Legal Issues When Starting A Web Design Business

Becoming an ace at web design? Thinking of taking on clients? If so, you need to make sure you are familiar with the legal issues applicable to starting a web design business.web design business

Contracts

If you learn nothing else from this article, please let it be that you should not lift a finger for a client unless you have a signed web design contract. If you do so, you risk spending a lot of time and effort with no guarantee of being paid. Oral agreements are very hard to enforce, and even an exchange of emails means little. Don’t be an amateur. Get it in writing!

The web design contract is critical because it sets forth the terms of the agreement between you and the client. Topics covered should include initial deposits, milestones, the overall design, the use of open source code and so on. It is critical you put all of this in writing, or the deal can turn into a “he said, she said,” disaster.

Copyright Hammer

As a designer, it is also critical you include a copyright hammer clause in the contract. This clause can be used to avoid situations where a client tries to use the design after failing to make all the payments. To understand how it works, you first need to grasp an odd twist in copyright law.

Under copyright law, the person creating the work is automatically vested with the copyright ownership. A transfer of this right is only valid if it is in writing.

This transfer may sound like a simple concept, but it is actually rather profound. To understand why, consider a web design. Who creates it? You – the designer, which means you automatically own the copyright. This designation is true even if you are paid to create the site design.

As an ethical designer, you should include a clause in the contract indicating you are transferring any and all copyright ownership to the client as part of the deal. Ah, but here’s the catch. The clause should be tailored to indicate the transfer only occurs upon full payment of the contract fee.

So, what happens if the client fails to pay the full fee to you? No transfer occurs. When they try to put their site up, a Cease & Desist letter is sent to them demanding they pay the outstanding bill or take down the site. If they refuse to do either, DMCA takedown notices are then filed with the DMCA agent service for their host who will take down the offending site.

The client now has a web design they cannot use. How long do you think it will take for them to come up with the rest of your fee?

Business Entity and Insurance

Depending on your situation, it may also make sense to form a business entity and consider liability insurance if your revenues allow for either. A business entity protects your personal assets from the liabilities of the company. Liability insurance, in turn, pays any lawyer fees to defend a lawsuit, as well as any settlement or judgment against you. It only takes a couple hundred dollars to sue someone regardless of the merits of the case, so protecting yourself is a very smart move.

Incidentals

You will need a business license to run a business in your municipality. On top of this, you should use a CPA to handle your taxes as they can save you a lot of money. Make sure to confer with a lawyer. You can undoubtedly guess who I would recommend. Depending on the nature of your business approach, there may be other issues involved as well.

Setting up your business correctly from the get go is crucial. Feel free to contact me today to discuss your situation.

Richard A. Chapo, Esq.