There is much you need to know as you begin your new business. Further, your web site will need legal policies. I suggest you do not attempt to write your own legal policies. This is not where your training and background lie, and though you are probably as smart as an attorney, you do not have their experience.
Below is a checklist for legal issues I use for new e-commerce clients.
1. Business Model – Is your idea viable as a web based business? Do you have a business model written out?
2. Business entity – Are you going to be a C corp, a sub-S, an LLC or a sole proprietorship? There are liability and tax issues that can dramatically affect how your business prospers and selecting the proper entity is a critical first step.
3. Terms of Service – This is your contract with your visitors and is the most important item for any e-commerce site. A little work here brings big dividends in the future. The absence of a written “Terms of Service” can expose your business and possibly you to both criminal and civil liability.
5. FTC guidelines – The FTC has been regulating business advertising for almost a century. All of their advertising guidelines apply to e-commerce sites. The FTC negotiates with established e-commerce businesses but new ones are frequently sanctioned with fines, etc.
6. Domain Name issues? Is your name available? Can you create a Trademark?
Domain names, trademarks and service marks can become valuable assets but the failure to properly protect them may deprive you of much of their value.
7. Trademark – Do you have a brand name free from conflict? Should you start with just common law rights? When Should you register the mark?
8. Copyright – If it is on the web, it already belongs to somebody. Did you buy a license for the images you are using? Using copyrighted materials without proper licensing is not only expensive but under some conditions criminal.
9. Do you need a DMCA policy? This is a very inexpensive “insurance policy” which gives you a “safe harbor” from liability if your visitors post copyright material on your web site.
10. Web Site security issues? Ask Target, etc. if this is an issue.
11. Do you need and have an EIN? You can get that for free. If your business is a corporation (C or S) you need an EIN. Even if you’re a single member LLC or sole proprietorship, you’ll need an EIN to open your bank account.
12. Do you need an arbitration clause? Arbitration is not always pleasant but it’s cheaper and quicker than litigation. Further, an arbitration clause will create a barrier against any class action being brought against you.
13. Do you have employees? If so you need written policies regarding their authority and use of the internet. This can be part of your employee manual.
14. Do you know the difference between a “browser wrap” and a “click wrap” and which do you need? Using a click wrap will greatly decrease your liability.
15. Are you abiding by the Child’s Online Privacy Protection Act (COPPA) rules? There are serious repercussions if you run afoul of COPPA.
I discuss this list with clients other issues arise. Finally, I always discuss with my clients their need for good accounting services. An accountant’s advice as you start-up can save you many dollars in tax that you might not save if you wait to speak to an accountant until your first tax return is due.
This post is an update from my August 30, 2013 post.