Introduction

Starting a startup is exciting—you’re ready to bring your vision to life and get things up and running. But the legal side of things can often feel overwhelming. Whether you’re launching a technology startup, a local service or an online store, getting your legal ducks in a row from day one is important. Not having a solid legal foundation can lead to costly mistakes that could slow down growth or even put your entire business at risk.

To help you navigate these waters, here are some top 10 legal tips for startups to keep things running smoothly and protect your venture from common pitfalls.

Tip 1: Choose the right business structure

One of the first and most important legal steps for any startup is choosing the right business structure. Your options—sole proprietorship, partnership, LLC (Limited Liability Company), or corporation—each come with their own set of rules for taxes, liability, and how your business is run day-to-day.

For many startups, an LLC or corporation is a popular choice because they offer liability protection (separating personal assets from business debts) and can provide some tax benefits.

However, the best choice depends on factors like how many owners there are, how much you plan to grow, and what risks are involved in your business. It’s smart to talk to a legal expert who can help you weigh these factors and choose the structure that best fits your startup’s needs and future plans.

Tip 2: Register your business name and domain

Picking the right name for your business is exciting, but there’s a legal side to it that you can’t ignore. Before you settle on a name, make sure it isn’t already in use or trademarked by someone else. Doing a trademark search can help you avoid legal disputes and costly rebranding down the road.

Once you’ve confirmed that your business name is unique, grab the matching domain name right away. Securing your domain early not only helps with branding but also prevents others from grabbing it first, which could lead to confusion or force you to pay a premium to buy it later. This is one of those legal tips for startups that can save you a lot of trouble and protect your brand from the get-go.

Tip 3: Protect your intellectual property (IP)

Your startup's ideas, logos, products, and content are what set you apart—these are your most valuable assets. To keep them safe, you need to protect your intellectual property (IP) from the start. Depending on your business, this could mean registering trademarks for your brand name and logo, and patents for any unique inventions or products.

Securing your IP early is crucial to avoid disputes, prevent others from copying your work, and protect your brand’s identity. It’s much easier (and cheaper) to defend your rights if you’ve already taken the steps to legally own them.

If you’re hiring external consultants, you’ll also want to make sure your contracts with them clearly say who owns the IP in any work the consultant creates. The last thing you need is a consultant doing work and paying them, all to find out that the own all the IP in the output (yikes).

Tip 4: Draft clear founder’s agreements

If you’re starting a business with co-founders, a well-written founders’ agreement is a must. This document lays out the terms of your partnership and helps prevent future disputes by clearly defining things like ownership stakes, roles, responsibilities, decision-making authority, and what happens if someone wants to leave the company or sell their shares. It can also cover important points like how profits and losses will be shared, how new partners can be brought in, and what happens if there’s a disagreement.

Getting these details in writing early on can save a lot of headaches later and keep everyone aligned on the company’s goals and values. The key is to be as clear and specific as possible—don’t leave room for misunderstandings. Even if things are great now, having a solid agreement in place is one of the smartest legal tips for startups, setting the stage for a smoother journey ahead.

Tip 5: Set up strong contracts and agreements

Contracts are the foundation of every business relationship.

Whether you’re dealing with customers, suppliers, partners, or employees, having clear, well-drafted contracts is essential. These documents should spell out all the terms, obligations, and expectations for both sides—what each party will do, what happens if things go wrong, and how disputes will be resolved.

An airtight contract can prevent misunderstandings, protect your startup from potential legal battles, and ensure that everyone is on the same page. Investing time and effort in strong contracts keeps things professional and reduces the risk of costly conflicts down the road.

Here are some of the key types of contracts your startup will likely need:

• Service agreements: If you’re providing a service or hiring someone to perform a service, a service agreement outlines the terms, payment, and deliverables involved.

• Vendor contracts: For businesses that rely on suppliers or vendors, these contracts specify pricing, delivery terms, and what happens if there’s a delay or issue with the goods.

• Employment contracts: If you’re hiring employees, employment contracts detail roles, responsibilities, salaries, benefits, and termination conditions.

• Non-Disclosure Agreements (NDAs): NDAs protect your business’s confidential information by legally binding parties not to disclose or misuse it.

• Partnership or joint venture agreements: If you’re partnering with another business, these agreements define each party’s contributions, profit-sharing, and responsibilities.

• Sales contracts: If you’re selling products or services, a sales contract outlines the terms of the sale, payment conditions, and what happens if the deal falls through. If you’re selling software, this includes a software-as-a-service agreement.

Read: The top 5 contracts every small to medium-sized businesses should have

Tip 6: Understand employment laws

As your startup expands, you’ll start bringing on new team members, and with that comes a whole new set of legal responsibilities. It’s crucial to have a solid grasp of employment laws to ensure you’re hiring fairly, treating employees right, and providing the required benefits. This includes understanding regulations around hiring practices, wages, overtime, workplace safety, anti-discrimination laws, and employee rights.

Make sure you’re using well-drafted employment contracts that clearly outline job roles, responsibilities, compensation, benefits, and termination terms. Staying compliant with labor laws not only helps you avoid expensive legal disputes and penalties but also builds trust with your employees and creates a healthy, positive work environment where everyone knows their rights and expectations.

If you’re unsure about any aspect, consult with an employment lawyer to keep everything on track.

Tip 7: Stay on top of regulatory compliance

Every industry has its own set of rules and regulations, and as a startup, you need to know which ones apply to you. This could include data protection laws like GDPR or CCPA, health and safety standards, environmental regulations, financial reporting requirements, or industry-specific standards. Staying compliant with these regulations is crucial because non-compliance can result in hefty fines, legal trouble, or even force you to shut down your business.

Make sure to keep up with changes in the law and understand what’s required in your sector. Having a system in place for regular compliance checks and audits can help you stay ahead. Consider consulting with legal or regulatory experts who can provide guidance specific to your industry and ensure you’re following all the rules.

Tip 8: Plan for Data Protection and Privacy

Data protection and privacy are critical legal areas that every startup needs to prioritize. With data breaches and cyberattacks on the rise, it’s essential to have a solid plan for how you’ll protect the personal data of your customers and clients.

If your startup collects, stores, or processes personal information, you need to comply with privacy laws like GDPR (General Data Protection Regulation) in Europe or CCPA (California Consumer Privacy Act) in the U.S. These laws outline strict guidelines on how data should be handled, stored, and protected, and the rights of individuals to access, correct, or delete their data.

Start by creating a clear and transparent privacy policy that explains what data you collect, why you collect it, how it will be used, and how it will be protected. Make sure this policy is easily accessible to your customers, and obtain their consent where necessary. Implement strong security measures like encryption, regular security audits, and access controls to prevent unauthorized access to sensitive information.

Staying proactive about data protection not only helps you stay compliant but also builds trust with your customers, showing them that you take their privacy seriously.

Tip 9: Consider liability insurance

No matter how carefully you plan, unexpected issues can still arise, and when they do, liability insurance can be a lifesaver for your startup. Liability insurance provides coverage in case your business faces lawsuits, claims, or damages that could otherwise cost you a fortune.

There are different types of liability insurance, such as general liability, professional liability (also known as errors and omissions insurance), and product liability, each covering different kinds of risks.

It’s important to speak with an insurance advisor who understands your industry and can help you determine which types of coverage are most relevant to your business. The right liability insurance can help protect your startup’s finances and reputation, ensuring that a single lawsuit doesn’t derail your entire operation. Having proper insurance in place is one of those legal tips for startups that provides peace of mind, letting you focus on growth rather than worrying about worst-case scenarios.

Read: 7 common contract mistakes that could cost your business thousands

Tip 10: Seek professional legal advice regularly

Legal advice isn’t just for when you’re in trouble. Regular check-ins with a legal professional can help you stay compliant, avoid potential issues, and keep your startup on a steady path to growth. Many legal tips for startups emphasize the importance of having a trusted legal advisor to navigate the complexities of business law.

Legal advice isn’t something you should only seek when things go wrong. Regular consultations with a legal professional can help your startup stay compliant with changing laws, prevent potential problems, and guide your business toward steady growth. As your startup evolves, new legal challenges can arise—from hiring employees and expanding to new markets, to dealing with intellectual property or contract disputes. Having a trusted legal advisor who understands your business and its goals can help you navigate these complexities smoothly.

By staying proactive and getting regular legal check-ups, you can address issues before they become costly problems, ensure your contracts and policies are up to date, and keep your startup on solid legal ground.

At Cobrief, we stress the the importance of building a relationship with a knowledgeable lawyer who can be your go-to resource for all legal matters.

Read: When should I hire a lawyer for my contract?

How Cobrief can help your startup

Reading your business contracts can feel overwhelming as a startup founder. On top of building your product, figuring out distribution and keeping your investors happy, reading legal documents can often feel like watching paint dry on the wall. That’s where Cobrief comes in. Cobrief helps business owners and operators review their business-to-business contracts for legal risks.

Upload your contract to Cobrief, click review and you’ll get a list of all the risks, in plain English. This helps you decide whether to sign, negotiate or reject the terms of your contract, or hire a lawyer. Think of it as a heat map for your contracts.

Get started here.