Legal checks before starting a business: a checklist

Read this first: this is not legal advice

This guide is general information to help you ask the right questions. It is not legal, tax or financial advice, and it does not describe the law of any particular country. Requirements vary between countries, and often between regions, cities and industries within a country. They also change.

Before you rely on any of this, check with a qualified professional in your country, such as a lawyer, an accountant or tax adviser, or the official government body responsible for business registration. Many governments publish free guidance for new businesses, and many professional bodies offer low-cost introductory consultations. A short paid conversation early is usually far cheaper than fixing a problem later.

Licences and regulated activities

Some activities need a licence, permit or registration before you can legally do them. Others are lightly regulated or not at all. The first legal question for any idea is which group yours falls into, because the answer can change the cost, timeline and feasibility of the whole business.

Areas that are commonly regulated in many countries include financial services such as lending, payments, investment advice and insurance; health, medical devices and anything that makes health claims; food and drink; childcare and education; legal services; transport; alcohol, tobacco and gambling; security; recruitment; property; and anything involving hazardous materials. Even ordinary businesses may need local permits, for example to trade from premises or to sell in a public place.

If your idea touches a regulated area, find out early whether you need authorisation yourself or can work through a partner that already has it. This is often a decisive factor in whether an idea is realistic for a small team.

Data protection and privacy

Almost every modern business handles personal data: customer names and emails, payment details, analytics, support messages. Many countries and regions have data protection laws governing how that data is collected, stored, used and shared. Well-known examples include the GDPR in the European Union and similar regimes elsewhere.

Questions to answer before you launch: what personal data will you collect and why; what is your lawful basis or permission for using it; where will it be stored and which suppliers will process it; how long will you keep it; how will people access or delete their data; and what happens if there is a breach. You will usually need a privacy notice that explains this in plain language. If you handle sensitive data such as health or financial information, or data about children, expect stricter rules.

Names, trademarks and intellectual property

• Trademark search — Before committing to a name, search the trademark registers that cover the countries you plan to trade in, including similar names in related categories. A name being available as a domain or company name does not mean it is free to use as a brand.
• Company name registration — Separate from trademarks. Registering a company name usually does not give you trademark rights.
• Domains and social handles — Check availability, but remember that owning a domain does not protect you from a trademark claim.
• Ownership of work — Make sure you own what you build. Work done by freelancers, agencies or co-founders may need a written agreement to transfer ownership to the business.
• Third-party material — Check licences for code libraries, fonts, images and data you use, especially commercially.
• Inventions — If you have something potentially patentable, take advice before disclosing it publicly, because public disclosure can affect whether protection is available.

Your current employment contract

If you are employed while starting a business, read your contract carefully before you begin. Many contracts contain clauses that matter here: restrictions on outside work or side businesses, sometimes called moonlighting clauses; confidentiality obligations; clauses giving your employer ownership of work or inventions created during employment, sometimes including work done in your own time or with company equipment; and restrictions that apply after you leave, such as not competing or not approaching clients and colleagues.

How enforceable these clauses are depends heavily on the country and the wording, which is exactly why it is worth professional advice if your business is anywhere near your employer's field. Practical precautions: do not use your employer's equipment, time, data or confidential information for your business, and keep records showing when and how you developed your work.

Entity choice and tax registration

Most countries offer a few legal structures for a business, such as trading as an individual, a partnership, or a limited company or corporation. They differ on personal liability, tax treatment, administration and how easily you can bring in co-founders or investors. Structures and their names vary by country, so compare the local options with an accountant before choosing.

Tax, contracts and other basics

• Tax registration — Find out which registrations apply, such as income or business tax, and sales or value-added taxes, including any thresholds and rules for selling across borders.
• Customer terms — Terms of service or sale, refund policy, and limits of liability appropriate to what you sell.
• Consumer protection — Rules on cancellations, refunds, pricing and advertising claims often apply when selling to consumers.
• Co-founder agreement — Agree ownership, roles, vesting and what happens if someone leaves, in writing, early.
• Insurance — Consider whether professional liability, public liability or other cover is required or sensible.
• Hiring — Employing people brings obligations around contracts, pay, tax withholding and workplace rules.
• Records — Keep accounts and records from day one, in the way your local rules require.

Questions