3 Things to Know Before Starting an Online Business

It seems simple – no lease to sign, no building to maintain or insure, fewer employees to manage. Online is easy, and starting up a new business is as simple as building a website! Only, it’s not. More often than not, I end up helping small business owners with issues they could have avoided if they had sought advice before starting an online business.

Based on the issues I am most often asked to address after the fact, there are three things I would advise a new online startup to understand before jumping in:

1. What type of business form is correct for my situation?
2. What type of control am I giving to my web developer?
3. How will I terminate an advertising and promotions contract?

The Correct Form for an Online Business

The rules governing your information technology company, information services company, or online business are different than a traditional brick-and-mortar business. There are the typical business formation questions; should you form your business as a corporation or LLC, for example. But it is also important to understand the legal implications of having a brick-and-mortar store with an online presence, or even transitioning your brick-and-mortar store to being solely online. And while it may look more affordable to ditch the brick-and-mortar storefront for a website, your agreement with the company that creates and maintains a website for you is in many ways similar to a lease. Signing a contract with a questionable company can cause you just as much grief as bad landlord.

Controlling Your Online Assets

With the growth of the internet and information technologies, more and more businesses are based completely online. An online business can include online advertising, a social media presence, and online sales of physical products, all of which come with their own set of legal ramifications. Whether your business is an information technology business, IT services business, supplements its income with an online store, or is completely online, you will probably be signing contracts with web development firms who will help you build and maintain your website. It is crucial that you understand what you are agreeing to when you allow someone to build a website for you. I hear stories all the time from developers such as:

I was being asked to build a third website for her, after two previous contractors failed to deliver a finished product, or failed to deliver a quality product. When I attempted to set up her new site, I found the previous developer had moved her domain, which she had owned and had control of for many years. She had given them permission to do so, but she didn’t understand that she was giving up control of her URL when she did. In addition, the company she contracted with to build her previous site had been controlling and filtering her email. She spent days on the phone trying to end the contract and get her domain and email back, and she lost much of her email history, and all of her website content in the process.

Unfortunately, this is a typical and frustrating scenario I hear from newcomers to online businesses. Another stumbling block I see small business owners encounter as they enter the online world involves contracts with companies that offer to help with advertising and promotion.

Promoting Your Online Business

Promoting your online business comes with it’s own set of concerns, whether you do it yourself or hire someone to help you. Some contracts tie you to a service regardless of whether or not it performs well for you – in this case, what you don’t know about social media, advertising, and promoting a business online can really hurt you. Again, a trusted advisor who understands internet technologies, and online business promotion can really help here. Until you have some experience and know what works for you, ask someone who does to recommend a company that can do it for you, or train you to do it yourself.

Even if you are an experienced entrepreneur, you will face challenges as you enter the online world and perhaps encounter unscrupulous actors offering to help you launch an online business. An attorney can help you make sure that important assets, such as your domain name, remain in your control. It is also very important that a clear means for you to retain the contents and coding for your website exists, even if you choose to end the relationship with the contractor or company that builds it for you. These, and other concerns can be avoided just by getting a good referral to a reputable firm. An attorney with a strong background in IT and online business practice can guide you to reputable firms, and make sure the contracts you sign are fair.

If you need guidance concerning the formation of your online business, or help reviewing a contract with a web developer or firm offering to promote your business online, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Real Estate Services for Business Owners

Elizabeth Lewis provides the following real estate law services to small and medium sized business owners in Denver and throughout Colorado:

• Commercial real estate purchases
• Legal review of commercial real estate leases
• Protecting your assets