A business plan represents a detailed description of a company’s strategic development, which includes not only marketing, financial, and operational aspects but also important legal issues. Clearly defined and well-understood legal considerations should be a significant component of the business plan, helping to prevent or at least minimize various types of risks — including financial, managerial, operational, market and competitive, legal and regulatory, technological, and reputational risks. Accordingly, it is essential to highlight and describe the key legal matters within the business plan.
I. Legal Form of the Company
The legal form of a business significantly determines the entrepreneur’s scope of liability, the scale of tax obligations, and the nature of operational activities. Therefore, it is advisable that the business plan includes the following information:
The legal form of the enterprise (e.g., limited liability company, joint-stock company/corporation, general partnership); The main and additional places of business of the enterprise; A general or detailed list of the enterprise’s activities; The enterprise’s primary goals/objectives.
This information provides business plan readers (investors, partners, or other interested parties) with an initial understanding of the scope of the business venture, the company’s legal status, business directions, and potential, which is critically important for attracting sufficient financial or other resources and establishing reliable and stable partnerships.
II. Licenses and Permits
Certain categories of businesses are required by national legislation to obtain specific licenses or permits. For instance, if a business is involved in the production of alcohol, pharmaceuticals, construction, or the financial sector, obtaining the appropriate license or permit is mandatory. Therefore, the business plan should reflect:
Precisely which licenses or permits are required; The timeframes/territorial scope of obtaining and maintaining the license or permit; The fees established for licenses and permits, and a general description of the application process.
III. Tax Status and Obligations
Proper tax planning is critical to the sustainability of a business. Although it may not be possible to fully account for all taxes during the initial stages, it is still advisable to include the company’s key tax parameters in the business plan, such as:
The company’s tax regime — whether the company will benefit from any special tax status (e.g., micro or small business taxpayer); Based on projected revenues, whether the company will be required to pay Value Added Tax (VAT); The main tax obligations and related accounting/reporting procedures (including how the company will receive bookkeeping or tax consulting services — via in-house or external service providers — and under which standards annual reports will be prepared, etc.).
IV. Labor Relations
With few exceptions, companies employ at least a few permanent employees with whom cooperation must be conducted under defined rules. Considering this, the business plan should address labor-related matters, specifically:
The types of contracts to be signed with employees (employment or other contracts, the form and duration of employment — on-site, remote, hybrid, freelance, etc.); The wage structure and minimum guarantees; Social benefits and mandatory contributions (pension, income tax, health insurance); Whether the company will implement an occupational safety policy.
V. Intellectual Property
If the business aims to create and/or use a unique product, design, brand, or technology, protecting intellectual property becomes essential. This need is particularly acute for technology companies offering innovative products and services. With this in mind, companies in such fields should also outline the following in their business plan:
Whether the company will register a trademark; Whether it plans to register a patent or copyright; How intellectual property will be protected in relations with contractors (including foreign companies).
VI. Contractual Matters
For the legal stability of the company, it is important to have reliable and thoroughly drafted contracts. To this end, the business plan should generally reflect the following:
Which sector representatives will be the company’s key partners; What dispute resolution procedures will apply besides negotiations (court, mediation, arbitration); What type and scope of legal services the company will receive and from whom (in-house lawyers, one-time or temporary external legal service providers, etc.).
VII. Data Protection and Confidentiality
In today’s business environment, where digitization is a growing trend, data protection has become a major challenge for many types of businesses. Typically, the data collected or processed by a company contains personal information, the protection of which is required by law. Therefore, the business plan should generally outline:
How customer data will be collected and processed; What methods, technologies, or resources the company will use to protect personal data; Whether the company will develop a data protection/confidentiality policy; If the company plans to enter the EU market, it is also important to address compliance with GDPR.
VIII. Conclusion
Among the many issues to consider when developing a business plan, legal aspects must not be overlooked, as they are critically important for the company’s stability and growth. A thorough legal analysis during the drafting of a business plan facilitates legally compliant operations, minimizes risks, ensures long-term success, and enhances competitiveness.
If you are planning to start a new business or expand, develop, or transform an existing one, it is highly advisable to carry out a legal analysis. This will help you properly develop your business plan, blueprint future activities in a consistent manner, allocate financial and other resources rationally, and manage your business securely.