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Bringing your business dreams to life by venturing out on your own is one of the greatest acts of courage and ambition one can display. Entrepreneurship is a bold step in the direction of endless growth possibilities in the commercial marketplace, but like any journey, there are going to be bumps along the road to success. Inevitably, no matter how much you planning is done, there will always be unforeseen issues that arise, including legal issues faced by entrepreneurs from trademarks to intellectual property and more. Here we’ll touch on some of the larger examples of ethical and legal issues in business, how to recognize them, and what you can do to minimize your exposure.1

Why is it important for entrepreneurs to protect themselves from legal issues?

Occasionally the desire to get a new venture up and running as quickly as possible can lead to catastrophic losses that could not only cripple a business but could also land an individual in significant legal trouble as well. When it comes to covering all the legal bases, it’s best to leave it to a professional, and knowing where to start is half the battle. Being familiar with a few of the larger legal issues examples can help you prepare yourself pre-launch or give you a better idea as to where to start retroactively safeguarding yourself and your business from future legal concerns.2

Choice of legal counsel and the depth of their involvement is critical for any entrepreneur looking to make their way into the commercial market. Hiring a professional to make sure you’re limiting your risk exposure while helping to ensure your business gets off the ground on the right foot is imperative to ensuring continued success. Find a lawyer who specializes in startups and new business ventures as there can be subtle, but critically important details that may be overlooked by someone who does not focus mainly on entrepreneurship.3

Legal issues examples for an entrepreneur

You may be asking, “What are some examples of ethical and legal issues in business that I should look out for as an entrepreneur?” While this list is by no means comprehensive, it does highlight some of the larger issues that entrepreneurs frequently overlook or encounter themselves. Knowing where to start and what to discuss with your lawyer will help give you a leg up when it comes to protecting you and your business. Have a look at the list below for some of the topics that deserve the attention of any aspiring entrepreneur.

  1. Neglecting to follow corporate compliance laws: Corporate compliance is a broad term covering everything from internal rules, regulations, and procedures, as well as the federal and state laws governing your area of business. Plan regular check-ups to make sure your business is operating in accordance with all laws and rules.
  2. Intellectual property, such as trademark and copyright infringements: Entrepreneurs need to take extra precautionary steps to ensure they’re not infringing on someone else’s intellectual property and to protect their own in the process.
  3. Non-disclosure agreements (NDA’s): Ensuring NDA’s are signed prior to sharing concepts ensures that you can maintain confidential trade secrets and works-in-progress.
  4. Separate business and personal assets: Ensuring that you’re using separate bank accounts is just one simple tactic that can add a layer of protection between your personal assets and those of your business.
  5. Employment handbooks and contracts: Working on a propriety handbook and drafting a contract with a lawyer will help to ensure that employees are correctly informed, classified, and protected.
  6. Employee termination: Reduce your chances of legal retaliation by explaining employment terms in person as well as in print in employee manuals that clearly document rules, regulations, and disciplinary actions should they need to be taken.
  7. Shareholder agreements: All small businesses should make certain that formal shareholder and partnership agreements exist and are legally binding so that there are no grey areas for any of the stakeholders.
  8. Correctly filing taxes: There are countless rules regulations and laws governing the operation of a for-profit business. Make sure that you have the right processes and software in place to keep detailed account of all monies coming in and going out; a seemingly small detail could potentially cause serious financial hardship down the line.1,4,5

Common legal mistakes entrepreneurs make

The two largest missteps that entrepreneurs make include the following:

1. Hiring a lawyer with little to no experience working with entrepreneurs

The importance of starting early when it comes to incorporating the guidance of a lawyer cannot be stressed enough. Before you get started with your business venture, and ideally while you’re still in the planning phase, you should be doing research to find an attorney who specializes in start-ups and knows the ins and outs of your industry as well as local laws.

Having proper legal counsel through your launch as well as ready in the off chance you are sued is critical. If your business is particularly complicated and you anticipate any issues with the IRS, it may also be a good idea to find a tax attorney in addition to the one specializing in entrepreneurial endeavors. Either way, good legal council will help you navigate the waters, plan for the future, and cover your bases so that you can grow with peace of mind.

2. Neglecting to use NDA’s

Non-disclosure agreements are legally binding documents used to protect industry secrets, sensitive data, propriety and/or confidential information, and more. These documents ensure that ideas and information will not be stolen by individuals close to the project(s) in question. Those in breach of an NDA may be subject to lawsuits, financial penalties, or may even face criminal charges. The aforementioned legal counsel should be more than happy to help you draw up an NDA.3,5,6

Small businesses can’t afford to take hits from lawsuits, especially for things that could be easily avoided with proper planning. Keeping these common legal issues faced by entrepreneurs in mind and having the right insurance for your small business are good step in the right direction.

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[1] 7 Legal Issues Most Entrepreneurs Overlook When Starting a Business. 21 Oct. 2015,
[2] Porteous, Chris. "8 Legal Requirements When You Start A Business." Entrepreneur, 25 Feb. 2020,
[3] "Top Ten Legal Mistakes Made by Entrepreneurs." HBS Working Knowledge, 3 Mar. 2003,
[4] "What Corporate Compliance Is and Why Compliance Is Important.” PowerDMS, 29 Sept. 2020,
[5] Council, Young Entrepreneur. "8 Legal Issues Most Entrepreneurs Don't Consider When Starting a Business, but Should." HuffPost, HuffPost, 7 Dec. 2017,
[6] Beers, Brian. "Don't Get Sued: 5 Tips to Protect Your Small Business." Investopedia, Investopedia, 4 Sept. 2020,

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