Help Your Online Startup Business Dodge Legal Landmines
Five things to watch out for when starting your new businessBy Carlos Harrison | Reviewed by Canaan Suitt, J.D. | Last updated on October 4, 2023 Featuring practical insights from contributing attorneys Brian S. Dervishi, Bradley Gross and John P. Kelly
Use these links to jump to different sections:
- 1. Research Trademarks To Avoid Infringement
- 2. Pay Attention to Copyright
- 3. Think About the Future Implications of Financial Partnerships
- 4. Consider Nondisclosure Agreements
- 5. Ensure Your Contract is Airtight
- Get Legal Counsel from an Experienced Business Law Attorney
Thinking of starting an online business? Although you may avoid some of the challenges of a traditional brick-and-mortar business, setting up an Internet-based business entity carries many of the same considerations—along with its own special set of legal issues.
“They’re very easy to set up because sometimes it’s just a matter of buying a URL, creating a website, and you’re up and running,” says Bradley Gross, a technology transactions attorney in Weston, Florida. “People forget that they need to be run like real companies. They need to have bank accounts, infrastructure, marketing, branding.”
Here are five important legal issues you should bear in mind when starting your online business.
1. Research Trademarks To Avoid Infringement
Online business owners, he says, also need to pay particular attention to intellectual property to avoid litigation. One of the most important intellectual property issues is trademark infringement. A trademark is a symbol or phrase that a company uses to represent its company or products in e-commerce or the marketplace.
“You don’t want to have a startup business where you put a lot of time and effort into coming up with a perfect name and a great logo, only to find out you need to change it because you didn’t do due diligence to see if anyone has a name that is the same or confusingly similar,” says Gross.
2. Pay Attention to Copyright
Then there are copyright considerations. “It’s wise,” says Gross, “to have an audit of [your] site performed by an IP attorney.”
A site developer for one of his clients, a physician, used pictures of models from the internet to show “pretty people going to the doctor’s office,” he says. “Those pretty people are represented by counsel. Now that person may have to deal with settlements of tens of thousands of dollars.”
3. Think About the Future Implications of Financial Partnerships
The nature of startups and small businesses often involves outside investors, but entrepreneurs don’t always consider the implications for their own business.
“They’re quickly willing to accept the money and give up control with thoughts of future grandeur,” he says. “They really need to sit back and think about what they’re giving away and how they’re giving it away, and what life will be like.”
4. Consider Nondisclosure Agreements
Also, think about nondisclosure agreements for your business model.
“If you’re going to sit down and talk with somebody who’s going to put $100,000 into your business to really get it going, you want to be sure that they’re not just going to be able to steal your idea,” says Miami business litigation attorney Brian S. Dervishi with Weissman & Dervishi.
5. Ensure Your Contract is Airtight
And remember, he says: Signer beware.
“Even if you have a really wonderful contract written up by the finest, most expensive lawyers in town, ultimately, the best guarantee of performance and reliability is the integrity of the person on the other side of the deal,” he says. “Enforcing a contract and dealing with litigation is such an expensive nightmare.”
Business owners should:
- Define their roles in a business plan;
- Ownership stakes;
- The amount of intellectual property each will contribute; and
- Whether the IP is owned by them or the business.
“Plan on how to get out of the relationship down the road,” says Fort Lauderdale business litigation lawyer John P. Kelly, with The Kelly Law Firm. You need, in effect, a business prenup. “I’ve seen the situation arise where… someone offered to buy the company, and one person wants to sell and the other doesn’t,” he says. “The only way to resolve the deadlock is to go to court.”
Having legal protection upfront can result in cost savings and a significant amount of time saved.
Get Legal Counsel from an Experienced Business Law Attorney
If you are starting a new online company, consider using the Super Lawyers directory to find an experienced business attorney in your area who can provide legal services during the business development process.
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