I would like to create a custom token but I cannot seem to find any dos and donts as far as legality goes with making one. Is it legal to just create an asset and start selling it or is there something I need to read over and follow before doing so? I am planning on making just a fun meme coin and build a community. Help is appreciated!!
It is legal to create whatever token you like.
What would be illegal pretty much everywhere is to advertise your token as a way of making money. Make it clear that it isn't a get-rich-quick scheme or anything that could be construed as such.
You may get better legal information on https://law.stackexchange.com/ - we on tis site aren't lawyers.
Pretty much depends on your location and business case. You better ask an expert for financial law and a tax consultant in your jurisdiction.
If it's just a fun thing, you might consider simply distributing your tokens to your community for free, which should most likely not have any legal requirements at all.
Here is a basic overview for bitcoin regulations worldwide, I think those will also apply for stellar tokens: https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory