📢 Disclaimer: I am not a legal professional. This blog provides general information, but you should always consult with a licensed attorney to ensure you’re meeting all legal requirements for your business.
Running a small business—whether you sell shirts, tumblers, stickers, DTF prints, or sublimation products—comes with a lot of moving parts. And while you might be focused on sales, marketing, and customer service, legal mistakes can sneak up on you and cause serious problems.
The good news? Most legal issues are avoidable if you take the right precautions! Let’s go over the most common legal mistakes small business owners make—and how to protect your business from them. 👇
1. Not Registering Your Business Properly 🏢
Many small business owners start selling without officially registering their business. While this might work short-term, it can cause big legal and financial issues down the road.
📌 What Happens If You Don’t Register?
❌ You may be personally liable if a customer sues you.
❌ You could face fines or penalties for operating illegally.
❌ You might have trouble opening business bank accounts or getting loans.
✅ How to Fix It:
✔️ Choose a business structure (Sole Proprietor, LLC, or S-Corp) based on your needs.
✔️ Register your business with your state or county.
✔️ Get an EIN (Employer Identification Number) from the IRS here.
🔥 Pro Tip: If you want to protect your personal assets, an LLC (Limited Liability Company) is a great option! You can register through LegalZoom or consult a business attorney.
2. Not Having Business Contracts in Place ✍️
Running a business without contracts is like playing with fire—eventually, you’ll get burned. If you work with freelancers, vendors, or custom order clients, clear contracts protect both sides.
📌 Problems That Happen Without Contracts:
❌ Clients may refuse to pay (and you have no legal backing).
❌ Disputes over refunds, timelines, and expectations.
❌ Vendors may fail to deliver supplies on time without consequences.
✅ How to Fix It:
✔️ Use a Client Agreement for all custom orders.
✔️ Have Supplier Contracts for material vendors.
✔️ Create Terms & Conditions for your website to cover refund policies.
✔️ Use Non-Disclosure Agreements (NDAs) if you work with designers or assistants.
🔥 Need contract templates? I personally use Dropbox Sign for legally binding e-signatures!
3. Ignoring Copyright & Trademark Laws ™️🚫
Just because an image or design is on the internet doesn’t mean it’s free to use! Many small business owners get into legal trouble for using copyrighted content without permission.
📌 Common Copyright & Trademark Mistakes:
❌ Selling products with Disney, NFL, or celebrity images (even fan art!).
❌ Using a business name that’s already trademarked.
❌ Copying another brand’s slogan, font, or logo.
✅ How to Fix It:
✔️ Always use original or licensed designs (or buy from legal design sources like Creative Fabrica).
✔️ Check trademarks before naming your business using USPTO Trademark Search.
✔️ Consider trademarking your own brand to protect it from copycats.
🔥 Pro Tip: If you’re unsure about what’s legally safe, work with a copyright attorney!
4. Not Collecting & Paying Sales Tax Properly 🏛️💰
If you sell physical products, you might be required to collect and pay sales tax—but many small business owners don’t realize this until it’s too late.
📌 What Happens If You Ignore Sales Tax?
❌ You could face penalties or back taxes if your state audits you.
❌ Your business might be shut down for non-compliance.
❌ Customers could file complaints if they’re charged incorrectly.
✅ How to Fix It:
✔️ Check your state’s sales tax laws at Avalara Tax Guide.
✔️ Use automated tax collection tools like TaxJar or Shopify’s built-in tax settings.
✔️ Register for a sales tax permit in your state (if required).
🔥 Pro Tip: Sales tax laws vary by state—always double-check with a tax professional!
5. Not Protecting Customer Data & Privacy 🔒
If you collect customer emails, payment info, or addresses, you must follow privacy laws like GDPR & CCPA.
📌 Common Data Protection Mistakes:
❌ Storing customer credit card info without encryption.
❌ Not having a Privacy Policy on your website.
❌ Sending marketing emails without consent (violating CAN-SPAM laws).
✅ How to Fix It:
✔️ Add a Privacy Policy & Terms of Service to your website.
✔️ Use secure payment processors like Shopify Payments or PayPal.
✔️ Follow email marketing laws using tools like Mailchimp or Klaviyo.
🔥 Pro Tip: Customers trust businesses that clearly state how their data is used. Be transparent!
6. Not Having Business Insurance 📑🛡️
Most small business owners don’t think about insurance—until something goes wrong. Whether it’s a damaged shipment, lost inventory, or legal dispute, having the right coverage can save your business.
📌 Why Business Insurance Matters:
✅ Covers you if a customer gets injured using your product.
✅ Protects against damaged or stolen inventory.
✅ Helps in legal disputes or liability claims.
✅ How to Get Covered:
✔️ Look into General Liability Insurance for product-based businesses.
✔️ Check out Next Insurance or Hiscox for small business coverage.
✔️ If you sell on Etsy or Amazon, check their insurance requirements.
🔥 Pro Tip: Some craft fairs & pop-up events require liability insurance—plan ahead!
Final Thoughts: Protect Your Business from Costly Mistakes! 🚀
Running a business is exciting, but legal mistakes can cost you thousands or even shut down your shop. By taking the right steps now, you can protect your brand, avoid penalties, and set your business up for long-term success!
✅ Register your business properly.
✅ Use contracts to protect yourself.
✅ Avoid copyright & trademark violations.
✅ Collect & pay sales tax correctly.
✅ Keep customer data safe & follow privacy laws.
✅ Invest in business insurance for extra protection.
📢 Reminder: This blog provides general legal guidance, but always consult a licensed attorney for professional advice!
💬 What’s your biggest legal concern as a small business owner? Let’s discuss in the comments! 🚀
