Small Business Legal Mistakes in Texas (and How to Prevent Them)

Stephanie Fernald
Jun 29
3 min read

You’ve got the big idea, the passion, and the business plan. But if you skip over the legal details, your Texas startup could hit serious roadblocks before it ever takes off.

At BC Robertson Law, we work with new business owners every day—and we’ve seen how preventable legal mistakes can cost thousands in fines, lawsuits, or lost opportunities.

If you're launching or growing a business in Texas, here are the top Small Business Legal Mistakes in Texas—and how to prevent them.

Small Business Legal Mistakes in Texas

Mistake 1: Not Forming a Legal Entity

Too many small business owners start out without officially forming an LLC or corporation. They run everything under their personal name or as a sole proprietorship—exposing their personal assets to business liabilities.

Why this is risky:

If someone sues your business, your home, savings, and personal property could be at risk.
You’ll likely miss out on tax advantages and credibility that come with a formal entity.

Solution: Form an LLC or S-Corp with the state of Texas and get help choosing the structure that’s best for your goals.

Mistake 2: Using Verbal Agreements or Downloaded Contracts

Whether it’s a contractor, client, or vendor—a handshake isn’t protection. And contracts pulled from the internet often miss key provisions required by Texas law.

Why this is risky:

You could end up with one-sided terms or unenforceable clauses
Disputes become harder (and more expensive) to resolve
You leave your rights unprotected

Solution:Have a Texas business attorney draft or review your contracts so you know exactly what you’re agreeing to—and what you’re protected against.

Mistake 3: Misclassifying Workers

Independent contractors vs. employees—it’s a hot issue in Texas and across the U.S. Misclassification can lead to IRS penalties, unpaid overtime claims, and legal liability.

Why this is risky:

The IRS, DOL, and TWC all have different rules for worker classification
You may owe back taxes, unemployment insurance, and benefits
Workers may sue for misclassification and unpaid wages

Solution: Work with a legal advisor to correctly classify workers and draft clear agreements based on your business model.

Mistake 4: Forgetting to Protect Your Intellectual Property

Your logo, tagline, website content, and service names are valuable assets. Failing to trademark or copyright your IP leaves it vulnerable to theft—or legal claims that you’re infringing on someone else.

Solution: Secure trademarks for your business name and branding. Use NDAs when needed. And make sure you have written IP ownership agreements with contractors, designers, and developers.

Mistake 5: No Clear Internal Policies or Processes

When your business starts growing, so do your risks. Without clear internal processes, handbooks, or compliance practices, you may end up facing:

Discrimination or harassment claims
Wage and hour disputes
Communication breakdowns and team conflict

Solution: Set up policies, procedures, and team contracts early. Your future self will thank you.

Legal Help Now Saves Money Later

Most business owners don’t think they need an attorney until something goes wrong—but by then, the cost is often 10x higher than it would have been with proactive guidance.

That’s why we offer affordable flat-fee legal services and monthly general counsel packages designed for Texas startups and small businesses.