The web is an immense market any business can tap, but there are legal issues you need to address when doing so. With this in mind, let’s take a look at the legal steps to starting a website.
Different Types of Sites
The web has evolved massively in the last 15 years. Websites now differ radically from each other. The legal issues for a social media site such as Facebook are much different than those faced by a shopping site or a blog. With this in mind, I am going to hit each of the following steps quickly, and you should keep in mind some steps may not apply to particular sites. I offer a free consultation, so contact me to discuss your questions on starting an online business in California.
A business entity such as a corporation or limited liability company can be created to provide a shield between your personal assets and the debts and liabilities of the website business. Should you take this step? It depends on how risky the online business is, your funds and the asset profiles of the owners. If you have items to protect such as investments and homes, then forming an entity is a smart move.
Yes, you can buy liability insurance for online businesses. The insurance industry is roughly a decade behind the times, but there are groups offering the policies. Why have insurance? A policy will pay any lawsuit judgments or settlements as well as your attorney’s fees in defending a case.
If you buy a domain from another person, you should use a domain transfer agreement. If you are just buying one directly from a registrar such as GoDaddy.com, then you do not need such an agreement. Regardless, it is wise to do a search through the web and PTO trademark database to make sure your domain doesn’t infringe on any trademarks.
If you are starting a small site such as a blog, you can just sign up with any old hosting company, and you will be okay. If you are launching a major site and need massive hosting capabilities, negotiating a custom agreement with the hosting company makes sense.
Website Design Agreement
A written website design contract is a critical part of any online business effort. The agreement should set forth the specifications for the project, timing milestones, and critical issues such as copyright transfer of the design from the designer to you, the client.
Setting up a payment processor relationship is critical if you are selling items on your site. Issues such as reserves and how chargebacks will be handled should be addressed in the agreement.
The Federal Trade Commission has the hots for disclaimers. It wants to see them on sites and in advertising pieces where appropriate. Failure to use these disclaimers correctly can result in fines of up to $16,000 per violation. If you have 100 products on the site and fail to use a disclaimer on each, the fine could be as much as $1.6 million. I’ll wait while you get up off the floor.
Possible Regulatory Issues
There are other legal steps that must be taken in certain situations as well. If you allow users to upload comments or content to your site, then you must comply with the Digital Millennium Copyright Act of 1998. This law provides you with immunity from any copyright infringement claims arising from the content your users upload.
If your site caters directly or indirectly to kids under the age of 13, you may need to comply with the Children’s Online Privacy Protect Act of 1998. “COPPA” is more or less a regulatory nightmare, but you have no choice when it comes to compliance. A Justin Beiber fan site recently paid a million dollar penalty for failing to comply.
Thought also needs to be given to registering trademarks and copyrights for your online business. The law provides you with serious advantages should a dispute ever arise, so doing so is well worth the time and expense.
To be blunt, this list of legal steps could be much longer. Although much of the above may be new to you, the good news is getting your site into legal compliance isn’t very difficult. The key is to get these steps taken care of as soon as possible so you can avoid problems down the road. Feel free to contact me to discuss your business.
Richard A. Chapo, Esq.