I am opening a small business making t shirts. I want to use the name of a Disney character on one of my designs as well as an image that is something the character holds in the film. I have hand drawn the item and would like a graphic artist to create it based on my drawing, so not using any of Disney's original work. Is there any legal reason I may not be allowed to do this?
Yes, you have named them in the tags: copyright and trademark.
The image you have drawn is a derivative work - only Disney can authorize derivative works.
The name is a Disney trademark - you can use that trademark to refer to and talk about the Disney character. You can't use it in a way that suggests your product has something to do with Disney as you propose.
Oh, and Disney are very diligent in protecting their IP.