6 Legal Tips for Starting Your Startup

While a business idea may be the unofficial start of your company, in the real world, a birth of a company doesn’t happen until you take some basic legal steps. After all, there are contracts to sign, decisions to be made and the issue of your company’s future tax scheme to be resolved. To first-time entrepreneurs, this can appear particularly intimidating, yet, if this was such a complex matter, there wouldn’t be so many new companies sprouting up every day. With this in mind, here are several tips on making your startup legal.

1. Deciding on the structure of your business

The first thing you need to do when starting a company is to determine the structure of your business. This means that you need to define the issue of the ownership by stating whether your business is a sole proprietorship (owned 100 percent by you), a partnership or a limited liability company (LLC). This is very important due to the fact that the structure of your company is the main determiner of the scheme by which you will pay your taxes. Starting out as a sole proprietorship is the most common choice for startups. However, its downside is the fact that your personal assets won’t be protected in any way should something go wrong.

2. Founder’s agreement

In a situation where you’re not starting a company on your own, you need to make sure that some basic rules are established from day one. The greatest problem with this particular issue is that a lot of people start their companies with their closest friends or relatives as partners. Therefore, they believe that they don’t need to put any of these rules on paper. Needless to say, this is a practice that backfires quite often. In fact, one of the unofficial aims of a well-composed founder’s agreement is to preserve the personal relationship that the business partners have in case things go sour.

3. Register your company

As soon as you have these basics out of the way, it’s time to think about the actual registration of your company. Naturally, this can be the biggest burden for the first-time entrepreneurs, who often get quite intimidated by all the paperwork. Fortunately, in 2018, you have the option to set up a company online in a matter of minutes, instead of having to chase all the necessary documentation for weeks. So, it is more than evident that you have enough on your plate as it is, which is why every step that facilitates the whole procedure of launching a startup will be a lifesaver.

4. Consult professionals

Once you have figured out the structure of your company, you might need to look for some professional startup legal aid. Namely, corporation, security and commercial law are not something to be underestimated, still, they are just the tip of the iceberg. As you start out, you will have to sign more than a couple of contracts with various parties, whether they are organizations or individuals, which is why you need to be 100 percent sure that they are in your best interest. Moreover, chances are that you will encounter more than a few instances of intellectual property law, which is also something you need to take seriously.

5. Think about insurance early on

The next thing you need to worry about is the issue of the insurance. Here, you need to consider various factors, such as property damage, as well as the protection of one’s personal property. On the other hand, some businesses, especially those in the construction industry, must be extra careful when choosing a third-party bodily injury insurance plan. Furthermore, any company that takes their marketing seriously needs to think about the advertising injury insurance. You would be surprised at how dangerous it is to skip this step in 2018. Last but not least, you need a solid employment liability insurance.

6. Getting your Federal Tax ID number

Last, but probably the most important, part of the process of making your startup legal is – getting your Federal Tax ID number. The application process is fairly simple and, in most cases, it only requires that you answer several short questions about the reason why you need the Tax ID number in the first place. Aside from this, you will be required to submit some basic personal information. Once you get the number, it is absolutely vital to save the copy of the official document on your computer.


You can look at all of this as some sort of unofficial test. After all, when running a business, you are expected to make decisions on a regular basis that are affecting the future of your company and everyone associated with it. Although this may seem a tad overwhelming, this is the harsh reality and not everyone is meant to be a successful entrepreneur. All in all, it is vital that you master these six legal steps, seeing as how it is possible that you might need to resort to them more than once, either for a side-project or your second attempt at entrepreneurship.