Small Business Legal Checklist

Essential legal steps every small business owner should take to protect their enterprise.

Starting a business in Washington state is exciting — but the legal foundation you build in the first year will either protect you for decades or cost you dearly when things go sideways. As the managing partner of Washington Law and lead of our business practice, I've watched too many founders skip these steps, and watched them pay for it later. Here is the checklist I wish every client had read before they walked through our door.

1. Choose the Right Entity Structure

Most small businesses default to an LLC because they've heard it "protects you." And it does — but only if it's set up correctly and maintained properly. A single-member LLC without an operating agreement, mixed business and personal funds, and no registered agent is a liability shield in name only. Judges pierce those veils regularly.

Before you choose LLC, S-Corp, or C-Corp, sit down with a business attorney. The answer depends on your revenue projections, how many owners you have, whether you plan to raise outside capital, and your exit strategy. Getting this wrong costs far more to fix later than it does to get right now.

2. Draft a Founders' Agreement

If you have a business partner, a founders' agreement is not optional. What happens if one partner wants to leave? What if someone stops contributing? What if one partner wants to sell their shares to a third party you don't trust? These conversations are uncomfortable when things are good. They are catastrophic when things are bad.

A well-drafted founders' agreement covers vesting schedules, buyout rights, decision-making authority, and what happens on death or disability. Spend $1,500 now or fight a $300,000 lawsuit later.

3. Register Your Intellectual Property

Your business name, logo, and core processes are assets. If you don't register them, someone else can — and then you're the infringer. File a trademark for your brand name and logo at both the state and federal level. If you have proprietary processes, software, or creative work, discuss copyright registration and trade secret protection with your attorney.

4. Get Your Contracts Right

Template contracts from the internet are dangerous. They're written for a different state, a different business model, or a different era of law. Every contract you sign — with clients, vendors, employees, and contractors — should be reviewed by an attorney before the first signature.

Pay particular attention to: liability caps, indemnification clauses, intellectual property ownership (especially with contractors), and dispute resolution terms.

5. Set Up Proper Employment Practices Before You Hire

Washington state has some of the most employee-protective laws in the country. Before you hire your first employee, you need: an employment agreement, an offer letter, an I-9 process, a payroll system that handles Washington's paid family and medical leave, and a basic employee handbook.

Washington's minimum wage, paid sick leave, and non-compete restrictions are stricter than federal law. Getting this wrong from day one is how you end up in wage-and-hour class actions.

6. Open a Dedicated Business Bank Account

This sounds obvious. You'd be surprised how many established businesses still run personal and business funds through the same account. This single step is the most important thing you can do to preserve your liability protection.

7. Understand Your Licensing Requirements

Every business in Washington needs a state business license. But depending on your industry — healthcare, food service, construction, financial services, real estate — you may need additional licenses, certifications, and permits at the city, county, and state level. Missing one can mean fines, forced closures, and personal liability.

8. Create a Data Privacy Policy

If you collect any customer data — email addresses, credit cards, health information, or even just website analytics — you need a privacy policy. Washington's My Health MY Data Act, effective 2024, adds significant obligations for businesses handling consumer health data. The penalties for non-compliance are severe.

9. Review Your Insurance Coverage

A general liability policy is the floor, not the ceiling. Depending on your business, you may also need: professional liability (E&O) insurance, cyber liability coverage, commercial property insurance, directors and officers coverage, and key person life insurance. Talk to both your attorney and your insurance broker together — they need to understand each other's work.

10. Know Your Exit Before You Build

You don't need a detailed exit plan on day one. But you need to think about it. Are you building to sell? To pass to your children? To run forever? The answer changes how you structure ownership, how you document processes, and how you protect intellectual property. Build with the end in mind.

Washington Law helps Seattle-area businesses from formation through growth, transaction, and exit. If you'd like a complimentary 30-minute review of your current legal structure, contact us at (206) 555-1847.