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

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Denver, CO 80209

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Colorado’s “Facebook Law”

For many businesses trying to sort through applicants for an open position at their company, it has become routine to run a Google search of applicants to find out more about them. This can quickly lead to finding their Facebook or other social media account, but did you know that some employers have begun asking for applicants’ Facebook passwords during interviews to look at their activity? In Colorado, you could face serious legal liability for such actions.

Trying to find out as much as you can about an applicant or employee is understandable. For businesses both big and small, nobody wants to waste time, energy, and company resources bringing someone in for an interview that will not be a good fit, but a line must be drawn. Many workers feel their personal privacy is seriously invaded when employers go digging into their personal online accounts.

With these concerns in mind, several states have begun passing laws to combat this practice. In may of last year, Colorado passed C.R.S. § 8-2-127, a so-called “Facebook Law,” which restricts employers’ ability to get social media and other personal online account information from applicants or employees.

While running a Google search and pulling up any publicly available information about an applicant or employee is permissible under this law, employers cannot suggest, request, or require an applicant or employee to disclose means for accessing their personal accounts or services (this includes usernames and passwords). Under this law, you also cannot suggest, request, or require an applicant or employee to change their privacy settings (to make their accounts public for example) or to have them “add” the employer or someone acting on behalf of the employer to their friends list. If an employee or applicant refuses to comply with these kinds of actions from an employer, then it is unlawful to penalize or refuse to hire them because of their refusal.

There are a few exceptions to this law, but aside from allowing the employer to freely view publicly available information, they are pretty narrow. Other exceptions include investigations pertaining to compliance with financial laws and regulations and the unauthorized download of employer proprietary information to a personal web-based account or website.

If you would like to discuss this or other legal concerns related to your employees or the hiring process, be sure to reach out to the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer, Elizabeth Lewis, 720-258-6647 or email her at Elizabeth.Lewis@eclewis.com.

Anonymous no longer?

In a recent ruling by a Virginia court, the court ruled that Yelp.com, which provides online review from consumers for companies, had to release information about consumers who “anonymously” review companies. In the Virginia case, the owner of Hadeed Carpet Cleaning, Joe Hadeed, alleged that the reviewers of his site were not real customers and needing information about them to determine if they were real customers.  If the individuals leaving negative comments were actual customers, then the review would be protected under the first amendment.  However, if the reviews were not from customers then they would not be protected speech and Mr. Hadeed would be able to sue the reviewer. Mr. Hadeed requested information about the reviewers from Yelp; however, Yelp refused to disclose the information.

The court ruled that Yelp must reveal the names of the users to Mr. Hadeed because if the users were not customers then the speech was not protected speech. Yelp has stated that it disagrees with the ruling and that it will silence critics online. However, others hope that it will ensure that when businesses are reviewed, it is by actual customers.

This case highlights other issues that have been present about Yelp, namely issues with “hidden” results and the number of inaccurate reviews on the site.  At this time, there is no news about whether Yelp will appeal the decision so online reviewers should be aware that reviews should be accurate and truthful because they may not be as anonymous as you think.

If you are a business that has had issues with possible inaccurate reviews online, please contact me, your Denver Business Attorney, Elizabeth Lewis at 720-258-6647 or elizabeth.lewis@eclewis.com.

What is the Marketplace Fairness Act?

The Marketplace Fairness Act was passed by the U.S. Senate on May 6th and is currently pending vote in the House of Representatives. The MFA would enable state governments to tax online retailers generating $1 million or more in a fiscal year.

The Marketplace Fairness Act is not a federal sales tax but a uniform framework for state governments to enforce their own sales tax laws on interstate exchanges. If the bill is passed in the House of Representives and enacted by President Obama, who has already indicated support for the legislation, states will have to follow basic rules as outlined by Rick Burgess if they do not join the Streamlined Sales and Use Tax Agreement:

  • Notify retailers in advance of any rate changes.
  • Designate a single state organization to handle sales tax registrations, filings, and audits.
  • Establish a uniform sales tax base.
  • Establish a way that a retailer can pay sales tax at a different state’s rate for sellers in that state.
  • Provide free software for managing sales tax compliance
  • Hold retailers harmless for any errors that result from relying on state-provided systems and data

The bill has rallied supporters and opponents alike. Among the supporters are state and local governments who can expect increased tax revenue as well as The National Retail Federation -the worlds largest retail trade association. The NRF has urged Congress to pass and implement the MFA. In a letter distributed to members of the Senate, NRF Senior Vice-President, David French states:

“As the retail industry evolves and digital commerce becomes a more prominent portion of total retail sales, it is critical that the tax laws not discriminate between businesses based on how their products are distributed…The Marketplace Fairness Act addresses the crisis by removing the constitutional limitations on states’ authority to collect sales tax from out-of-state sellers.”

Ardent opponent of the MFA Terri Alpert, a well-respected CEO in Connecticut who has built two top-shelf brands that generate more than $14 million in sales every year sat down with Forbes magazine to discuss why she is against the bill. The most vocal proponents claim that the MFA is an attempt to level the playing field between brick-and-mortar stores and online retailers but in reality it is: “a way to consolidate sales and power in the hands of the biggest retailers and to crush the little guys with an administrative burden that no small or even medium-size company can handle” according to Alpert.

In regards to the $1 million dollar revenue cutoff exemption Alpert adds that “for most people, that sounds like a pretty large business. But retailers work on very small net margins, often 5% or lower. So the typical $1 million seller may have one part-time employee and may be earning about $50,000 a year!”

The Marketplace Fairness Act may have more difficulty passing through the Republican majority of Congress than it encountered in the Senate. For now, only time will tell how the Marketplace Fairness Act will play out. In the event that you have any questions about the pending legislation or any legal business matters, contact your Denver business attorney Elizabeth Lewis at 720-258-6647 .

Identifying Internet Scams

Today was a great day – rain was falling in our state which had been dry for weeks.  It was the beginning of a great week.  We had just celebrated the Fourth of July and I had been on a slight vacation – partially by chance and partially due to health.  I was glad to be back to a full work week.

However, my first week back to work was quickly brought down by a phone call.  This person alerted me that someone was using my information to sell items through kijiji.com.  This person is stating that she is an attorney located in Denver Colorado and must sell items through kijiji (the Canadian version of our Craiglist’s) such as instruments and machinery. The person is saying that the buyer should go through a site called sell2pal and submit all the money in advance and then the items will be shipped to them.

I have never sold on the kijiji website.  I have also never sold to anyone in Canada. Needless to say, this made me realize how easy it is to become a victim of identify theft.  So, in addition to saying if you are buying large items though kijiji I recommend you don’t if it is through someone saying they are an attorney in denver named Elizabeth Lewis, I recommend in any case you do the following:

  1. Never send money up front – especially large sums of money.
  2. Make sure you know who you are dealing with.  If you are going to be making a large purchase, the person should have a name, number, address, and other information that is verifiable.
  3. If you are making a large purchase and must put money down, have an agreement to go through any escrow agent to hold the funds before delivery of the item.
  4. Lastly, if a deal seems to good to be true, it probably is.

And, finally, if you get contacted by someone saying they are lizzyhome at gmail.com, run the other way.  I’ve never gone by Lizzy and am not selling items in Canada.  Use some common sense.  Do some research.  Call the supposed person you are buying from.  And, no, I am not selling anything at this time – especially not to anyone in Canada!

Can I do that? Social media investigations in the hiring process.

As an attorney that frequently speaks on social media, online law, and other techy legal issues, I get asked by employers what they can and can’t do as far as investigating applicants online.  Unfortunately, the answer really varies on the specific circumstances.  However, in most cases, employers should follow at least the following basic rules:

  1. Don’t do anything online that you can’t do offline.  For instance, do not use information you find online to discriminate against a potential new hire.  If you cannot discriminate against someone due to having children offline, you can’t research whether they have children online.
  2. You may be required to tell individuals where you get information about them during the interview process.  If you are going to hire a company to research online sources to find out more about applicants, check with your attorney to determine if you must reveal this under the Fair Credit Reporting Act.
  3. After hire, make sure you clearly state what you expect from employees both on and off the job regarding the use of social media.  For instance, do you need to worry about complying with the FTC endorsement rules (i.e. if your employee says good things about you do the disclose the employment status)?

Depending on the number of employees you have and the type of business you have, you may need to have a policy on both using social media in the hiring process and after hire.  If you are hiring employees, or have employees and haven’t thought about whether you need a policy before this, contact me, your Denver Small Business Lawyer today to find out if you need one today.