Legal Essentials: Protecting Your Business from Day One

Setting up proper legal foundations isn't exciting, but it's crucial for protecting your business.

While this guide isn't a substitute for professional legal advice, it will help you understand the essential protections your business needs from the beginning.

1. Choose the Right Business Structure

Your business structure affects your personal liability, taxes, and operational flexibility.

Common options:

• Sole Proprietorship: Simplest structure, but offers no personal liability protection.

• Pty Ltd, LLC (Limited Liability Company): Protects personal assets while maintaining operational flexibility.

• Corporation: May offer tax advantages once your business reaches certain profit levels.

• Partnership: Suitable when starting with co-owners (requires clear partnership agreements).

Quick decision guide: Most small businesses should start as a Pty Ltd or LLC unless you're a very low-risk, part-time business (sole proprietorship) or have significant startup capital and investors (corporation).

2. Register Your Business Name

Protect your brand identity with proper registration:

• Conduct a business name search

• Register your business name

• Register a business structure

• Register for Goods and Services Tax

• Check domain availability to ensure online consistency

• Search trademark databases to avoid infringing on existing businesses

Trademark consideration: While full trademark registration costs $250-$350, it provides national protection for your business name and brand elements.

3. Create Proper Client Contracts

Solid contracts prevent misunderstandings and protect both parties:

Essential elements to include:

• Detailed scope of work and deliverables

• Payment terms and schedules

• Cancellation and refund policies

• Intellectual property ownership

• Limitation of liability

• Dispute resolution process

Resource tip: Contract templates from reputable legal sites can be customised for your business for $100-$300, saving thousands compared to attorney-drafted contracts; however they should also be checked by your legal representative.

4. Implement Website Policies

If you have a website (and you should), these policies are essential:

• Privacy Policy: Legally required if you collect any user data, including contact forms.

• Terms of Service: Establishes rules for using your site and limits your liability.

• Cookie Notice: Required in many jurisdictions if your site uses cookies.

• Disclaimer: Important for certain industries (health, finance, education).

Compliance tip: Use a reputable legal template service to create these documents rather than copying from other websites, which may not cover your specific needs.

5. Understand Basic Tax Obligations

Tax compliance prevents costly penalties:

• Obtain an EIN (Employer Identification Number) or Tax File Number.

• Set up a system for tracking business income and expenses.

• Understand sales tax requirements in your state.

• Learn about estimated quarterly tax payments.

• Plan for self-employment taxes (15.3% on top of income tax).

Organisation tip: Set up a separate business checking account immediately—commingling personal and business funds creates tax nightmares.

6. Secure Necessary Permits and Licenses

Requirements vary widely by location and industry:

• Check city/county/state business license requirements.

• Research industry-specific licenses (food service, childcare, construction, etc.).

• Verify home-based business regulations if operating from home.

• Investigate professional licensing requirements for your field.

• Confirm zoning laws allow your business type in your location.

Research method: Start with a Google search in your city.

Legal Protection Timeline: What to Do When

Before accepting your first client/sale:

• Choose a business structure and register an entity

• Obtain EIN/TFN and business bank account

• Create a basic client contract

• Research industry-specific regulations

Within first 30 days:

• Set up a bookkeeping system

• Implement website policies

• Obtain business license(s)

• Establish sales tax collection if applicable

Within first 90 days:

• Review insurance needs (liability, professional, etc.)

• Create more detailed client agreements

• Set up a quarterly tax payment system

• Consider trademark protection if the brand is established

Affordable Legal Resources

Build your legal foundation without breaking the bank:

• Formation services: ZenBusiness, Northwest Registered Agent ($100-$300)

• Contract templates: LegalZoom, RocketLawyer ($100-$500)

• Website policies: TermsFeed, Complyguru ($50-$200)

• Trademark search: USPTO's TESS database, Trademarksonline, iponz (free to search)

• Tax guidance: Search Small Business Tax Guide (free)

If you need help with your business legal setup, contact your Accountant.