Starting a business or signing a contract is a major step. Understanding the basics can help you protect yourself and avoid costly disputes.

Starting a Business

Tennessee allows several types of business structures:

Sole Proprietorship – Simple and inexpensive, but you are personally responsible for all debts.
Partnership – Two or more people share ownership and responsibility.
LLC (Limited Liability Company) – Offers liability protection and flexible management; a common choice for small businesses.
Corporation – A separate legal entity with strong protection but more formal requirements.

No matter the structure, it is important to have clear written documents—such as operating agreements, partnership agreements, or bylaws—to define how the business will run and how decisions are made.

Understanding Contracts

A contract is any agreement that creates legal obligations. Tennessee law recognizes written and oral contracts, but written contracts provide far better protection. Handshake agreements exist but may not be enforceable in court.  A good contract should clearly spell out:

• What each party must do
• Deadlines and payment terms
• What happens if someone fails to perform
• How disputes will be resolved

Avoid relying on generic forms, as they often miss important terms or fail to comply with Tennessee law.

Why Legal Guidance Helps

Getting legal advice before forming a business or signing a contract can:

• Prevent misunderstandings
• Protect your assets
• Ensure compliance with state law (very important as minimum legal formation requirements must exist to be protected in any court)
• Reduce the risk of future litigation

A small investment in proper planning can save significant cost and trouble down the road.