This article is contributed by Suzanne Natbony, Esq., partner at Aliant LLP, and Tomislav D. Zbozinek, PhD, a licensed psychologist specializing in anxiety and depression.
Entrepreneurship offers excitement and opportunity, but it also brings significant legal complexity and emotional strain. From entity formation and regulatory compliance to contracts, disputes, and nonstop decisionmaking, founders routinely face pressures that can affect both business performance and personal wellbeing.
In this article, the authors examine how legal uncertainty contributes to entrepreneurial stress and explain why combining proactive legal planning with evidencebased psychological strategies is essential for longterm success. The piece offers practical guidance for founders seeking to protect their businesses while also strengthening emotional resilience.
Entrepreneurship is exhilarating, but it can also be legally and emotionally draining. Every founder must navigate a maze of regulations, contracts, and compliance obligations, all while coping with uncertainty, financial pressure, and nonstop decision-making.
Consider Jana, a California entrepreneur hoping to start a wellness consulting company. She wonders whether to form an LLC or remain a sole proprietor, and whether to register in California or in another state such as Delaware or Nevada. Once she decides, she faces new questions: Can she advise clients on nutritional supplements without crossing into medical practice? Can her assistant be classified as an independent contractor? Does she need a written consulting agreement with a cancellation policy? What happens if a client refuses to pay – or if a disgruntled employee files a complaint?
This cascade of questions is typical for small-business owners. From entity formation to risk management, legal complexity is one of the greatest hidden stressors in entrepreneurship.
Understanding those legal stressors – and learning healthy ways to manage them – can help founders not only build stronger companies but also preserve their mental health.
1) Understanding the Legal Landscape for Entrepreneurs
Entrepreneurs face legal decisions from day one:
- Entity Formation: Whether to organize as a sole proprietorship, partnership, corporation, or limited liability company, and in which state.
- Intellectual Property: Securing trademarks, copyrights, and trade secrets before launching products or services.
- Contracts: Drafting agreements for co-founders, investors, vendors, employees, and independent contractors.
- Regulatory Compliance: Ensuring marketing, data, and professional practices comply with state and federal rules (especially critical in healthcare, finance, and wellness sectors).
- Leases and Guarantees: Negotiating commercial leases, which often involve personal guaranties with long-term financial exposure.
Even after setup, legal risk never stops. Disputes may arise with employees, clients, landlords, or business partners. A single misstep, such as misclassifying a worker or inadvertently sharing patient or consumer data, can trigger lawsuits, fines, or regulatory investigations.
As counsel to startups and medical professionals, lawyers often see legal stress manifest as “analysis paralysis”: the entrepreneur becomes so overwhelmed by potential risks that decisions stall. This not only delays business progress but also heightens anxiety and burnout.
2) How Legal Stress Affects Entrepreneurial Mental Health
Research confirms that entrepreneurs experience higher stress and burnout rates than traditional employees (Kiefl, Fischer, & Schmitt, 2024). The constant demand to make legally and financially consequential decisions creates chronic cognitive and emotional strain. Even founders who are decisive and resilient may develop anxiety or depression when faced with persistent uncertainty, litigation threats, or “bad actors” such as exploitative partners or an avaricious landlord or “serial suer” plaintiffs, such as disgruntled employees or vengeful customers.
Recognizing these stressors allows entrepreneurs to implement both legal systems and psychological strategies to protect themselves. Proactive legal planning and mental-health resilience are essential as both rely on structure, foresight, and self-regulation.
3) Legal Planning as Preventive Self-Care
From a lawyer’s standpoint, preventive law is the business equivalent of preventive medicine. Just as good health habits avert illness, strong legal infrastructure prevents crises. A few key strategies:
- Written Agreements for Everything. Clearly drafted contracts reduce misunderstandings, protect cash flow, and provide recourse if relationships sour.
- Defined Policies and Procedures. Employee handbooks, compliance protocols, and privacy policies create clarity and reduce regulatory exposure.
- Professional Guidance Early. Consulting with a business attorney before signing leases, hiring staff, or taking investors can save far more than it costs.
- Insurance and Indemnity. Proper coverage – including professional liability and cyber policies -provides an emotional safety net as much as a financial one.
When these legal fundamentals are in place, founders experience less “background stress.” They can redirect energy toward creativity and growth rather than constant firefighting.
4) Seven Psychological Tools to Cope with Legal and Business Stress
Legal security alone doesn’t eliminate stress. To stay resilient, entrepreneurs can draw from the following seven based evidence-based psychological techniques to combat and ward off stress, anxiety, and depression.
i. Problem Solving
Instead of ruminating over “what-ifs,” effective problem solving involves defining the issue, generating options, choosing one, implementing it, and moving on.
Often times, people worry about their problems instead of engaging in problem solving. Worry involves: i) perseverative thinking about problems and their potential future negative outcomes, ii) difficulty disengaging from those thoughts, and iii) sometimes excessively seeking reassurance about what decision to make (Leahy, 2012). Worry is inefficient with regards to time, effort, and emotionality; is an unpleasant experience; and can strain relationships with other people (e.g., through reassurance-seeking or spreading worry). It makes you want to gather as much information as possible before making a choice. The problem with that, though, is gathering so much information is time- and effort-intensive; also, the more information you gather, the more likely the information becomes contradictory, making it hard to know what decision to make (i.e., “analysis paralysis”).
In contrast, problem solving is much more time-bound, effort-bound, and emotionally healthy. It involves thinking about a problem, thinking of solutions, picking a solution, enacting that solution, and moving on (D’Zurilla & Nezu, 2010). This can be done solo or in conversation with others. If the solution inherently involves waiting periods (e.g., waiting to hear back from someone), people who are worrying will anxiously perseverate over the problem/solution while waiting, whereas people who are savvy at problem solving will be able to compartmentalize (i.e., focus on other things and experience little-to-no anxiety). No matter how distracting a problem might feel, it’s important to catch yourself when you’re worrying and shift to problem solving. This can feel more pleasant, give you time back in your day, decrease burnout, and help you run your business more efficiently. Shifting from worry to problem solving is a typical part of cognitive behavioral therapy for anxiety.
ii. De-Catastrophizing
Cognitive techniques that examine evidence for and against catastrophic thoughts can reframe these events realistically.
Anxiety and depression often make us believe that our problems are way worse than they actually are. This is called catastrophizing (Gellantly & Beck, 2016). For example, a “no” from an angel investor or venture capital firm might feel like the end of the world. The entrepreneur might think, “I don’t know what I’m doing”, “I don’t have what it takes”, or “I’m a complete failure”. These are all thoughts – not necessarily facts – and it’s important to remember that thoughts are not necessarily accurate. I’ll repeat that: thoughts may or may not be accurate (Buschmann, et al., 2018). But the emotions stemming from those thoughts don’t care if the thoughts are accurate; our emotions believe our thoughts are accurate, so emotions rise and fall based on the contents of our thoughts (i.e., what we believe is true).
To find out if thoughts are accurate, we need to look at the evidence: what supports and refutes our thoughts. By definition, if there is any evidence refuting the thought, then that thought is at least partly inaccurate, so we need to change that thought to whatever is most consistent with the evidence. For example, instead of “I’m a complete failure”, a more accurate thought might be, “I didn’t get this investment, but I’ve gotten others, and these investors gave me some helpful feedback that will improve my chances with the next investors.” Additionally, a helpful de-catastrophizing question is, “realistically, how long will this problem last? A few minutes? A day? A week? A month? A year? 5 years? 10 years? 20 years? The rest of my life?” Usually, the problem’s duration is much shorter than what our anxious or depressive mind says while catastrophizing. Understanding that the problem has an expiration date and that the expiration date is probably sooner than what the catastrophizing mind believes can help reduce anxiety and depression. Lastly, it can be helpful to think about what difficulties you’ve already overcome. Have you overcome similar or even more difficult situations before? Remembering your personal track record can help you feel stronger and de-catastrophize the current situation. De-catastrophizing is a common strategy in cognitive behavioral therapy for anxiety.
iii. Acceptance
Acceptance that even the most strategic entrepreneurs face obstacles. Accepting that setbacks are part of entrepreneurship reduces emotional turbulence and keeps decision-making rational.
Entrepreneurship can be very difficult. Even the most successful entrepreneurs say that repeated failure is part of the path to success, and they emphasize learning, persevering, and quickly pivoting when encountering those failures. Dialectical behavior therapy and Buddhist practice believe that suffering equals pain times resistance, such that the pain may exist, but resistance amplifies the pain to cause suffering (Linehan, 2015). In entrepreneurship, genuinely accepting that setbacks, failures, and challenges are part of the entrepreneurial journey can help the entrepreneur accept that those difficulties are inevitable, expect them to happen, and minimize suffering when they occur. Along those lines, many people have found the “Serenity Prayer” helpful during difficulty: “Give me the serenity to accept what cannot be changed, the courage to change what can be changed, and the wisdom to know the one from the other.” You have much more control over yourself (e.g., your reactions to problems) than you do other people (e.g., disgruntled employees) or the world around you (e.g., the economy). Accepting where you have greater vs limited control can change your relationship with setbacks so that you move on instead of getting stuck ineffectively resisting problems that are outside of your control.
iv. Self-Compassion
Practicing mindfulness, self-kindness, and a sense of shared humanity can transform self-criticism into constructive reflection, improving both well-being and leadership.
Problem solving fixes the problem, whereas self-compassion soothes the problem. Self-compassion can be used in addition to problem solving or as an alternative, depending on what your goal is or what you need in that moment. Self-compassion has three components: mindfulness, self-kindness, and common humanity (Neff, 2015). Mindfulness is non-judgmental awareness of the present moment. Oftentimes, stress, anxiety, and depression take our mind out of the present moment and into distressing thoughts of the past or future. Usually, the present moment is much more tolerable than this, so mindfulness helps us release those difficult thoughts and focus on what is happening here and now. If you catch yourself ruminating over a past decision/outcome or worrying about a future problem, bring your mind to the present moment. The French philosopher, Michele de Montaigne, described his anxiety, stating, “My life has been full of terrible misfortunes, most of which never happened.” Second, the self-kindness component of self-compassion involves genuinely being kind to yourself. Often, entrepreneurship can produce self-criticism, such as “I’m not good enough.”
Think of the most caring, loving, nurturing, empathetic person in your life (or imagine the ideal caring person if that’s easier). What would they say to you in this situation? What tone of voice would they use? They would probably say something kind with a gentle tone of voice. What would they say if they heard you talking to yourself so critically? It can help to replace your self-critical thoughts with the kind thoughts this nurturing person might say. Or, what would you say to a loved one going through the same problem? It can help to use those words on yourself. Sometimes, people think that self-criticism motivates strong performance; perhaps it does sometimes, but it is also painful. Ask yourself: do you need self-criticism to perform well? Maybe you can instead soothe yourself with self-kindness; then, when you feel soothed, you can go forth and perform even better. Lastly, our difficulties can feel very isolating or like we are being targeted. The third self-compassion component, common humanity, means that you are not the first nor the last person to go through this. Your difficulty is a common human experience. Realizing you’re not alone often helps validate and soothe the difficulty.
v. True Positivity
Celebrating wins (small or large) matters because positive emotions strengthen resilience and buffer stress.
The word “true” (in “true positivity”) has two meanings here: to focus your attention on true positives, and to truly feel positive about them. As an entrepreneur, it’s easy to get swept up in the “to-do” list and to disregard the “done” list. When a sales pitch goes poorly, how much attention do you devote to the negativity? How long does that attention last? Conversely, when a sales pitch goes well, how much attention do you devote to the positivity? How long does that attention last? How quickly do you move on to your next to-do item? People often tend to focus on negative truths and disregard positive truths. Instead, take time to genuinely feel positive about your successes or about positive aspects of difficult situations (Craske, et al., 2023). Positive emotions feel good, which is important in and of itself.
Additionally, having high positive emotions uniquely protects people from developing anxiety and depression in the face of acute and chronic stress (Sewart, et al., 2019; van Steenbergen, et al., 2021). Focusing on the positive truths may require a deliberate shift of attention at first, but with practice, it can become more habitual. When you focus on your positive truths, what emotions do you feel? Happiness? Enthusiasm? Excitement? Curiosity? Gratitude? Generosity? Love? Inspiration? Determination? Pride? Strength? It’s easy to gloss over these emotions, but it’s better to slow down and take a few minutes to really savor these emotions – to really feel them, to swim in the emotions, to bask in them. Which emotions do you feel? Where do you physically feel them? What do they feel like? Once you answer those questions, stick with those emotions and really feel them. This can increase your capacity to experience positive emotions more frequently and more deeply (Craske, et al., 2023).
vi. Healthy Habits
Entrepreneurs who treat wellness (sleep, nutrition, exercise, moderate alcohol use, and social connection) as part of their job perform better legally and professionally because wellness directly affects mood and executive function.
It is important to maintain healthy habits – things like getting good sleep, eating well, minimizing alcohol/substance use, exercising regularly, engaging in personal interests, and maintaining social life can reduce stress, anxiety, and depression and improve cognitive functioning (Walsh, 2011). How do you feel after a poor night’s sleep or after a good night’s sleep? After eating poorly for a period of time (or even one meal) versus eating healthy? When drinking alcohol or using other substances or refraining from them? When your exercise routine is inconsistent versus consistent? How do you feel after engaging in a hobby or spending time with close family/friends? How does all of this affect your work? Maintaining healthy habits sets a strong foundation for your mental health and entrepreneurial performance.
vii. Relaxation Techniques
When stress peaks during a deal or dispute, try a “reset button” – diaphragmatic breathing can quickly calm the body and restore clarity.
A specific type of healthy habit is engaging in regular relaxation exercises. Maybe an unexpected problem occurs with your business, or a stressful situation arises with your family. Regardless, if you’re feeling distressed at around a 7 or more out of 10 (0 = not at all, 10 = extremely), you’re probably not thinking very clearly. Diaphragmatic breathing can help to calm your body down physically by directly engaging your parasympathetic nervous system (the body’s relaxation system) (Hamasaki, 2020; Hopper, et al., 2019). To do this, breath at your normal pace and depth using your diaphragm (upper belly) rather than your upper chest. If you were to place one hand on your upper chest and the other hand just above the belly button, the hand above your belly button should be the only one moving as you inhale and exhale. While breathing, keep your mind focused on your breath (rather than your problems). Your mind may wander; when it does, just gently bring it back to your breath.
The nice thing is – once you’ve gotten the hang of it, diaphragmatic breathing can help you physically and mentally calm down in just a few minutes. Sometimes distress reduces a lot; other times, only a little. Even if your distress reduces only a little, that may make the difference in feeling better and approaching your problems with a clear mind to address them effectively. Relaxation techniques are standard in therapy for general life problems and are also a component of cognitive behavioral therapy for anxiety.
5) Integrating Legal Foresight and Emotional Resilience
Building a business requires both a solid legal foundation and a sustainable mental framework. Hiring an attorney early helps entrepreneurs prevent common pitfalls, such as unclear ownership, poor contract terms, and compliance oversights, which could otherwise lead to expensive, emotionally draining conflicts. Meanwhile, utilizing psychological tools like problem solving, acceptance, and self-compassion helps founders handle inevitable challenges without losing perspective.
Entrepreneurship is a marathon, not a sprint. By combining sound legal planning with proven stress-management practices, business owners can thrive: legally, financially, and emotionally.
References
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Craske, M. G., Meuret, A. E., Echiverri-Cohen, A., Rosenfield, D., & Ritz, T. (2023). Positive affect treatment targets reward sensitivity: A randomized controlled trial. Journal of consulting and clinical psychology, 91(6), 350.
D’Zurilla, T. J., & Nezu, A. M. (2010). Problem-solving therapy. Handbook of cognitive-behavioral therapies, 3(1), 197-225.
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Hopper, S. I., Murray, S. L., Ferrara, L. R., & Singleton, J. K. (2019). Effectiveness of diaphragmatic breathing for reducing physiological and psychological stress in adults: a quantitative systematic review. JBI Evidence Synthesis, 17(9), 1855-1876.
Kiefl, S., Fischer, S., & Schmitt, J. (2024). Self-employed and stressed out? The impact of stress and stress management on entrepreneurs’ mental health and performance. Frontiers in Psychology, 15, 1365489.
Leahy, R. L. (2012). The worry cure: stop worrying and start living. Hachette UK.
Linehan, M. M. (2015). DBT skills training manual (2nd ed.). Guilford Press.
van Steenbergen, H., de Bruijn, E. R., van Duijvenvoorde, A. C., & van Harmelen, A. L. (2021). How positive affect buffers stress responses. Current Opinion in Behavioral Sciences, 39, 153-160.
Walsh, R. (2011). Lifestyle and mental health. American Psychologist, 66(7), 579-592.
Author Bios
* Suzanne Natbony, Esq. is a licensed California lawyer, with an emphasis in healthcare law, and partner at Aliant LLP, with her own law firm, Solve & Win, PC, practicing transactional and regulatory-compliance law, while also being an entrepreneur with her own healthcare product company and online legal document and video platform, LawTake. She is also general counsel to a multistate medical spa franchise and other medical spas and physicians around the U.S. with a connection to California. You may find more articles and information about Ms. Natbony at solveandwin.com or contact her by email at suzanne@lawyer.com.
** Tomislav D. Zbozinek, PhD is a licensed psychologist in California, with an emphasis on anxiety and depression. He has his own private practice – Anxiety and Depression Treatment Specialists, A Psychotherapy P.C. – where he helps people with anxiety, depression, stress, self-criticism, increasing positivity, gaining personal insight, and navigating life. He is also employed at the University of California, Los Angeles (UCLA), where he is Associate Director of the Anxiety and Depression Research Center; in this role, he does research helping improve our understanding and treatment of anxiety and depression. You may contact Dr. Zbozinek by email at tzbozinek@adtspsych.com.
