Is Your Small Business Legally Healthy? A 10-Point Legal Health Check

As a small business owner or entrepreneur, your main focus is on growing, managing, and scaling your business. But when was the last time you checked in on the legal health of your business?

Not focusing on legal fundamentals now can lead to expensive surprises and operational setbacks later. Whether you are just starting out or years into operation, this Business Legal Health Checklist will help you identify and reduce risk, ensuring your business is built on a solid legal foundation.

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Business Legal Health Checklist: 10 Legal Essentials Every Small Business Should Review

1. Business Formation and Entity Structure

Choosing the right entity structure protects your personal assets and clarifies decision-making.

• Is your business legally registered with the appropriate state?

• Are your formation documents (e.g., LLC operating agreement, bylaws) signed and accessible?

• Are you using the correct legal structure (LLC, S-Corp, C-Corp) for your business goals?

• Do you have a clear ownership or equity structure documented?

2. Contracts and Legal Agreements

Strong business contracts reduce risks, set clear expectations, and protect your business in disputes.

• Do you use written contracts with clients, vendors, contractors, or partners?

• Are your legal agreements reviewed regularly for enforceability and clarity?

• Do they clearly cover payment terms, IP ownership, termination, and dispute resolution?

• Do you use Non-Disclosure Agreements (NDAs) where necessary?

3. Intellectual Property (IP) Protection

Your brand is a valuable business asset! Protect your intellectual property before someone else claims it.

• Have you trademarked your business name, logo, or key products?

• Are your website content, products, or branding legally protected?

• Do contractors or employees assign IP rights to your business?

• Are you respecting the IP rights of others (e.g., no unlicensed use of content or code)?

4. Employment and Worker Compliance

Employment law missteps are one of the top causes of lawsuits and audits for small businesses.

• Are your workers properly classified (employee vs. contractor)?

• Do you use compliant offer letters or employment contracts?

• Do you have an employee handbook or workplace policies?

• Are you compliant with wage and hour laws, PTO, and other labor requirements?

5. Website and Privacy Compliance (GDPR/CCPA)

Data privacy laws are changing fast. Stay compliant to avoid fines and protect customer trust.

• Do you have a clear Privacy Policy and Terms of Service on your website?

• Are you collecting data in compliance with laws like CCPA, GDPR, or other privacy regulations?

• Do you use cookies or email opt-ins correctly?

• Do you have a plan in place in case of a data breach?

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6. Licensing and Permits

Operating without the right business licenses and permits can lead to shutdown or fines.

• Do you hold all required business and professional licenses?

• Are you registered in every state where you operate or hire (state registration)?

• Do you understand industry-specific compliance obligations?

7. Corporate Governance and Recordkeeping

Clean corporate records are essential for audits, fundraising, or selling your business.

• Are you keeping business records (minutes, resolutions, ownership changes) organized?

• Are major business decisions documented in writing?

• Are you holding annual meetings if required?

8. Tax Compliance and Financial Oversight

Financial mismanagement can put your entire operation at risk—legally and operationally.

• Are your business taxes current with the IRS and your state?

• Are you collecting and remitting sales tax correctly (if applicable)?

• Do you have an accountant or CPA advising you?

• Are you using a bookkeeping system that separates business and personal expenses?

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9. Business Insurance and Risk Management

The right business insurance turns a crisis into a speed bump—not a shutdown.

• Do you have appropriate coverage (general liability, professional liability, cyber insurance, etc.)?

• Have you reviewed your coverage recently?

• Do you have internal risk protocols in place (e.g., remote work, cyber hygiene, customer complaints)?

10. Exit and Succession Planning

Planning ahead ensures your hard work isn’t lost in a transition crisis.

• Do you have a buy-sell agreement or succession plan?

• Are your ownership and equity agreements up to date?

• Have you considered how the business would continue if you exit or become unavailable?

Even if you checked most boxes above, business laws and best practices evolve constantly. A proactive legal review can save your small business money, time, and stress down the line.

At Borukhov Law, PLLC, we specialize in helping modern businesses build on solid legal ground—from formation and contracts to compliance and business scaling. Book a free intro consultation today and let’s make sure your business is legally protected and positioned for growth.

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Disclaimer: You should always consult your own lawyer. While I am a lawyer, I may not be yours (yet). Please note that the information provided here is for informational purposes only and should not be considered legal or tax advice.

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