Legal Considerations to Include in Your Business Plan

18 February 2025

Starting a business is like embarking on an exhilarating adventure. You’ve got your idea, your passion, and your determination. But here’s the thing—before you dive headfirst into entrepreneurship, you need to make sure you’ve got your legal ducks in a row. Think of it as building a strong foundation for a house; without it, everything else could crumble.

A well-thought-out business plan isn’t just about mapping out your goals and financial projections. It’s also your first line of defense in navigating the legal maze of running a business. Let’s talk about the key legal considerations you absolutely need to include in your business plan to keep things smooth and above board.

1. Business Structure: Picking the Right Fit

Choosing the right business structure is like picking the right outfit—it has to fit your goals and personality. But the implications go much deeper than just aesthetics; your structure will impact your taxes, liability, and even how you raise funds.

Do you plan to go solo as a sole proprietor? Or maybe you want the simplicity of a partnership with a trusted friend? Perhaps you’re dreaming bigger—considering an LLC (Limited Liability Company) or a corporation? Whatever you choose, your business plan should clearly outline why you’re picking that structure and how it supports your financial and operational goals.

For instance, with an LLC, you get liability protection while maintaining a flexible tax setup. On the other hand, corporations offer robust protection but come with intense paperwork and double taxation. Weigh these pros and cons in your business plan.

Pro Tip:

If you’re uncertain, consult a legal advisor or accountant to help pinpoint the best fit. It’s always better to spend a little money upfront than to pay for mistakes later.

2. Licensing and Permits: Don’t Skip the Paperwork

Imagine opening your dream restaurant, only to have it shut down because you didn’t get the necessary permits. Yikes, right? Your business plan should include a section detailing all the licenses and permits your business needs to operate legally.

From local business licenses to industry-specific permits (like health permits for food businesses or compliance certificates for manufacturing), make a list. Double-check federal, state, and local regulations because these vary widely depending on your location and niche.

Quick Question:

Are you thinking of taking your business online? Don’t skip e-commerce regulations, terms of service, and privacy policies. Yes, even e-commerce businesses need legal coverage.

3. Intellectual Property (IP) Protection: Guard What’s Yours

Your business idea is your baby. Whether it’s a brand name, logo, product design, or a groundbreaking invention, protecting your intellectual property is crucial. Without proper IP safeguards, someone could swoop in and steal your hard work.

In your business plan, outline how you’ll protect your IP. Will you trademark your logo and brand name? Do you need patents for innovative products? If you’re creating content or designs, copyright might be your go-to.

Remember, intellectual property isn’t just for tech startups or multinational companies. Even small businesses need to think about it. After all, your brand’s identity is one of your most valuable assets.

Fun Fact:

Filing for a trademark can cost as little as $250, but the peace of mind it brings? Priceless.

4. Contracts: The Backbone of Your Business

Every business, no matter how small, needs contracts. They’re like prenuptial agreements for businesses—defining roles, responsibilities, and what happens if something goes south. From supplier agreements to employee contracts, your business plan should address how you’ll manage contracts.

Think about your relationships with clients, vendors, and partners. Are you planning to use formal contracts or rely on informal handshake deals? (Spoiler: handshake deals are a terrible idea!) Lay out the key types of agreements you’ll use and how you’ll ensure they’re legally binding.

Oh, and don’t forget about NDAs (Non-Disclosure Agreements). If you’re sharing sensitive information—whether it’s with employees, freelancers, or potential investors—an NDA can keep your secrets safe.

5. Compliance with Employment Laws

Planning to hire a team to help you grow your business? Awesome! But it also means you’re stepping into the complicated world of employment laws. Think of this as learning the rulebook before playing the game—it’s not optional.

Your business plan should outline how you’ll stay compliant with laws related to wages, benefits, workplace safety, and discrimination. Depending on your location, there could be a lot of red tape. For example, are you familiar with the Fair Labor Standards Act (FLSA) in the U.S.? It governs minimum wage, overtime, and child labor laws.

Even if you’re outsourcing or hiring freelancers, you’ll want to clarify their classification (employee vs. contractor). Misclassification could lead to hefty fines.

Real Talk:

Failing to comply with employment laws isn’t just a legal risk—it can also damage your brand’s reputation. And nobody wants that.

6. Tax Considerations: Keeping Uncle Sam Happy

Taxes are one of those things you just can’t escape; they’re like the ultimate party crasher. Your business plan should include a roadmap for managing your tax obligations. This means understanding what taxes apply to your business, how you’ll report them, and when payments are due.

Will you need to charge sales tax? What about payroll taxes for employees? And don’t forget about self-employment tax if you’re a sole proprietor. These details can vary based on your business structure and location.

Consider setting aside a portion of your revenue each month for taxes. Trust me, the last thing you want is to owe Uncle Sam at the end of the year.

Bonus Tip:

Get a good accountant or tax advisor on speed dial. They’re worth every penny.

7. Risk Management: Preparing for the “What Ifs”

Life happens, and businesses aren’t immune to unexpected hiccups. Including risk management strategies in your business plan can save you a ton of stress down the road.

What happens if a client refuses to pay? How will you handle a potential lawsuit? Will you need insurance to cover liability, property damage, or even cybersecurity breaches?

Outline the types of insurance policies you’ll need and how they’ll protect your business. Even a simple general liability policy can be a lifesaver if something goes wrong.

Think About This:

Risk management is like having a parachute—you hope you never need it, but you’ll be thankful it’s there.

8. Exit Strategy: Planning for the Unthinkable

Okay, no one likes talking about the end when they’re just getting started. But having an exit strategy is like having a backup plan—it doesn’t mean you’re giving up; it means you’re smart.

Will you eventually sell your business, pass it on to a family member, or dissolve it if things don’t pan out? Your business plan should address these scenarios, even if they feel a million miles away.

An exit strategy is especially important if you’re seeking investors. They’ll want to know how you plan to return their investment, whether through a sale, merger, or IPO. Leaving this out of your business plan could be a dealbreaker.

Wrap-Up: Why Legal Matters Are Non-Negotiable

Let’s be honest—thinking about legal considerations isn’t the most exciting part of starting a business. But it’s absolutely vital. Ignoring these details can lead to costly mistakes, lawsuits, or even the demise of your business. And no one wants that.

Your business plan isn’t just a roadmap for growth; it’s also a shield that protects you from potential pitfalls. By addressing these legal considerations upfront, you’re setting yourself up for success—and peace of mind.

So, before you print out that business plan and start pitching investors, give it a legal check-up. Trust me, your future self will thank you.