By Fred S. Steingold
So, you're ready to put your self-storage business online. The move from brick and mortar to "click" and mortar can be exciting--but also a bit daunting. Fortunately, there is plenty of literature and software out there to get you up to speed on the business and technology issues, as well as consultants to aid you. But information about legal issues can be more difficult to come by, so we'll focus on those here. The following suggestions can help reduce your legal risks as an e-commerce company.
Consider setting up a corporation or limited-liability company.
If your business is already organized that way, great. But if it's set up as a sole proprietorship or partnership, consider a change. The reason: It's impossible to predict your business' legal exposure when operating on the web. The Internet is relatively new, and courts and legislatures are just beginning to look at e-commerce conflicts.
Since the web is everywhere, if you are involved in litigation relating to its use, you may find yourself hauled into court halfway across the country. If your business is a sole proprietorship or partnership, you, as an owner, can be personally liable for a judgment against it. Your personal assets will be at risk. Why take a chance? It's simple to limit your personal liability by shifting to a corporation or limited-liability company (LLC).
Make sure you own your domain name and that it's legally secure.
Registering a domain name, such as www.ProtoBiz.com, is the easy part. If someone hasn't already registered it, you can pay a modest fee to an accredited registrar, and the name is yours. But if you've used a consultant to help you get online, you need to make sure your business--not the consultant--is named as owner. If you and the consultant should part ways, you want to be able to control the domain name in the future.
Also be aware that just registering the domain name doesn't mean you can keep it. If the name resembles some other company's trademark, you may wind up in a lawsuit. If you lose, you'll have to give up the name, and may have to pay hefty damages to the rightful owner. The best protection is to have a lawyer do a trademark search for you. You'll learn if your preferred domain name infringes on someone else's trademark. A trademark search isn't 100 percent foolproof, but it comes pretty darn close.
Be certain you own your website content.
If you hire a website developer, have a written agreement that makes your business the owner of the words and images that make up the site. Otherwise, the developer may continue to own some rights, and will be able to use your material on other sites. Similarly, if you or the developer use material, such as an article or photo, from third parties, get permission in writing to use that material. This permission is sometimes called a license.
Be alert to linking issues.
As you know, linking to other sites is what makes the web fun and interesting. In fact, linking is what the web is all about. You may want to put a link on your own site, allowing visitors to get quick access to another site--maybe one with good information about your industry.
Usually, linking is free of legal problems. But watch out for deep linking--taking visitors to someone else's site but bypassing the other site's home page. The other site may be getting advertising revenue based on the number of visitors to the home page. If your visitors don't have to stop there, this ad revenue is lost, and you could be sued.
Keep up with privacy agreements.
Be truthful in online advertising.
Claims and promises you make online are subject to the FTC's advertising rules. Tell the whole truth online and don't mislead customers. Don't hide important information in inaccessible places. Otherwise, you'll incur the FTC's ire, and have to pay fines, too.
If you'll be shipping goods to online customers, get familiar with the FTC's Mail Order Rule. It applies to online sales as well. It requires you to update customers on when goods will be shipped and gives them the chance to cancel their order if they don't like the delay.
Clearly state warranty and other contract terms.
When you sell goods, provide services or present information online, you may want to limit your liability. Off-line, you might do this with a written contract or a sign posted in your business place. Online, you need to find another way. Consider the following issues: Just what does your warranty cover? When can a customer get a refund? Are you soliciting customers in certain states only? Do customers have to be older than a specified age? Whatever your answers to these and similar questions, post your terms clearly on your site.
You might require customers to acknowledge, by clicking, that they accept your terms. These "click-wrap" agreements probably are legally binding on the customer. We'll know for sure in a few years when judges have had a chance to rule on such agreements.
The age of e-commerce is upon us, and will continue to rise to more sophisticated levels. Following these simple guidelines will help ensure the success of your online business--and keep you out of legal hot water.
Fred S. Steingold practices law in Ann Arbor, Mich. He is the author of The Legal Guide for Starting and Running a Small Business and The Employer's Legal Handbook, published by Nolo.com.