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“So You Want To Start A Business?” Legal Considerations Beyond Entity Formation

“So You Want To Start A Business?” Legal Considerations Beyond Entity Formation

Starting a new business? Congratulations! Now is the time to plan ahead and set up structure and clarity to ensure success in the future and avoid potential legal pitfalls for the unwary.

To start, you will want to formalize your business as a legal entity, meaning you will have to choose the type of legal entity which best suits your unique needs and situation. However, what are other legal issues to anticipate or legal considerations to think about when setting up a new business? 

To read more on why you should formalize into a business entity, click HERE!

Non-Disclosure Or Confidentiality Agreements

            Does your business involve using or selling confidential or proprietary information? If so, consider setting up a good system to make sure people with access to that information cannot take it for their own use.  If your business is based around a unique or proprietary idea you want to make sure that the basis of your business is protected. Make sure that you keep track of who has access to that information – for example when discussing contracts with suppliers, designers, web developers, etc.


            Consider trademarking your name or logo or any other unique design elements which are important to your business and its identity. Formalizing this protection can help resolve issues in the future – especially as your business succeeds and starts to expand into other geographical areas. Make sure you are protecting your identity.

Employment Contracts/Employee Handbook

            Are you hiring employees? Before you start interviewing, think about: How are you going to pay them? Will they be hourly or salaried employees? What kind of tax withholding do you need to set up? Will you provide benefits? How will you handle disputes between employees? Do you have a nondiscrimination policy? It may be a good idea to have these items explained clearly and covered in an offer letter detailing an employee’s anticipated responsibilities and compensation, including benefits. In addition, it would be well worth considering putting together a complete employee handbook that overviews disclosures and further sets out company policies.

Other Contracts

            Who will you be working with to deliver product to your customer?  Are you buying raw materials? Are you relying on services provided by another company? This is the time to look at who you are working with and make sure that you have a clearly outlined contracts which outline everyone’s respective responsibilities and obligations to avoid issues later.  Having these contracts in place at the beginning should help avoid issues in the future which might prevent you from carrying on business as usual.

Sales Tax

            What products or services will you be offering your customers?  Have you set up a system to collect and pay sales tax? Whatever you do, you want to make sure all your taxes get paid! Get software to help organize this or meet with an accountant, bookkeeper, or CPA to help ensure that you get a plan together to fulfill all your obligations.

Redding Law, PLLC intends this educational article to illustrate a specific legal concept or situation. However, the reader should note that this example and explanation is specific to Texas, intended to be educational, and is not intended to be legal advice for any person or situation. To receive additional copies of this newsletter or permission to reprint any portion please contact Redding Law, PLLC.

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