Internet Business Start up Legal Concerns

            Given the seemingly unstoppable growth of the Internet, it isn’t surprising that the number of start-up Internet businesses continues to surge each and every day.  For these young companies, there are specific legal issues that must be addressed.  This article will outline the most pressing of these legal concerns, and shall provide preliminary guidance to Internet entrepreneurs who want to make sure they’re starting out on the right foot.

Step 1:  Decide on a Business Structure

            The first legal step to starting a successful Internet business is deciding on the business structure for your company.  There are several choices, but the three most common are: 

1. Sole Proprietorship,
2. Limited Liability Company (LLC)
3. Corporation. 

By far and away the LLC business structure is the most popular, as it allows two or more individuals to join forces, form a company, and avoid, for the most part, any personal liability.  The LLC structure comes with tax advantages as well.  If you want to form either an LLC or a Corporation, hiring an attorney to file the appropriate documents is the best way to go.

For one-person companies, Sole Proprietorships are the simplest form of business organization, and are actually formed instantly if the name of the founder is actually in the name of the business.  For instance, if Mike Johnson wanted to start Mike Johnson’s Internet Money-Making Business, Inc., he wouldn’t even have to file with the state.  If you want to use a company name that doesn’t have your personal name in it, you need to file a D/B/A (“doing business as”) registration with the appropriate county in your state, and follow the instructions.

Step 2: Protect Your Intellectual Property

If you are like most Internet businesses, you will own at least some Intellectual Property assets, whether in the form of copyrights, trademarks, or patents.  If so, be sure to register your copyrights and trademarks and file for patent protection as soon as possible, ideally before introducing these marks or inventions into the stream of commerce.  Although you technically own the rights to your creative designs and trademarks just by using them first, it is always better to register.

Step 3: Design a Unique and Original Name, Logo and Website

            The last thing you want to do is start out on the wrong foot by committing copyright or trademark infringement by inadvertently copying someone else’s ideas.  Register your copyrighted work, and do a trademark search to see if the name and logo you’d like to use for your product is already taken.  As you may expect, an attorney can be a valuable asset when it comes to performing such a search.  Also note that you can use other company’s trademarks on your site without their permission so long as they are rationally related to your product or service and are not likely to cause confusion. (i.e. you can put Visa and Mastercard logos on your site if you accept them as forms of payment.)  You should however list disclaimers on your website that the companies whose logos you are displaying have not endorsed your product.

Step 4: Have an Attorney Draft Your Electronic Contracts

            The beauty of Internet businesses is that money can be made by selling products and services online, without the need to interact in person with the customer.  Thus, a business’s electronic contracts, i.e. the contracts read and agreed to online by the customer, must be well-drafted, understandable, and legally sufficient in order to be enforceable in a court of law.   Thus, you would also be wise to consult with an IP Business attorney, who can ensure that your contracts are in line with government regulations and general principles of contract law.  Note that is not only important what these contracts say, but how they are displayed on your website and the method by which you obtain the user’s consent to their terms.  The most important contracts you will want an attorney to draft are your website’s Terms & Conditions (sometimes called Terms of Use), Privacy Policy, and Sales Agreement between you and the customer.

Step 5:  Address Miscellaneous Legal Issues

            Finally, there are some general legal concerns for which an attorney’s services can be extremely valuable.  For one, most businesses will maintain contractual relationships with other businesses, such as suppliers, buyers, or other third parties.  Attorneys can help monitor these relationships and draft the appropriate IP and other important agreements.  Another area attorneys can address is Employment Law.  If you plan to hire employees, independent contractors, or other third-party agents, it is advisable to consult an attorney who can draft the appropriate agreements.  In all, it is highly advisable to keep any attorney at your disposal, either as in-house or outside counsel, to address ongoing legal concerns.