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Starting a New Business: What to Fix Before the First Contract, Hire, or Investor

  • Todd Nurick
  • 2 days ago
  • 10 min read


Business attorney advising founders on starting a new business, contracts, ownership, and legal setup
Business attorney advising founders on starting a new business, contracts, ownership, and legal setup

Starting a New Business is exciting. I've done it for myself, and for countless clients. You have an idea. You may already have a name, a partner, a first customer, a prototype, a website, or a pitch deck. Someone may have told you to “just form an LLC,” get an Employer Identification Number, (EIN), open a bank account, and start selling. That may be enough to get moving. It’s usually not enough to build the business correctly.


I tell every client: Build your castle on a foundation of steel and concrete, not sand. It may not be for years- but, build it on sand and it's going to tumble down.


The first legal mistakes in a new business are often quiet. Nobody notices them when the company is small. How many of these do you recognize- The ownership split seems obvious. The name is amazing. The founder who created the logo “knows” it belongs to the company. A contractor is treated like an employee until that becomes inconvenient. A customer contract gets signed because revenue matters. A friend helps with code, content, sales, design, or operations, and nobody writes down who owns what.


Then the business grows. Someone leaves. An investor asks questions. A customer refuses to pay. A vendor contract goes sideways. The founders disagree. Suddenly, the easy setup doesn’t look so easy.


Starting a New Business should involve more than filing a form. The better approach is to build a legal foundation that matches the company’s actual plan, people, money, risk, and growth strategy.

Todd Nurick of Nurick Law Group, LLC is a Pennsylvania and New York business attorney with approximately 30 years of civilian business law and litigation experience and a former Army officer. As Fractional General Counsel and Outside General Counsel, he helps businesses address entity formation, contracts, founder issues, employment questions, intellectual property, risk management, disputes, and the full range of legal concerns that an internal legal department would ordinarily handle.


Starting a New Business: don’t let the filing tail wag the business dog

The entity filing is only one part of the setup. A Limited Liability Company, (LLC), may be the right structure for many closely held businesses because it can offer flexibility, limited liability, and pass-through tax treatment. A corporation may make more sense if the company expects outside investors, equity incentives, venture capital, or a more formal governance structure. A sole proprietorship may be simple, but simplicity can come with personal exposure. A general partnership can form more casually than the owners realize, and that can create serious problems if the relationship breaks down. The right choice depends on the business.


That includes:

  • who owns it;

  • who controls decisions;

  • how profits and losses will be shared;

  • whether investors may come in later;

  • whether equity will be used to attract talent;

  • what tax treatment makes sense;

  • how much personal liability protection is needed;

  • whether intellectual property should sit in the same entity as the operating business;

  • where the business will actually operate.


A filing service can usually create an entity. It usually won’t tell the founders whether the structure fits the business, whether the ownership terms are complete, whether the tax treatment makes sense, whether a separate intellectual-property entity should be considered, or whether the company is being built in a way future investors, lenders, buyers, or courts will understand. It won't draft an Operating Agreement, Shareholder Agreement or other necessary documentation and governance customized to your particular needs.


Starting a New Business with partners requires a written deal before things get uncomfortable

Founder relationships are easiest to document while everyone is still optimistic. After all, who goes into business with someone they don't trust? That’s also when people are most likely to avoid the conversation. I always tell clients that law libraries are full of "books full of cases" between people who trusted one another- friends, family, prior partners.


A new business with two or more owners should address the hard questions early. Who owns what? Who contributes money, labor, equipment, contacts, code, designs, or other assets? Who makes final decisions? What happens if one owner stops working? What happens if one owner wants out? Can an owner transfer interests to a spouse, trust, creditor, competitor, or third party? Who owns the work product? How are deadlocks resolved? Those questions don’t get easier later.

The operating agreement, shareholders’ agreement, buy-sell terms, equity documents, and written consents are not paperwork for paperwork’s sake. They’re the rules of the business relationship. If the company waits until a dispute starts, the documents are no longer just planning tools. They become weapons.


The business name is not cleared just because the state accepted it

This is one of the easiest traps for new owners. A state may allow a business to register a name because that exact name is available in the state filing system. That does not mean the name is safe to use as a brand. It does not mean the company has trademark rights. It does not mean a similar business in another state, or even in the same market, cannot object.


Before investing in signs, packaging, domain names, social media handles, advertising, uniforms, software, or a website, the business should look at name clearance more seriously.


Some action items:

  • state entity-name availability;

  • fictitious name/doing-business-as filings;

  • domain-name availability;

  • social media handles;

  • United States Patent and Trademark Office, (USPTO), search results;

  • common-law use in the relevant market;

  • whether the name is too generic or descriptive to protect well;

  • whether a logo, slogan, product name, or service name should be protected separately.


A weak or conflicting name can be expensive to fix after launch. It can mean rebranding, losing goodwill, surrendering a domain, changing marketing material, or responding to a cease-and-desist letter at the exact moment the business is trying to grow.\


Protect the company’s work before someone else claims it

Ownership of work product shouldn't be left to memory. A business may start with help from friends, contractors, designers, developers, marketers, photographers, writers, consultants, employees, or early collaborators. If the company doesn’t have written agreements assigning or protecting the work, it may later have trouble proving that it actually owns the assets it depends on.


That can affect:

  • logos;

  • website content;

  • software code;

  • product designs;

  • customer lists;

  • training materials;

  • pitch decks;

  • inventions;

  • formulas;

  • business plans;

  • social media accounts;

  • confidential processes.


Confidentiality agreements, invention-assignment language, contractor agreements, employee agreements, and ownership provisions should be handled early. A company should not wait until a financing, sale, dispute, or founder breakup to ask who owns the thing around which the business is built.


Contracts should match how the business actually makes money

New businesses often treat contracts as something to deal with once they are “bigger.” That can be costly. The first customer contract may set expectations the company cannot meet. The first vendor agreement may include one-sided indemnity language. The first lease may lock the company into space it will outgrow or cannot afford. The first software subscription may give a vendor too much access to business or customer data. The first independent-contractor agreement may fail to address ownership, confidentiality, payment, scope creep, or termination.


A practical startup contract review usually looks at:

  • what the business is promising;

  • when payment is due;

  • what happens if the customer does not pay;

  • who owns deliverables;

  • who is responsible if something goes wrong;

  • whether liability is capped;

  • whether the company is giving warranties it cannot support;

  • whether confidential information is protected;

  • whether termination rights are balanced;

  • whether the contract matches the sales process;

  • whether the contract creates obligations the team does not understand.

Revenue matters. So does the contract that creates the revenue.


Hiring too early without employment structure creates avoidable risk

The first hire is exciting and always a turning point. Before hiring employees, a business should understand payroll, tax withholding, workers’ compensation, wage-and-hour rules, required notices, Form I-9 obligations, employee classification, handbook needs, anti-discrimination obligations, leave laws, and state/local requirements. New York, for example, has its own employment-law requirements that can matter quickly as a company grows or hires there.

Independent contractors are not a workaround simply because the business would rather avoid payroll. The company needs to understand the difference between an employee and a contractor before the relationship begins, not after a claim is made.


Early employment structure does not need to be overbuilt. It does need to be intentional.

That may mean:

  • written offer letters;

  • confidentiality and intellectual-property assignment terms;

  • clear job duties;

  • correct exempt/nonexempt classification;

  • payroll and withholding setup;

  • workers’ compensation coverage;

  • basic workplace policies;

  • document retention practices;

  • a process for complaints, discipline, and termination.

New businesses are often informal by necessity. Employment law is not always informal in return.


Financing, investor materials, and the story the business tells

A business plan is not only for investors. It forces the founders to explain what the company does, who the customer is, how the company will make money, what it needs to launch, what risks exist, and how much capital is required. The United States Small Business Administration, (SBA), describes the business plan as the foundation of the business, and that’s a useful way to think about it.


Investor materials require even more care. A pitch deck, executive summary, use-of-proceeds statement, financial projection, or investor data room should be accurate, supportable, and consistent with the company’s contracts, ownership records, intellectual-property position, and financial assumptions. Counsel does not usually write the business plan for the founders, but legal review can help avoid statements that are misleading, unsupported, or inconsistent with what the documents actually say. Money changes the legal analysis.


If the business is raising capital, the company needs to think about securities laws, investor rights, ownership dilution, control, disclosure, valuation, and whether the financing structure fits the company’s future plans. Friends-and-family funding may feel casual, but it is still real money from real people who may later have real expectations.


Modern compliance: do not rely on last year’s checklist

Business setup rules change. One recent example is Beneficial Ownership Information, (BOI), reporting under the Corporate Transparency Act, (CTA). Current Financial Crimes Enforcement Network, (FinCEN), guidance says U.S. companies and U.S. persons are exempt from BOI reporting under the interim final rule, while certain foreign companies may still have reporting obligations. That is a significant change from earlier guidance, and it is exactly why old startup checklists should be checked before they are reused.


Pennsylvania is another example. Beginning in 2025, most domestic and foreign filing associations are required to file annual reports, including business corporations and LLCs. A business formed in Pennsylvania should build that continuing obligation into its calendar instead of treating formation as a one-time event.


New York has its own trap for LLCs. New York law requires a domestic LLC to complete a publication requirement within 120 days after the effectiveness of its articles of organization. That is the kind of state-specific requirement that can be missed when a founder thinks the only step is filing online.


The point is not that every new business has the same compliance burden. The point is that formation is not the finish line.


A cleaner new business setup usually includes these steps

A strong setup doesn't need to be complicated. It needs to be organized.

Before launch, or as early as possible after launch, the business should usually address:

  • business plan and startup budget;

  • entity choice;

  • state of formation;

  • ownership percentages;

  • management and voting rights;

  • operating agreement, bylaws, or shareholder documents;

  • tax classification and accountant coordination;

  • EIN application;

  • bank account and separation of business/personal funds;

  • state and local tax registration;

  • licenses and permits;

  • name clearance and trademark review;

  • domain names and online accounts;

  • confidentiality agreements;

  • contractor and employee ownership terms;

  • customer contract templates;

  • vendor contract review;

  • insurance;

  • employment setup;

  • corporate records;

  • compliance calendar.


That list may look long. It is still easier to handle in order than to reconstruct after money, customers, employees, or partners are already involved.


Why this is really a general counsel issue

Starting a New Business is not just a formation project. It is a sequence of decisions that affect ownership, risk, taxes, contracts, employment, intellectual property, financing, operations, and exit options. Those decisions connect to each other. Entity choice affects tax and financing. Founder agreements affect control and future disputes. Contractor agreements affect ownership. Customer contracts affect revenue and liability. Employment choices affect compliance. Brand clearance affects marketing and growth.


That is why Fractional General Counsel and Outside General Counsel can be useful even at the startup stage. The goal is not to make the business slow or overly legalistic. The goal is to help the founders avoid preventable mistakes, document the important decisions, and build in a way that still makes sense when the company has customers, employees, lenders, investors, or buyers looking closely.


Conclusion

Starting a New Business should feel exciting. It should not feel like legal work is suffocating the idea before it has a chance to grow. But the early decisions are important. The company’s name, entity, ownership structure, tax setup, contracts, intellectual property, employment practices, financing documents, and compliance calendar can either support the business or create problems that show up later.


A filing simply creates the shell. The legal structure makes the business usable.


If you are starting a new business, bringing in partners, hiring employees, protecting a brand, raising money, or signing your first meaningful contracts, Todd Nurick and Nurick Law Group, LLC can help build the foundation through practical business-law guidance, Fractional General Counsel support, and Outside General Counsel support.


Sources

Disclaimer: This article is for informational purposes only and isn't legal advice. Reading it doesn't create an attorney-client relationship. Todd Nurick and Nurick Law Group aren't your attorneys unless and until there is a fully executed written fee agreement with Todd Nurick or Nurick Law Group.

 

© 2025 by Nurick Law Group. ***Nurick Law Group and Todd Nurick do not function as your legal counsel or attorney unless a fee agreement has been established. The information presented on this site is not intended to serve as legal advice. Our objective is to educate businesses and individuals regarding legal issues pertinent to Pennsylvania. 

 

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