The 8 Legal Steps to Creating a Startup

Name Your Company

Everything starts with the name. But before you start ordering business cards or creating a Facebook page, make sure that great new name isn't infringing on the rights of an already existing business. For example, calling yourself "McDonalds" won't work; choosing the name "McDowells" should be okay, unless you're going into the restaurant or food business.

In most cases, you don't need an attorney for this task, as you can perform a free search online that looks at business names registered with the secretary of state. In addition, make sure a good domain name is available and purchase that domain (along with any similar variations) right away.

Register Your DBAs: "Doing Business As" a.k.a Fictitious Business Name

If you have a sole proprietorship/general partnership, a DBA registration must be filed when your company name is different than your own name. For an LLC or corporation, DBAs must be filed whenever you conduct business using a name that's different than your company - i.e. CorpNet.com vs. CorpNet. Depending on where you live, DBAs are filed at the state and/or county level.

Incorporate or Form an LLC

You'll also need to determine the best business structure for your startup. Depending on your specific circumstances, you might choose among an LLC (great for startups that want legal protection, but minimal formality), an S Corporation (for startups that will make a profit soon after incorporation and that profit will be distributed to the shareholders), or a C Corporation (for those startups who plan to reinvest profits back into the company or seek funding from a VC). Unless your business is particularly complex, you should be able to file for incorporation online, without having to retain a business attorney.

One word of advice. While Delaware and Nevada are hot states for incorporation, if your startup has less than five shareholders, it's best to incorporate in the state where the business has a physical presence (i.e. where you live). Otherwise, you won't reap any benefits, and you'll be dealing with added hassles and costs of operating "out of state."

Get a Federal Tax ID Number, a.k.a an "TIN" or "Tax Identification Number"

To distinguish your startup as a separate legal entity, you'll need to get a Tax Identification Number.

File for Trademark Protection

You should also take steps to protect your company name by filing for a trademark. After all, you most likely spent untold hours deliberating what to call yourself.

Educate Yourself on Employee Laws

Do you have a staff or future plans to bring employees on board? Too many small businesses think employer laws and regulations apply only to larger companies; however, your legal obligations as an employer begin as soon as you hire that first employee.

In this case, I advise spending time with an employment law professional to fully understand your obligations in such areas as federal and state payroll and withholding taxes, self-employment taxes, anti-discrimination laws, OSHA regulations, unemployment insurance, workers' compensation rules, wage and hour requirements, among others.

Obtain Business Licenses and Permits

Depending on the type of business, you may be required to have one or more business licenses and/or permits from the state, local (city and county) or even federal level. These can include: a general business operation license, zoning and land use permits, sales tax license, health department permits, and occupational or professional licenses.

Buy Insurance

Your specific insurance needs will vary depending on your type of business and risk tolerance. Consulting with an insurance agent who understands your industry is typically the best way to proceed in this area.

And yes, I know, when you're hustling for clients or putting in 80-hour weeks to get product out the door, legal fine print and paperwork aren't exactly high on your priority list. But getting your legal ducks in a row from the start will enable you to scale far more smoothly and help you avoid any legal pitfalls in years to come. Remember, you can't be an expert in every area, but just be wise about when you need to bring in expert counsel and when do-it-yourself is a reasonable way to go.