What Are Legal Questions to Ask When Starting a Business?

By Grit Daily Staff Grit Daily Staff has been verified by Muck Rack's editorial team
Published on March 28, 2023

From “What risks will I be held accountable for?” to “Is Every component of my business process legal?”, here are 18 answers to the question, “What are the most important legal questions to ask when starting a business?”

  • What Risks Will I Be Held Accountable For?
  • Who’s Responsible for Business Debts?
  • Are There Tax Reliefs for Young Businesses?
  • What Insurance Requirements Do I Need to Consider?
  • What Type of Insurance is Necessary for My Business?
  • What Do I Need to Do to Protect My Business?
  • Do I Need to Register a Trademark?
  • What’s the Right Legal Structure for My Business?
  • Am I Infringing on Existing Patents?
  • What Labor Laws Do I Need to Be Aware Of?
  • Which Zoning Laws Do I Need to Be Aware Of?
  • Which Legislation is My Business Governed by…?
  • Does My Business Qualify for a License?
  • What Type of Business Entity Should I Choose?
  • To What Extent Should My Company Be Incorporated?
  • What Level of Liability Do I Have?
  • Where Do I Begin to Seek Funding?
  • Is Every Component of My Business Process Legal?

What Risks Will I Be Held Accountable For?

We all understand how, as a legal organization, a business is primarily accountable to the people it employs and the clients it serves. But this is just the start. There are several regulatory factors connected with a business, including corporate procedures, paperwork, and compliances, adherence to local, state, federal, and international laws, and even the quality of the product and service. 

Each of these components must abide by established rules and protocols. More importantly, any non-compliance could result in serious legal consequences. Hence, one of the first things you should determine as a business owner is how much of this risk you will bear, both directly and indirectly. Study the worst-case possibilities so that you are fully aware of what you are getting into.

Riley Beam, Managing Attorney, Douglas R. Beam, P.A.

Who is Responsible for Business Debts?

Who handles your business’s debts if it shuts down? Businesses can go bankrupt in the same way that individuals can. We have to have a contingency plan for what happens if our business shuts down because it can happen.

When you’re setting up a business, you should have a contingency plan for this. If you fail to have a contingency plan, then your employees are at risk of not receiving their wages. Your suppliers will also be at risk of not receiving payment.

You need to be aware of this when you’re setting up your business so that you can plan accordingly with insurance and other financial assistance.

Matthew Ramirez, CEO, Paraphrase Tool

Are There Tax Reliefs for Young Businesses?

Starting a business might not be straightforward, and you might have to wrap your head around plenty of things all at once. You also need to understand that for the first year or two, you’ll have to invest heavily to make it work.

That’s why one of the first legal questions you have to ask when starting a business is if there are any tax reductions for fledgling businesses, and any other ways in which you can ensure you actually have a budget to invest in the company.

Natalia Brzezinska, Marketing and Outreach Manager, PhotoAiD

What Insurance Requirements Do I Need to Consider?

Businesses have various conditions in which they operate and these may come with various risks, so it is important to ask what insurance legal requirements you may have when starting a business. Insurance obligations are dependent on many factors, from the type of industry to the number of employees, and there can often be different ones that are required by local, state, and federal agencies.

Asking about what liabilities you need to have covered, if you have special conditions such as hazardous materials, if you require insurance based on the number of employees, and even what coverage you need in relation to customers is critical to make sure you are in compliance. By asking what your legal requirements are in relation to insurance, you will make sure that you do not run afoul of regulations and that you do not open your business up to unnecessary risk.

Cody Candee, CEO, Bounce

What Type of Insurance is Necessary for My Business?

The type of insurance you need will vary depending on the business you’re running and/or the industry you’re in. In some cases, insurance may be mandatory, and in others it’s simply recommended as an added layer of protection for you and your company. 

A lawyer can advise you on what type of protection your business needs to ensure that you’re fully protected. They can offer different solutions based on budget as well, so that you can be sure that you’re spending wisely and not on services or protection plans that you don’t actually need.

Mark Pierce, CEO, Cloud Peak Law Group

What Do I Need to Do to Protect My Business?

There’s a lot of legal work and advice your lawyer can help you with when starting a business. This can be from anywhere about funding, taxes, business names, copyrights, and employees. One question you should always ask is, what do you need to do to protect your business? 

This can be about protecting your business name and brand identity, protecting your firm and reducing risks, as well as protecting your company from financial issues and legal cases by having the necessary documents and insurance in place.

Denise Hemke, Chief Product Officer, Checkr

Do I Need to Register a Trademark?

When starting a business, it’s crucial to consider whether you have registered a trademark. A trademark is a legal means of protecting your business’s name, logo, and other distinctive features.

Registering a trademark grants you exclusive rights to use the name or logo with your goods and services. Failure to register a trademark may lead to someone else claiming rights to your name or logo, preventing your use of them. Moreover, you may also be held liable for damages if someone else has already acquired the trademark rights to your name or logo. Hence, it is vital to register a trademark before beginning your business to ensure that it is legally recognized and safeguarded.

 If you have not yet registered a trademark, it’s highly recommended that you do so as soon as possible. This action will help protect your business and its assets.

Burak Özdemir, Founder, Online Alarm Kur

What’s the Right Legal Structure for My Business?

One legal question every entrepreneur should ask when starting a business is, “What legal structure is most appropriate for my business?” This question can help determine the most advantageous legal entity for the business, which can impact everything from taxation to liability.

James Scott, Founder, Embassy Row Project

Am I Infringing on Existing Patents?

As a 40-year product inventor and engineer, you need to make sure your product idea is not infringing on any existing patents or copyrighted tag lines of previously established competitors. This is important to avoid potential legal disputes, costly litigation, and reputational damage. Conducting a thorough search of existing patents and trademarks can help identify potential conflicts and allow for adjustments to be made to the product or invention. 

Seeking legal advice and guidance from a qualified patent attorney can also provide valuable insights and ensure compliance with intellectual property laws. By addressing these legal concerns upfront, businesses can mitigate legal risks and avoid costly mistakes that could impede their success.

Marc Werner, CEO and Founder, GhostBed

What Labor Laws Do I Need to Be Aware Of?

When starting a business, there are many legal questions to consider. If you’re hiring employees for your new venture, you’ll want to make sure you ask what labor laws must be taken into account regarding wages, working hours, employee rights, etc. 

It’s essential that you understand all relevant information about these matters prior to engaging with staff members; especially any knowledge about health insurance requirements, overtime pay rates, personal injury, and more. By understanding all applicable labor laws beforehand, businesses can ensure they remain compliant with state and federal regulations while protecting their workers at the same time.

Mark Childress, Founding Attorney, The Law Offices of Mark Childress

Which Zoning Laws Do I Need to Be Aware of?

Zoning laws prescribe whether you can run a business in a certain location or not. With the clamor of online business being the trend, many would-be successful business people find themselves in a run-in with the law in their area because they are operating a business from their home when the zoning laws don’t allow it. 

This is especially common for people living in Homeowners’ Associations (HOAs). Hence, it’s important to get clarification from your lawyer on any zoning laws that may threaten the existence of your business once formed.

Liam Liu, Co-Founder and CMO, Parcel Panel

Which Legislation Is My Business Governed by…?

One key legal question when you start a business is “Which legislation is my business governed by, and what rules does this put on my business?” Knowing the laws and regulations that apply to your business is essential for avoiding legal pitfalls and ensuring that your business operates within the legal framework.

Legislation and regulation can be complex and hard to understand. It is also costly if you don’t comply, so getting it right is key. Invest in expert advice and make sure you register your business with the appropriate authorities to ensure you comply with relevant laws and regulations.

Lilia Koss, Community Manager, Facialteam

Does My Business Qualify for a License?

The most important legal issue new businesses must address is licensing. Specifically, business owners must assess their model and conclude that their business complies with local, state, and federal licensing laws.

Failure to get a business license will cause fines and possible legal action, something that could easily make a new business go under. Business licenses vary, but rarely exceed $100, making them a relatively inexpensive and necessary expense.

Whether or not your business qualifies for a license is the most important question when starting a business, for the lack of a license can only have a negative effect in the long run.

Benjamin Nadrich, Marketing Consultant, Nadrich & Cohen LLP

What Type of Business Entity Should I Choose?

The choice of business entity will have significant legal and tax implications for the business, its owners, and its stakeholders. The most common types of business entities include sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. 

Each entity has its own advantages and disadvantages, and the choice will depend on factors such as the size of the business, the number of owners, the level of personal liability the owners are willing to assume, and the desired tax treatment.

Mike Schmidt, Civil Trial Law, Personal Injury Trial Law, and Civil Trial Specialist, Schmidt & Clark

To What Extent Should My Company Be Incorporated?

Business taxation, liability, and administration are just a few areas where I believe a company’s legal structure to be crucial. You can choose to operate as a sole proprietorship, a partnership, an LLC, or a corporation, to name just a few of the legal entities available. 

We should carefully weigh the benefits and drawbacks of each structure before settling on the best option for your company. Before deciding on a structure, it’s wise to discuss the options with a lawyer or other legal practitioner to make sure you fully understand the legal requirements and implications.

Dean Lee, Head of E-commerce, 88Vape

What Level of Liability Do I Have?

Almost every firm, in my opinion, will be responsible for the harm or injury of one or more of its customers or employees at some point. Yet, every firm is unique and has its own set of risks; the owners of a car wash, for instance, are probably much less at risk than the owners of a private zoo with deadly animals. 

To find out how to protect your business from legal action, talk to an attorney. Depending on the circumstances, adopting precautions may be important, in addition to selecting a suitable corporate structure that can minimize virtually all personal liability risks.

Daniel Foley, SEO Specialist, Unagi Scooters

Where Do I Begin to Seek Funding?

Maintaining healthy growth, in my opinion, is essential to the survival of any organization, no matter the size of your company. It will benefit greatly from the help of an expert who knows how to help you get the money you need to expand. 

A lawyer specializing in capital-raising law will be invaluable as you weigh your funding possibilities, negotiate with investors, and draw up agreements. It is especially important to have legal representation when raising capital because of the stringent rules that apply to the process.

Shakzod Khabibov, Founder, Natura Market

Is Every Component of My Business Process Legal?

Just because your main business idea is legal, it does not mean every process associated with it toes the line, too. It is, therefore, crucial to review every aspect of your business and ensure that it is being conducted and delivered lawfully. 

In the paintball business, for example, we have to follow a specific process to recycle or dispose of our waste. Now, we know for sure that our business idea is entirely legal. Still, if we do not follow state, federal, and municipal rules in our waste recycling and disposal process, our entire business fails to adhere to legal regulations. 

After all, it’s never about how small a component is illegal; it’s about paying close attention to every detail and providing comprehensive legal cover to everything we do in our business.

Tony Angeleri, Vice President, Lone Wolf Paintball

By Grit Daily Staff Grit Daily Staff has been verified by Muck Rack's editorial team

Journalist verified by Muck Rack verified

Grit Daily News is the premier startup news hub. It is the top news source on Millennial and Gen Z startups — from fashion, tech, influencers, entrepreneurship, and funding. Based in New York, our team is global and brings with it over 400 years of combined reporting experience.

Read more

More GD News