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From Not-Com to Dot-Com

April 1, 2001

5 Min Read
From Not-Com to Dot-Com

From Not-Com to Dot-Com

Putting your self-storage business online

By Fred S. Steingold

So,you're ready to put your self-storage business online. The move from brick andmortar 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 upto speed on the business and technology issues, as well as consultants to aidyou. But information about legal issues can be more difficult to come by, sowe'll focus on those here. The following suggestions can help reduce your legalrisks 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 asa sole proprietorship or partnership, consider a change. The reason: It'simpossible to predict your business' legal exposure when operating on the web.The Internet is relatively new, and courts and legislatures are just beginningto look at e-commerce conflicts.

Since the web is everywhere, if you are involved in litigation relating toits use, you may find yourself hauled into court halfway across the country. Ifyour business is a sole proprietorship or partnership, you, as an owner, can bepersonally liable for a judgment against it. Your personal assets will be atrisk. Why take a chance? It's simple to limit your personal liability byshifting 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. Ifsomeone hasn't already registered it, you can pay a modest fee to an accreditedregistrar, and the name is yours. But if you've used a consultant to help youget online, you need to make sure your business--not the consultant--is named asowner. If you and the consultant should part ways, you want to be able tocontrol the domain name in the future.

Also be aware that just registering the domain name doesn't mean you can keepit. If the name resembles some other company's trademark, you may wind up in alawsuit. If you lose, you'll have to give up the name, and may have to pay heftydamages to the rightful owner. The best protection is to have a lawyer do atrademark search for you. You'll learn if your preferred domain name infringeson someone else's trademark. A trademark search isn't 100 percent foolproof, butit comes pretty darn close.

Be certain you own your website content.

If you hire a website developer, have a written agreement that makes yourbusiness the owner of the words and images that make up the site. Otherwise, thedeveloper may continue to own some rights, and will be able to use your materialon other sites. Similarly, if you or the developer use material, such as anarticle or photo, from third parties, get permission in writing to use thatmaterial. 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 andinteresting. In fact, linking is what the web is all about. You may want to puta link on your own site, allowing visitors to get quick access to anothersite--maybe one with good information about your industry.

Usually, linking is free of legal problems. But watch out for deeplinking--taking visitors to someone else's site but bypassing the other site'shome page. The other site may be getting advertising revenue based on the numberof visitors to the home page. If your visitors don't have to stop there, this adrevenue is lost, and you could be sued.

Keep up with privacy agreements.

The Federal Trade Commission (FTC) is concerned with how you use informationyou collect from customers online--especially children. We don't have the finalword yet on what will be premissible, but you should develop a privacy policyand post it prominently on your site. If, for example, you're going to sellpersonal information to outsiders, customers should know that. For moreinformation on this developing issue, check the FTC's website at www.ftc.gov.

Be truthful in online advertising.

Claims and promises you make online are subject to the FTC's advertisingrules. Tell the whole truth online and don't mislead customers. Don't hideimportant information in inaccessible places. Otherwise, you'll incur the FTC'sire, and have to pay fines, too.

If you'll be shipping goods to online customers, get familiar with the FTC'sMail Order Rule. It applies to online sales as well. It requires you to updatecustomers on when goods will be shipped and gives them the chance to canceltheir 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 maywant to limit your liability. Off-line, you might do this with a writtencontract or a sign posted in your business place. Online, you need to findanother way. Consider the following issues: Just what does your warranty cover?When can a customer get a refund? Are you soliciting customers in certain statesonly? Do customers have to be older than a specified age? Whatever your answersto these and similar questions, post your terms clearly on your site.

You might require customers to acknowledge, by clicking, that they acceptyour terms. These "click-wrap" agreements probably are legally bindingon the customer. We'll know for sure in a few years when judges have had achance to rule on such agreements.

The age of e-commerce is upon us, and will continue to rise to moresophisticated levels. Following these simple guidelines will help ensure thesuccess 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 TheLegal Guide for Starting and Running a Small Business and The Employer'sLegal Handbook, published by Nolo.com.

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