Legal Basics 101: Entrepreneurial Essentials for Protecting and Growing Your Business

Running a business requires more than just a strong product or service.

As an entrepreneur, protecting your business legally is equally essential to ensure your operations remain secure and poised for growth. 

In our latest webinar, Trademarkia attorney Victoria Velasquez Walker broke down the essentials every business owner should know. 

From selecting the right business entity to understanding intellectual property rights, here are some key takeaways.

Choose the right business structure

Choosing the right business structure is one of the first decisions you’ll need to make as a business owner. This choice impacts both your legal protections and your ability to attract investors.

• General partnership: A partnership is easy to form but lacks the critical liability protections to shield your personal assets. Each partner is liable for the actions of the other, which can increase risk.
• Limited liability company (LLC): An LLC is a popular choice for small businesses due to its flexibility and limited liability protections. LLC owners are not personally liable for business debts, making it an attractive option for new businesses seeking both protection and growth potential.
• Corporation: A corporation offers the highest level of protection and is most appealing to investors. Corporations operate as separate legal entities, which means they can sue or be sued independently of their shareholders. However, they come with stricter compliance requirements and higher costs.

Tip: The right structure depends on your business’s size, growth potential, and risk tolerance. 

LLCs are ideal for smaller businesses, while corporations work best for larger enterprises looking to scale.

Protect your business assets: trademarks and copyrights

Trademarks and copyrights may sound similar, but they serve different purposes in protecting your business.

• Trademarks: A trademark identifies your business in the marketplace. It includes your company’s name, logo, and slogan—anything that makes your brand unique. Trademark registration is essential because it’s the only way to own your business name and prevent others from using it or something similar.
• Copyrights: Copyright protects creative content, such as books, music, software, and graphic designs. Registering your copyright provides a bundle of rights allowing you to reproduce, display, or create derivative works from the original.

Tip: Register your trademarks and copyrights as soon as possible. This proactive approach prevents legal risks and allows you to protect your business’s identity and creative works from infringement.

Use customized contracts to protect business relationships

Contracts are the foundation of business relationships, whether with employees, vendors, or independent contractors. However, not all contracts are created equal.

• Avoid generic templates: While online contracts may seem convenient, they often lack critical details specific to your business. A customized contract should clearly outline the scope of work, payment terms, and liabilities specific to your unique business needs.
• Mitigate risks: Tailored contracts help reduce risks by including provisions like indemnification, liability limitations, and termination clauses. This clarity prevents misunderstandings and can help resolve disputes more effectively.

Tip: Use contracts that are specifically drafted to protect your interests. Each contract should be carefully reviewed to ensure it meets local laws and regulations and addresses the specific nature of your business relationships.

Comply with Federal Trade Commission (FTC) guidelines

The FTC is a federal agency that protects consumers from unfair business practices. 

Whether you’re running advertisements, endorsing products, or collecting customer data, you need to ensure compliance with FTC regulations.

• Impact of non-Compliance: Businesses that fail to comply with FTC guidelines risk hefty fines, legal action, and reputational damage. Violations can stifle your business growth and affect your ability to attract clients.

Tip: Awareness is key. Review FTC rules regularly and consult with legal professionals to ensure your practices align with federal requirements, no matter how small your business is.

Protect your personal assets

The importance of separating personal and business assets cannot be overstated.

If you operate without a legally recognized business structure (e.g., as a sole proprietor), your personal assets—such as your home and savings—are at risk.

• Create a liability brick wall: Victoria introduced the concept of a liability brick wall to explain how a business entity like an LLC or corporation creates a barrier between personal and business assets. This wall ensures that business debts or legal judgments cannot impact your personal finances.
• Avoid commingling funds: Mixing business and personal funds is a surefire way to break down this wall and expose your personal assets to risk. Always maintain separate accounts and meticulous records for your business transactions.

Tip: Form a business entity early on and follow best practices for entity management to keep your personal assets secure.

Common pitfalls to avoid

• Misunderstanding business structures: Many business owners believe that forming an LLC automatically protects their brand name. Remember, an LLC only protects your personal assets. To protect your brand name, you must register a trademark.
• Using online contract templates: As mentioned earlier, generic contracts found online may not address your unique business needs and can lead to legal issues down the line.
• Ignoring FTC compliance: FTC regulations apply to all businesses, regardless of size. Make sure your advertising, endorsements, and data privacy practices comply with federal laws.

A proactive approach to legal protection

Legal protection isn’t just about avoiding risks but enabling growth. 

By (1) choosing the right business structure, (2) protecting your intellectual property, (3) using customized contracts, and (4) ensuring compliance, you lay the groundwork for sustainable business growth.

For personalized assistance with trademarks, copyrights, or any business-related legal matters, feel free to reach out to our team here at Trademarkia. 

We offer consultations with experienced IP attorneys, helping you navigate the complex terrain of business law.