Starting a new business can be an exciting and empowering time. But without proper planning and legal guidance, many first-time entrepreneurs find themselves entangled in costly legal trouble. Here are five of the most common legal mistakes made by entrepreneurs—and how to sidestep them like a pro.

05. Choosing the Wrong Business Structure

Registering your business with the Secretary of State is just the beginning. Choosing the right business structure is essential for protecting your personal assets, managing taxes, and setting your business up for scalable growth.

An LLC is popular, but it may not be the best fit depending on your goals. For some entrepreneurs, a corporation or partnership model may offer better protection or tax advantages.

Business Tip: Consult with a business lawyer or CPA before selecting your structure. Let them help you register the entity that fits your current needs and future plans.

04. Failing to Protect Your Trademarks

You’d be surprised how many entrepreneurs end up using the same name. Without a trademark, you’re vulnerable to name disputes, cease-and-desist letters, or even lawsuits.

The cost of a rebrand or infringement lawsuit can easily exceed $150,000. A federal trademark protects your brand name, logo, and slogan from being used by others.

Business Tip: Start the trademark registration process before launch with an “intent-to-use” application to lock in your rights early.

03. Running a Business Without Insurance

Many business owners assume insurance is optional—until they’re sued. Even if you did nothing wrong, legal defense costs can bankrupt a business without proper coverage.

Business insurance provides the financial cushion you need if a claim is made against your company.

Business Tip: Review your business insurance annually to ensure you have the right coverage for your current operations. Don’t leave gaps that could cost you everything.

02. Not Using Written Contracts

Oral agreements are legally binding, but they’re also hard to prove and enforce. When deals go south, having your terms in writing can mean the difference between a win and a financial disaster.

Written agreements provide clarity, set expectations, and reduce disputes.

Business Tip: Work with an attorney to draft reusable contracts customized to your business. Put everything in writing, and don’t skip the fine print.

01. DIY’ing the Legal Stuff

Entrepreneurs are scrappy by nature, but legal protection is not the place to cut corners. What you don’t know can hurt you—financially, professionally, and personally.

From trademarks to contracts, a DIY approach can leave you vulnerable to legal issues that could have been easily avoided with proper counsel.

Business Tip: Invest in legal guidance early. Work with an attorney who understands your business and can build a strategy tailored to your goals.

Final Word from The Nest:

The law doesn’t have to be intimidating or expensive. But ignoring it can cost you far more in the long run. Build your business with intention and make legal protection part of your launch plan.

Need help avoiding these mistakes? Book a consult with our team at canaryandhedge.com.