Legal Considerations for New Business

At Pearson Butler, we have decades of experience serving individuals, businesses, and families across Utah in over a dozen practice areas. With more than thirty qualified legal professionals, we have the resources and experience needed to resolve even the most complex legal matters.

Legal Considerations for New Businesses

Start Your Business With a Utah Employment Law Attorney to Guide You

There are many ways to legally organize a business. Each organizational form offers protection to the owner, but each also has certain requirements the owner must adhere to if the protections are to be kept in place. Every business owner should be sure to understand what these requirements are. Above all, a business owner should guard against liability by knowing what records to keep, how to manage bank accounts and pay an owner's salary, what records to file with state agencies, and how to keep personal assets separate from business assets.

Get more information about legal considerations for new businesses by contacting the experienced Utah employment lawyers at Pearson Butler. Call (800) 265-2314 today!

Founding Documents

The law requires different filings to create each business form, and this paperwork carries many legal and tax consequences which may not be obvious to the do-it-yourselfer. There are also documents that are vital to protecting your business and your personal assets which are only filed in the business' own filing cabinet. Corporations must adopt and adhere to bylaws which define the duties of the officers, directors, and shareholders. An operating agreement plays a similar role for limited liability companies. For multi-member limited liability companies, it is crucial to have an operating agreement that protects the member's interests and lays out the rules of running the business. Every new business owner should have an operating agreement or bylaws which conform to the state law the business operates in and fully which protects the owner's personal interests.

Your Business Name

Although you may have already registered your business name with the Utah Department of Commerce, unless you have hired an attorney to do a trademark search and file a trademark application with the United States Patent and Trademark Office and the Utah Division of Corporations and Commercial Code, you are still at risk of trademark infringement and someone else could make you change your name. This is a failing point of many businesses. It is highly recommended that you do this before spending money advertising or creating your product. Also, be sure to file a Doing Business As (DBA) application with the Utah Division of Corporations (DOC) if you are going to use any name aside from the official full name of your registered business.


Aggressive marketing is often the key to starting a business in a down economy. The line between aggressively promoting your company and deceptive advertising may be thinner than you think. The Federal Trade Commission regulates advertising and marketing and works to protect the consumer from unfair trade practices and deceptive marketing. Make sure that you understand how marketing in your field is regulated so that you can safely advertise your product or service.

Negotiating & Entering into Contracts

There is no faster way to endanger your personal assets than by entering into contracts which you do not fully understand. As contracting with a new company can be risky, most institutions that will contract with you will try to get a personal guarantee from you that will make you liable if the company defaults on the contract. If they succeed, much of the protection you gained by incorporating vanishes.

If properly set up and run, your business can be liable for its own debts and if your business idea does not pan out, closing the business can be as easy as liquidating the assets and paying off the creditors on a pro rata basis. If you enter into contracts that bind you personally, filing bankruptcy for your business and yourself may be the only way out of a bad business venture.

Unfortunately, contracts are often written in language that is difficult to understand, and it may not be readily apparent whether you are making a personal guarantee to be liable for the contract. For this reason, it is highly recommended that you have a Utah employment law attorney review the contracts you sign and give you continuing guidance to ensure that your personal assets are never at risk.

Hiring People to Work for You

Employment laws are often counter-intuitive and perhaps the biggest source of problems for business owners in Utah and across the country. There are multiple laws that dictate, among other things:

  • Who you can hire and how you must do it;
  • How much you must pay the person;
  • When you must pay them;
  • When you must give them time off;
  • The actions you can take if they don't perform their jobs;
  • How you must respond to their complaints;
  • What you can do when they do not get along with each other; and
  • What records you must keep.

To go along with these laws, there are several federal and state agencies that actively regulate and investigate businesses. Moreover, the laws affect every business differently depending on the industry and the size of the company. In order to avoid having to comply with these many regulations and agencies, many small business owners attempt to classify their workers as independent contractors and become frustrated to learn that each employment law has different rules for determining whether you can hire someone as an independent contractor instead of an employee. Due to all this, before you hire people work for you, it is highly recommended that you consult with a Utah employment lawyer or with the U.S. Department of Labor, the Equal Employment Opportunity Commission, the Utah Department of Workforce Services, and the Utah Labor Commission to learn about your obligations as an employer.

Forming Company Policies

With everything else that a new business must consider, forming company policies often falls to the bottom of the task list. What most business owners do not understand is that forming company policies and consistently adhering to them offers a significant amount of protection and saves money. For instance, a policy requiring sobriety while at work can save the business from having to pay the expenses of a workers' compensation claim to a worker who was injured due to his inebriation in the workplace. There are likewise many other policies a business can adopt to save money and protect itself, but each policy must be documented, distributed, and consistently enforced in order to have the intended effect.

On the other hand, forming company policies can create undesirable legal consequences such as changing the status of at-will employment to termination only for cause. Owners can also be held liable for policies put in place to respond to customer complaints. As a result, business owners should be very careful about what policies to adopt and how they give customers and employees notice of them.

Contact a Utah Employment Lawyer & Protect Your Interests

These considerations are intended to be used as a helpful basis for thinking about the legal consequences of running a new business. This is not a complete list of all the laws or regulations that could affect your particular business and should not be solely relied on. The relay of this information does not create an attorney-client relationship with Pearson Butler. The firm’s seasoned professionals will be happy to meet with you in order to provide you with the skilled legal advice you need.

Call (800) 265-2314 or contact Pearson Butler online for comprehensive guidance and representation throughout the life of your business.

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