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[ironxage]

I want to build my own website with all my own images and such and sell cheap business logos i have made, Can i run into any legal problems by not registering the company or something like that? I would be selling them through paypal most likely, thanks!

[Robert K S]

I'm not your lawyer, and this is not legal advice.  The laws are a bit different in each state and you really should consult a lawyer if you want legal advice.  Also, this is probably the wrong forum, since your question only half relates to intellectual property.  I'll touch on the half that doesn't, first.  That half relates to taxation and legal liability if anyone ever sues you.

When a person goes into business for himself, even if he doesn't file anything with the secretary of state in the state where the business is "headquartered" (or any other state), he forms a kind of business entity, a sole proprietorship.  A sole proprietorship has a nice tax advantage in that any profits made by the business pass directly to the sole proprietor and are only taxed once, on his income tax.  Many types of incorporated entities, on the other hand, are taxed twice on their profits: once on the corporation's (taxable) income and again on the personal income taxes of the owners when they receive the company's profits in the form of dividends.  But a sole proprietorship has a disadvantage in that the sole proprietor's personal assets can be touched by any legal judgment against him.  Shareholders in corporations are in all but a few odd cases protected from such liability.  Their liability is "limited" to their equity stake in the company (i.e., the money they spent to buy stock).  So that is the financial disadvantage of non-registration.  As a practical matter, for very small entities like a guy's personal business, it doesn't make sense to incorporate, as the disadvantages to incorporation outweigh the advantages.  The owner of a single-owner incorporated entity is still going to be personally liable for any torts he commits in the course of his business, and no other business is likely to make contracts big enough to sue over with a tiny business that has almost no assets, without demanding the owner be personally liable.

That's the corporations law side of things, and that has nothing to do with intellectual property.  As I said, corporation law varies from state to state and anyone thinking of starting a company will want to get acquainted with the laws of that state.  The office of any state's Secretary of State will probably have useful materials to read that may be assistive.  There will almost certainly be a filing fee for registering articles of incorporation, and further there will probably be an annual franchise tax, plus a number of more or less burdensome formalities that will need to be attended to by incorporated entities.

But this is an intellectual property forum, so let's talk IP.  The biggest risk for a well-intentioned but underinformed new business that comes to my mind is that associated with trademark infringement.  If a sole proprietor (or a corporation) starts doing business under a trade name that is already the trademark of another business, and such usage is likely to cause confusion for consumers, this has the potential to invite legal action.  The particular type of business you describe might also raise additional new trademark issues on a case-by-case basis with each new design sold.  Even if the designs were original, there would not be the guarantee that they would not infringe on the intellectual property of others.  If you're worried about IP, consult a trademark attorney.

[Kaitlin]

Robert's given you some good thoughts. 
With the same disclaimer, that this should not be construed to be legal advice, I'll add a tweak and an underscored endorsement:

Re incorporating, a tweak:

Many types of incorporated entities, on the other hand, are taxed twice on their profits: once on the corporation's (taxable) income and again on the personal income taxes of the owners when they receive the company's profits in the form of dividends. 

A "subchapter S" corporation is a corporation that can act like a sole proprietorship (or partnership) for tax purposes--permitting the business profits and losses to "flow through" to the owner's or owners' individual income taxes, thus avoiding the double income taxation issue.  On the other hand, depending on local law, sometimes LLC's and S-corporations, unlike sole proprietorships, may have additional tax burdens unrelated to income tax--e.g. a yearly filing fee of several hundred dollars for a business property tax.  And while I believe Robert's point about liability is true when it comes to professional liability, such as attorney or medical malpractice, I believe having corporate status or the status of a limited liability company or limited liability partnership can protect owners' personal assets from normal liability for negligence. 

For general information on starting a business, you might try looking at Nolo Press' book on the subject.  Generally, their legal guides tend to be legally well-researched as well as well written for the layman.  http://www.nolo.com/products/legal-guide-for-starting-and-running-a-small-business-RUNS.html


Re trademarks:

The biggest risk for a well-intentioned but underinformed new business that comes to my mind is that associated with trademark infringement.  If a sole proprietor (or a corporation) starts doing business under a trade name that is already the trademark of another business, and such usage is likely to cause confusion for consumers, this has the potential to invite legal action. 

 
You've now heard this from myself, Artchain, and Robert K.S.  This is a biggie.  One of the most common problems I saw in my trademark practice was businesses who chose and registered a business name and invested in it, only to find several years down the road when their business had grown that another competing business already had dibs on its use as a trademark.   
Your state does NOT do a trademark search for you when they register your business name.  They just check to make sure there isn't an identical  one within your state. Similar story with domain names.  Although here they look beyond your state, they're still essentially just checking to make sure no one has the exact same domain.
In each case the powers that be want to make sure no one has an IDENTICAL one, so that mail (and particularly any legal summons) gets delivered to the right doorstep, and a url with a particular domain only leads to a site of that domain owner.
TRADEMARK LAW, by contrast, is concerned with consumers and how they interact with marketing and involves a much more sophisticated analysis than just seeing whether the names are the same.  Completely different words can conflict, if they have the same or similar meaning--or sound similar--or look similar.  I can't stress this enough: before investing further, get your chosen name checked out, even if you've already paid for the domain or registered the name.

Especially if you're going as a sole proprietor, you don't want your personal assets on the line in defending a trademark suit because you didn't bother to take the time to do a proper search.