The #1 Legal Mistake New Business Owners Make
According to Sam, the most common (and costly) mistake? Waiting too long to get legal protection.
Many entrepreneurs think they don’t need legal coverage yet — especially if they’ve only got a few clients or aren’t turning a profit.
But the law doesn’t care how big or small your business is. Whether you’re working with one client or one thousand, you need legal protection from day one.
The 3 Legal Essentials Every Business Needs
Thankfully, you don’t need a law degree (or a huge budget) to legally protect your business. Sam broke it down into three simple components:
1. Register Your Business
Registering as an LLC (Limited Liability Company) is a common first step for online businesses because it separates your personal finances from your business finances.
But here’s something I didn’t know until chatting with Sam: LLC protection only works if you actually act like an LLC. That means:
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Signing contracts in your business’s name (not your own)
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Keeping business and personal finances separate
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Using your LLC’s name consistently online and offline
Also, be aware: some states don’t fully recognize single-member LLCs. So it’s worth doing a little research (or checking with an attorney) to make sure you’re fully covered where you live.
💡 Pro Tip: You can usually register your LLC online through your state’s business website. Some people choose to use an attorney, especially when forming a partnership, but most solopreneurs can do it themselves.
2. Have the Right Contracts in Place
Think of contracts like your business’s boundaries. They protect you, your client, and your relationship.
Depending on what you sell, this could include:
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Client agreements (for services)
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Terms of use (for courses or digital products)
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Shop policies (for physical products)
One thing Sam emphasized: Don’t DIY your contracts using free templates or AI tools like ChatGPT. Not only do they often leave out critical sections (like disclaimers or venue clauses), they can give you a false sense of security — which is even riskier.
Sam recommends using professionally created legal templates (like the ones she sells), or working with an attorney if you have the budget. The key is to feel confident that your contract actually protects you.
3. Get Business Insurance
This one is often overlooked — but it’s essential.
The right business insurance can protect you in case of:
There are two main types of insurance most online business owners should consider:
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Professional Liability Insurance (aka Errors & Omissions or E&O) — covers issues with your services or products
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General Commercial Liability Insurance — covers bodily injury or property damage
You can usually get quotes through a business insurance broker, who will shop around for you to find the best fit and price. Just make sure you’re clear about what you do and how you sell, so you get the right coverage.
