Starting your own business can be exciting, but don't let that excitement cause you to overlook the importance of having a solid legal foundation in place. As an entrepreneur, it's crucial to protect your ideas, products, and brand from potential theft and legal disputes.
One of the most important things you can do early on is establish a legal foundation to protect your business. Without certain legal protections in place, you leave your business vulnerable to issues like intellectual property theft, contract disputes, and liability claims. You’ve come too far to let one contract, one customer, or one mistake take everything away.
Let’s talk about the legal moves you need to make NOW to protect your work, your income, and your peace.
Know Your Business Structure
The first step is to choose a business structure. Will you be a sole proprietorship, partnership, LLC, or corporation? This determines how you’re taxed, what kind of liability you carry, and how your money flows.
Sole proprietor: A sole proprietorship is the simplest and most straightforward business structure, making it a default option for solo entrepreneurs.
However, sole proprietors are personally liable for the debts and obligations of the business, putting their personal assets at risk in the event of legal claims or financial liabilities.
Limited Liability Company: An LLC offers the benefits of both a sole proprietorship and a corporation, providing owners with limited liability protection while maintaining flexibility and simplicity in management.
By forming an LLC, entrepreneurs can shield their personal assets from business debts and liabilities, reducing the risk of financial loss in case of legal disputes or bankruptcy.
Corporation: A corporation is a separate legal entity from its owners, offering the highest level of liability protection for shareholders. Ideal for growing businesses making $50K+ in profit.
Corporations also offer advantages in terms of raising capital and attracting investors, as they can issue stock and have a formal structure with shareholders, directors, and officers.
Consult with a professional!
Register Your Business Name & Domain
If you’ve come up with a bomb brand name or business idea, make it official. Your brand is your baby, and protecting it should be a top priority.
- Register your DBA (Doing Business As) or LLC name with your state.
- Buy your .com domain name (even if you’re not ready to launch).
- Grab the matching usernames on Instagram, TikTok, Pinterest, and YouTube.
- Consider a trademark if your brand is unique and growing quickly.
You can use platforms like GoDaddy, Namecheap, or Squarespace to secure your digital presence fast. Consulting with an intellectual property attorney can help you navigate the registration process and maximize the legal protection for your business.
Use Contracts Every Time (Yes, Even for Friends)
A handshake isn’t protection, it’s a setup. Contracts are the backbone of any business relationship. Whether it's with employees, contractors, clients, or suppliers, having clear and well-drafted agreements is essential to avoid misunderstandings and protect your interests.
Must-Have Contracts:
- Brand Deal Contracts: Outline deliverables, deadlines, rights, and payment.
- Influencer Contracts: Whether you’re the influencer or hiring one, clarify terms.
- Brand Ambassador Agreements: Define scope, discount codes, and commission structure.
- Partnership or Collaboration Agreements: Avoid miscommunication before it happens.
You can get affordable, plug-and-play templates (like the ones I offer for just $5 on my website!) to make this easy.
You should also have clearly defined terms and conditions, privacy policies, and contracts that outline the rules of engagement with your customers, clients, and business partners. It’s best to work with a lawyer to draft customized documents for your specific business needs.
Separate Your Business and Personal Bank Accounts
This is where a lot of creators and small business owners slip up: mixing personal and business money.
Why You Need Separate Accounts:
- Legal Protection: If you’re ever audited or sued, mixing funds can destroy your “limited liability” protection.
- Clean Bookkeeping: It’s nearly impossible to track expenses and income accurately if it’s mixed together.
- Tax Deductions: A separate account gives you proof of your business expenses come tax time.
What You Need to Open a Business Bank Account:
- Your business name (DBA or LLC)
- EIN (Employer Identification Number) from the IRS (you can get this for free)
- Business license (depending on your state/city)
Look into online business banks like Bluevine, Lili, Found, or Relay if you want no monthly fees and digital tools built for entrepreneurs.
How to Pay Yourself as a Business Owner:
If you’re a sole proprietor or LLC, you’ll usually take an “owner’s draw” — transferring money from your business to your personal account.
If you elect S-Corp status, you can pay yourself a salary and take distributions (this can lower your self-employment tax).
Track Your Income & Expenses
If you’re earning money from brand partnerships, affiliate links, digital products, or anything else… the IRS sees that as self-employment income. And they want their cut.
But here’s the thing: you can deduct business expenses. You should be tracking:
- Software (Canva, CapCut, Notion, Zoom)
- Inventory or product supplies
- Travel related to your business
- Phone/internet used for business
- Home office expenses
- Equipment (ring lights, mics, tripods)
- Contractors or virtual assistants
Use tools like QuickBooks Self-Employed, Wave, or Keeper Tax to stay organized.
Quarterly Estimated Taxes:
- Instead of waiting until tax season, the IRS wants you to prepay taxes 4 times a year (April, June, September, January).
- Use your tracking method or accountants to help you estimate what to pay based on last quarter’s earnings.
1099s & Income Reporting:
- Brands, platforms, or companies that pay you more than $600 in a year must send you a 1099-NEC.
- But even if they don’t send one, you are still legally required to report all income, including free products or stays if they’re part of a paid collaboration.
Don’t Forget About Sales Tax (If It Applies)
If you sell physical products (like merch or other products), you may be required to:
- Register for a sales tax permit in your state
- Collect and remit sales tax to your state on those sales
The goal isn’t just to make money… it’s to keep it, grow it, and protect it.
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