6 Legal Mistakes That Can Shut Down Your Business
Running a Business? These 6 Legal Mistakes Could Cost You Everything!
Starting a business is exciting—until legal trouble knocks on your door. Whether it's choosing the wrong business structure, skipping trademarks, or accidentally breaking copyright laws, small mistakes can lead to BIG problems.
If you want to protect your business, your finances, and your peace of mind, I have a few special tricks you can use.
1. Stop Running Your Business as a Sole Proprietor!
🚨 Why it’s a problem: If your business gets sued, your personal assets (like your house and savings) are on the line. Your business is supposed to get you more, not take it away!
Don't let your business drain you – it should be the other way around!
✅ The fix: Register as an LLC (Limited Liability Company) or Corporation to separate your personal and business finances.
An LLC and a Corporation are both legal ways to set up your business so that your personal money and assets are protected if something goes wrong—like a lawsuit or business debt.
Think of It Like This:
Sole Proprietorship → Running your business as you (no protection). If your business gets sued, your personal money is at risk.
LLC → Like a shield for small businesses. It protects your personal assets while giving you flexibility in how you run and tax your business.
Corporation → Like a big ship for growing businesses. It has more rules but makes it easier to raise money and scale.
If you're just starting, an LLC is usually the best option because it's simple and protects you from personal liability. If you're planning to grow fast and get investors, a corporation might be a better choice.
🔗 Want official guidance? Check out the IRS guide to business structures.
2. Business Partnerships: They’re Like a Marriage (But With More Paperwork)
🙅♂️ The mistake: Jumping into a business partnership without a solid agreement.
💡 The solution: Draft a partnership agreement that includes:
How profits and losses are shared
Decision-making processes
What happens if one partner leaves
🔗 Pro tip: Just like in sports, plan for tie-breakers! Deadlocks in business decisions can grind your company to a halt.
But remember! You are not a lawyer. And you didnt want to be.
Yall, “diy ing” your contracts can really mess up your business. I know it's just a piece of paper, but it's the only thing making your handshake deal official.
3. Trademarks: Your brilliant idea can already be someone else's
⚠️ Why it’s risky: Many new business owners pick a name without checking if it’s already trademarked. This can lead to lawsuits and expensive rebrands.
🔍 How to avoid this:
✔️ Search the USPTO database before choosing a name.
✔️ Register your trademark to prevent others from using it.
✨ Many biz ownwers ask me: "But Samantha, Isn't trademarking for big brands? How I know if my business would benefit from a trademark?”
We actually have an easy 10 min FREE quiz so you can get north on what should be your next step on your trademark journey!
4. Copyright Mistakes That Can Get You Sued! Don't let a grinch steal your biz…
A few years ago, a photographer had a brilliant idea for holiday mini-sessions. Instead of the usual Santa Claus setup, she hired a Grinch impersonator to pose with kids. The photos? Absolutely hilarious—some kids were thrilled, and others were terrified (which made it even funnier).
She posted the pictures online, and they went viral. Parents were lining up to book their own Grinch-themed shoots. Business was booming... until she got a very scary letter.
🎄 Guess what? The Grinch is copyrighted!
Universal Studios, which owns the rights to How the Grinch Stole Christmas, was not amused. Their legal team quickly shut her down, claiming she had used their character without permission for profit. She was forced to remove all the photos and almost lost her business.
So here is how to Avoid a Grinch-Level Lawsuit
🎵 Music Matters: Just because you can use a song on Instagram or TikTok doesn’t mean you can use it in your business videos or ads. You need a commercial license.
📸 Fan Art ≠ Free to Use: Selling Disney, Marvel, or Harry Potter-inspired merch on Etsy? Think again. Certain companies actively hunt down unauthorized products and can shut down your store overnight.
🛑 Protect Yourself: Always check if you need permission before using someone else's work. When in doubt, create your own!
Lesson learned? Don't let a copyright mistake steal Christmas (or your business).
5. The Profit First Method: A Cash Flow Lifesaver
📉 Why businesses fail: They don’t manage cash flow properly.
💰 The fix: The Profit First method helps businesses stay profitable by setting aside money for:
Profit (yes, you pay yourself first!)
Taxes (so you’re not surprised in April)
Expenses (so you don’t overspend)
A great Book recommendation for a better understanding of this: Profit First by Mike Michalowicz.
6. Planning for the Future: Business Growth & Pivots
🚀 What works today might not work in three years.
📌 Stay ahead by:
Regularly reviewing your business structure with an accountant and lawyer.
Considering incorporation if you plan to expand internationally. (here is a quick insta carousel if you plan to go global)
Ensuring your legal setup aligns with your long-term goals.
Don’t Let Legal Issues Derail Your Business
Legal mistakes are expensive, stressful, and avoidable. The best way to protect your business is to plan ahead, set up the right legal structures, and work with a business lawyer before problems arise.
📞 Can I help? If you’re in Virginia or it concerns your intellectual property, you can Book a call with me to get expert legal guidance tailored to your business.
**Disclaimer: This is only general information, not legal advice specific to your situation, and does not create a client-attorney relationship between you and Samantha Bradshaw, a Virginia licensed small business lawyer, or InLine Legal, a 100% virtual law firm. If you need legal advice, please contact a lawyer in your area.