Top 10 Legal Mistakes Made By Online Entrepreneurs

Legal mistakes are a fact of life for any business. The chances of you not running into a legal issue are similar to those of you winning the lottery. With this in mind, following are the top 10 legal mistakes made by online Top 10 Legal Mistakes Made By Entrepreneursentrepreneurs.

1. Securing Intellectual Property

Intellectual property is undoubtedly one of the “hot” fields of internet law. I’m not sure any area of law can actually be “hot”, but I digress.

Entrepreneurs run into problems with intellectual property in a number of ways. The most common problem is failing to secure their intellectual property rights. If you have a third party design a website, logo, develop an app for you or whatever, you must get the rights transferred in writing. If it is not in writing, even if you paid, you do not own the rights to the work. This lack of ownership is going to be a big problem when you either try to sell the site or see someone else with a site that looks exactly like yours. Get your intellectual property in order and secure it!

2. Monetization

Monetization is more of a practical issue than a legal one. You may have the greatest idea in the world, but ask yourself a simple question – how are you going to make money off of it? If you do not have three to five definitive strategies, you risk developing an idea that leads to a dead end financially. Not smart.

3. Protection

For the love of God, take all steps necessary to protect yourself online. Form a business entity such as a corporation or limited liability company to create an asset protection shield between the company and your personal assets. Also, look into buying liability insurance to pay for lawyers in case you named as a defendant in a lawsuit.

4. Compliance

There are laws related to the web. Comply with them. The failure to do so can lead to disaster. Do you have a privacy policy on your site? You better. Do you allow people to post on your site, even if just as comments to an article? You better be in compliance with the Digital Millennium Copyright Act. Does your site attractive to kids under 13 such as with a music or gaming site? Failure to comply with the regulations associated with the Children’s Online Privacy Protect Act can lead to fines of $16,000 per child on your site! Know what laws apply to your site by getting a site review and then make sure you are in compliance with each of them.

5. Return on Investment

Entrepreneurs are famous for going broke because they do not accurately forecast expenses in relation to the return on investment they get from sinking capital into a business. Even if they do forecast correctly, they often don’t stick to their budget.

Let’s be clear. You need a positive return on your investment. If you start spending $10,000 a month on Google Adwords and bring in $8,000 in sales, you have a major problem. Always make sure to run your numbers, so you know how you are doing at any point in time.

6. Giving Away Ownership Percentages

The key thing to understand about the ownership of a business is maintaining control and decision-making power is critical. If you own the business completely, you have total control. The minute you bring others in and given them a percentage of ownership, you start to lose control. In generally, don’t give away ownership. If you wish to reward employees, consider giving them bonuses. If you want to pursue a joint business idea with another party, consider forming a strategic alliance instead of giving them a piece of your company.

7. Strategic AlliancesStrategic Alliance

The web is unique in that different companies team up to leverage their respective strengths, which doesn’t happen all that often offline. A classic example would be Toys R’ Us and Amazon. Ten years ago, they teamed up to offer toys on the Amazon site. This joint effort allowed Toys R’ Us to leverage its large inventory of toys and Amazon to give its shoppers a new category of products.

As an entrepreneur, you should be looking for similar relationships online. Since you will most likely be offering a product, you can locate sites that do not compete with you directly but have a significant amount of traffic in your niche area. These alliances are very common on the web, so don’t be shy when seeking them out. They can produce massive profits. Just make sure you reduce everything to writing in the form of a contract.

8. Not Doing SEO

If you launch a site, make sure the designer configures it for search engine optimization. “SEO” is the process of getting ranked in the top five of search engine results for certain keywords. If you do, people searching for your goods and services will find you every day on the search engines. These listings represent free traffic 365 days a year so long as you remain ranked.

SEO can take time to achieve results, so many entrepreneurs fail to pursue it. This decision is a mistake. You should look at your site as a long term investment. So what if it takes a year to get up in the rankings for your desired keywords? Consider this site. I am ranked in the top 10 on Google for “internet attorney” and “internet lawyer”. It took roughly 8 months to achieve these rankings, but now I receive thousands of visitors a month looking for counsel. I pay $0 for this traffic. It does wonders for the bottom line.

9. Guest Blog

Your goal should be to dominate your niche online. If your product is a treatment for septic tanks, then you and your site should seek to be the dominant force in the septic tank field online. An excellent way to do this is to guest blog. Guest blogging involves going to other sites in the septic field and offering to write free articles for their site on septic issues. As you publish articles on different sites, people come to recognize you as the Bob Villa of septic tanks. This recognition establishes your brand. It also helps move your site up in the rankings since most guest posts include a link back to your site.

10. Cheap Bastard

Don’t be a cheap bastard online. The digital world is no different from the physical one. If you pay someone $250 to do SEO work for you, don’t be shocked when it doesn’t move your site up in the rankings. If you use a free generator to create a privacy policy for your site, don’t be surprised when you are sued for failing to comply with privacy laws. In short, you get what you pay for online so form a reasonable budget and use competent individuals for your web design, marketing, taxes and legal needs.

A Ginsu Knife Free Extra Tip

The web is extremely unique in one business area. Most offline companies will protect their business secrets as though they were the Holy Grail. This is not the case online. There are plenty of sites where entrepreneurs not only share business secrets, they reveal exactly what they are doing, how they are making money and how you can do it – all for free.

For a real eye opener, you should bookmark and follow Pat Flynn at He’s a former architect who is doing very nicely online and he shows you exactly how he does it.

In Closing

It is important to remember mistakes are natural. Everyone makes them and you will undoubtedly make a few of the ones mentioned in this article. The key question is do you learn from those mistakes? If you do, then you are on the road to joining the numerous entrepreneurs who are successful online.

Richard A. Chapo, Esq.