security, which should be part of every business owner’s legal checklist for starting a small business.
Cybersecurity Best Practices
Even if specific laws don’t apply to your business, security breaches can destroy customer trust and create legal liability.
Implement These Measures:
- Use encrypted payment processing (never store credit card numbers)
- Enable multi-factor authentication on all business accounts
- Install firewalls and antivirus software
- Regularly update software and systems
- Use strong, unique passwords (consider a password manager)
- Limit employee access to data on a need-to-know basis
- Regularly back up data (3-2-1 rule: 3 copies, 2 different media, 1 offsite)
- Train employees on phishing and security awareness
Create a Privacy Policy Your website needs a clear privacy policy that explains what information you collect, how you use it, who you share it with, how you protect it, and user rights regarding their data.
Free privacy policy generators are available, but have an attorney review yours if you handle sensitive data or significant transaction volumes.
Breach Response Plan
Have a plan in place before a breach occurs. First, contain the breach immediately. Second, assess what data was compromised. Third, notify affected customers as required by law (timing requirements vary by state). Fourth, report to relevant authorities if required. Fifth, offer credit monitoring if appropriate. Finally, review and improve security measures.
Many cyber liability insurance policies include breach response services, which can be invaluable during a crisis.
Step 11: Develop a Compliance Calendar
Legal compliance isn’t a one-time event—it requires ongoing attention. Missing deadlines can result in penalties, late fees, or loss of good standing. A compliance calendar is the final essential component of your legal checklist for starting a small business.
Create Your Compliance Calendar
Annual Tasks:
- File federal and state tax returns
- Renew business licenses and permits
- File annual reports with your state (required for corporations and LLCs in most states)
- Review and renew insurance policies
- Conduct annual corporate meetings (corporations)
- Update employee handbook and policies
- Review and update contracts
Quarterly Tasks:
- File and pay estimated taxes
- File employment tax returns (Form 941)
- Review financial statements
- Assess compliance with employment laws
Monthly Tasks:
- Reconcile bank accounts
- Review profit and loss statements
- Process payroll (if applicable)
- Pay business credit cards and bills on time
Ongoing Tasks:
- Keep receipts and records organized
- Monitor changes in regulations affecting your industry
- Stay current on license and permit renewals
- Maintain corporate formalities
Set up reminders in your calendar or use compliance software to track deadlines. Missing a filing deadline can result in penalties that dwarf the cost of simply staying organized.
Final Thoughts: Build Your Business on a Solid Legal Foundation
Starting a small business in 2025 is challenging enough without legal complications adding to the stress. While this legal checklist for starting a small business may seem daunting, remember that taking care of these requirements upfront prevents far bigger problems down the road.
You don’t have to tackle everything at once. Prioritize based on your immediate needs:
Before you accept your first customer: Business registration, basic insurance, necessary licenses
Within your first 90 days: Operating agreements, employment compliance, accounting systems
Within your first year: Intellectual property protection, comprehensive insurance review, tax planning
The investment you make in legal compliance today protects everything you’re working to build. Your business deserves a strong foundation built on a comprehensive legal checklist for starting a small business.
When to Seek Professional Help
Don’t hesitate to consult professionals when choosing your business structure, drafting important contracts, facing employment issues, dealing with regulatory compliance questions, planning tax strategies, or protecting valuable intellectual property.
The cost of professional advice is almost always less than the cost of fixing problems that result from going it alone. Professional guidance is an investment in your legal checklist for starting a small business that pays dividends for years.
Frequently Asked Questions About the Legal Checklist for Starting a Small Business
Do I really need a lawyer to start a small business?
Not for every task. Many activities like registering your business, obtaining an EIN, and applying for basic licenses can be done yourself using this legal checklist for starting a small business. However, consulting an attorney for your initial setup, contract review, and complex issues is usually worth the investment. Many attorneys offer flat-fee packages for startup legal services.
What happens if I operate without the required business licenses?
Consequences vary but can include cease-and-desist orders, fines ranging from hundreds to thousands of dollars, forced closure until you’re compliant, and difficulty obtaining licenses in the future. In severe cases, you could face criminal charges. Following a legal checklist for starting a small business helps you avoid these issues entirely.
Can I legally run a business from my home?
In most cases, yes, but you’ll likely need a home occupation permit and must comply with zoning regulations. Some homeowners associations prohibit or restrict home businesses. Check with your local planning department and review your HOA rules if applicable. Home-based business requirements should be part of your legal checklist for starting a small business.
How do I protect my personal assets as a business owner?
Forming an LLC or corporation creates legal separation between you and your business, protecting your personal assets from most business liabilities. However, this protection only works if you maintain proper corporate formalities, don’t personally guarantee business debts, and carry adequate insurance. Asset protection is a key reason for following a legal checklist for starting a small business.
What’s the easiest business structure for a solo entrepreneur?
A sole proprietorship requires the least paperwork and is cheapest to establish, but it provides no personal liability protection. A single-member LLC offers a better balance—it’s nearly as simple as a sole proprietorship but protects your personal assets. For most solo entrepreneurs, a single-member LLC is the smarter choice despite slightly higher costs. Your legal checklist for starting a small business should help you evaluate this decision carefully.
How much does it cost to start a business legally?
Costs vary significantly by state, industry, and business type. Budget $500-$2,000 for basics including business registration ($50-$500), EIN (free), initial licenses and permits ($100-$1,000), basic legal documents ($100-$1,000 if using templates, more with attorney help), and initial insurance ($300-$1,500). Professional services add more but provide valuable protection. A comprehensive legal checklist for starting a small business helps you budget appropriately.
Do I need insurance if I’m just starting out with no employees?
Yes, at minimum you should have general liability insurance. Even if you work from home with no employees, you can still be sued if a client claims your service caused them financial harm or if someone is injured during a business activity. Insurance is cheap compared to a single lawsuit, which is why it’s included in every legal checklist for starting a small business.
How do I know if I need to collect sales tax?
You must collect sales tax if you sell tangible personal property or certain services in states where you have nexus (a significant presence). Nexus can be created by having a physical location, employees, inventory, or in many states, simply by exceeding certain sales thresholds to residents. Check your state’s tax authority website or consult a tax professional. Sales tax compliance should be part of your legal checklist for starting a small business.
What records do I need to keep for my small business?
Keep financial records for seven years, corporate documents permanently, employment records for three to seven years after termination, and contracts for their duration plus seven years. The IRS requires adequate documentation to support your tax returns. Proper recordkeeping is an essential component of any legal checklist for starting a small business.
When should I trademark my business name?
Trademark your business name as soon as you’re committed to it and have the budget (typically $250-$350 plus attorney fees if needed). If your brand is central to your business and you operate in a competitive industry, prioritize trademark protection early. Intellectual property protection is an important part of your legal checklist for starting a small business.
