Start with the legal basics when building a business

12/31/2025

Launching a small business is often fueled by passion and a vision, but nothing replaces the legal foundations that keep a business protected and positioned to grow. 

Whether for a solo consultant, a tech startup founder or a brick-and-mortar shop owner, the legal to-do list is longer and more consequential than many expect. Choosing a business structure, securing trademarks, drafting contracts, setting up payroll, navigating sales tax, protecting confidential information and planning for eventual succession are all part of the list. It can be overwhelming, but they are all risk-management tools that shield business owners from financial loss and future headaches.

Many small business owners do not realize how early these needs show up or how quickly they evolve as the business grows. 

The contracts a business starts with won’t likely be the contracts it will need two years in. Employment laws shift. Tax obligations expand when they go from a sole proprietor to hiring their first contractor or employee. Intellectual property issues become real the moment a brand gains traction. And, without clear agreements — whether for clients, team members or partners — misunderstandings can turn into costly conflicts.

The truth is simple: legal structure and documentation form the backbone of a healthy business. Solid contracts set expectations. Trademarks protect identity. Payroll and sales tax compliance keep state and federal agencies out of the inbox. Confidentiality and employment agreements guard ideas and teams. And succession planning ensures the businesses that owners have poured themselves into can continue — or close — on their terms.

Small business owners don’t need to become legal experts, but they do need to recognize that legal decisions aren’t optional or “nice to have.” They are foundational investments that save time, money and stress down the road. 

 

Get it in writing 

Nora Crosthwaite knows a thing or two about being a small business owner. She founded a company that allowed real estate agents or homeowners to take pictures of their homes prior to listing preparation and submit them to a stager, and she still leads a real estate team today: Home Sweet Des Moines, brokered by Realty ONE Group Impact.

It started with the basics. When she first launched a small business, Crosthwaite was surprised by the requirement to set up an EIN for her LLC and use it to open her business checking, savings and credit card accounts.

“My personal banker was a fountain of information here,” she says. “However, when I expanded into the Home Sweet Des Moines team, I was taken aback by the requirement to set up a DBA (Doing Business As) with the Iowa Real Estate Commission, not the Iowa Secretary of State.”

And then when Crosthwaite hired her first assistant, she brought her on as a W-2 employee.

“Setting up payroll, with the reporting requirements to the state of Iowa, was a hassle,” she says. “Since then, my team members are all set up as 1099 contractors, not employees.”

Crosthwaite also has contracts with each of her team members that outline job responsibilities, confidentiality requirements, data and privacy practices and more. Each team member must sign this contract before proceeding.

“This also lays out what happens if we terminate our relationship,” Crosthwaite says. “I see it as a way to ensure any splits are handled smoothly.”

She has learned a lot since becoming a small business owner, but Crosthwaite still leans on others for support when it comes to changing employment laws and legal needs. She has found that networking groups like FemCity Des Moines and the Urbandale Chamber of Commerce do a great job sharing legal updates.

During the period when Crosthwaite also ran the tech startup, she had to set up trademarks, navigate ownership requirements and more. The biggest hassle was changing from an LLC to a C Corp to support her needs. Working with professionals in both areas proved extremely beneficial.

“I used an attorney who focused on intellectual property for my trademark, and a different attorney who focused on startups to change my corporate structure,” she shares.

Crosthwaite advises other small business owners to find someone with a similar type of business and ask about things like required structures.

“Lean into your networks to find the right people (attorneys, CPAs) to assist along the way,” she says. “The type of business you have will drive your needs.”

She also encourages entrepreneurs to invest the time and money to get things right from the start.

“Fixing corporate structure later is a hassle,” Crosthwaite says. “Ensure every partnership, employee or contractor is covered with a contract. If it’s not in writing, it doesn’t exist.”

 

Legal clarity is good business

When Bethany Snyder was getting her small business, Snyder Strategies LLC — a consultancy that helps nonprofits and membership-based organizations strengthen their advocacy — off the ground, the legal side of things was not too overwhelming. Her spouse is an attorney, so she was able to launch with a solid, well-drafted contract.

“What DID surprise me was how much those documents evolve over time,” she says. “As I worked with more clients and saw how other consultants structured their agreements, I kept refining my own.”

For Snyder, the trickiest moments usually come when a client wants to use their contract instead of hers.

“That’s when having an attorney on standby is essential — someone who can walk through the language, point out any areas of risk and help negotiate terms that protect me,” she says.

A particularly memorable instance was when a client tried to include a strict intellectual property clause that would have given them ownership of part of Snyder’s work product.

“That required careful back-and-forth,” she says. “We ultimately reached agreement, but I wasn’t about to give away my business product just because it was convenient for them.”

Administratively, the biggest curveball has been deciding when to move from an LLC to an S-Corp.

“There’s no handbook that tells you the exact moment to make that shift, so figuring out the tax and structural implications took more digging than I expected,” Snyder says. “And, of course, I relied on my attorney and accountant.”

As she has grown Snyder Strategies, her contracts — and equally important, her detailed scope of work — have become the foundation of how she protects her business. They set crystal-clear expectations, safeguard her time and IP, and ensure everyone understands the parameters before work begins.

“Those documents don’t just protect me legally … they communicate professionalism,” Snyder says. “Clients see them and instantly understand that I run a serious, well-structured consultancy. It sets the tone for the relationship from day one and shows that I know my stuff. A strong contract is a business asset — it’s legal protection and a professional asset.”

Looking ahead, Snyder plans to add more formal data and privacy language, especially as AI becomes a bigger part of her work.

Given her own experiences, Snyder’s biggest piece of advice is to work with an attorney to build a solid contract and scope of work.

“This isn’t something to piece together from the internet,” she notes. “A well-crafted contract protects you, sets expectations, strengthens client relationships and signals that you take your business seriously. Once you invest in it, you can reuse it for years with small adjustments as needed. Mine has been my backbone for nearly a decade.”

Ultimately, she says, legal preparedness is less about being defensive than about setting boundaries and starting every client relationship on strong footing. ♦