6 Secrets To Buying An Internet Business

By | Internet Lawyer, Website Lawyer, Website Legal Documents | No Comments

buying an internet businessAre you considering buying an Internet business?

You’re not alone! According to Nasdaq, it’s estimated that 95% of purchases will be through eCommerce by 2040. That means individual investors are seriously looking at internet businesses to jump into the eCommerce boom.

Like all investments, purchasing a website carries certain risks. Not all deals are as good as they may seem. It’s unwise to jump into the eCommerce market without performing due diligence. The following contains detailed steps you should take to maximize your investment and protect yourself from lawsuits.

1. It’s practical to use a broker to meet sellers, but don’t use their forms!

Using an internet business broker is a great way to find motivated sellers and potential opportunities when buying an Internet business. Some of these brokers will even offer in-house legal forms to help you during the purchase of a website.

Buyer beware! Because most of these business contracts are not written by lawyers, and even worse, they are not written with your best interests in mind. There is no way to ensure you are adequately protected when you use broker-provided forms — unless you have an experienced business and technology attorney review the contracts for you.

2. Don’t makes the same mistakes as Microsoft and Alibaba investors

Even tech giants make mistakes. When Microsoft purchased LinkedIn, they purchased an online business with a disastrous financial model. Ultimately, they paid 7x Linkedin’s annual revenues (not profits!) to close the deal. While they may have had a legitimate interest in Linkedin’s data and platform, their valuation did not make good business sense and they took a huge loss on the purchase. Microsoft may have had the funds to bail out an unprofitable venture, but as a solopreneur you probably won’t have as much financial wiggle-room.

Another huge eCommerce investment blunder was the Alibaba.com initial public offering. While the company’s founder, the Chinese government, and Wall Street underwriters benefited from the IPO, unsuspecting investors set themselves up for failure.

Because the Chinese government restricts foreign ownership in technology companies, investors were only able to purchase equity in an offshore shell corporation that exists only on paper. The problem with this is that Alibaba is under no obligation to actually disclose or transfer profits to the shell corporation. Even worse, the shareholder contracts are only enforceable as long as the Chinese government agrees that they are. Basically, shareholders have no way of ensuring that they ever see any profits; they spent $93/share on a virtually worthless piece of paper.

As discussed below, it’s on you as a potential buyer to perform your due diligence before signing any contracts.

3. Perform a legal diagnostic on the website before purchasing

An experienced Internet attorney can help you perform a legal diagnostic of any website you’re considering purchasing to identify legal risks that may exist on a seller’s website. You don’t want to take ownership of a website only to find out the previous owner infringed on another’s intellectual property. You are looking for an investment when buying an online business, not a lawsuit!

4. Prepare a non-binding letter of intent before entering any contracts

When you first start negotiations with a website seller, you will want to protect yourself legally before you ever enter a legally enforceable contract. With a well-written non-binding letter of intent, you can maintain your ability to walk away if you discover any information that makes the potential deal unattractive.

5. Ensure your legal documents address dispute resolution

Sometimes deals go sour. The best way to protect yourself is to outline what you will do if a dispute occurs long before the dispute arises. Internet Business Attorney Mike Young suggests including alternative dispute provisions like mediation and arbitration that will help you work out the dispute without the need to go to court (saving you time and money). However, you will want to create an exception for intellectual property infringement and non-compete disputes so you can head straight to court if either of these issues arise.

6. Know what you’re actually purchasing

Last, but not least, make sure you know what you’re purchasing. Make sure you will have ownership over all intellectual property and ensure the previous owner legally owned all images and content. The last thing you want to find out is that the website you’ve purchased has stolen content or that the seller retains ownership over the content they created.

Do You Need Help Buying An Internet Business?

If you’d like legal help buying an Internet business, schedule a phone consultation with Attorney Mike Young today.

Software Licensing: Why Is Buying Software So Difficult?

By | Software Agreements, Software Lawyer | No Comments

software licensing agreementIn a recent Forbes’ article, Adrian Bridgwater discusses why purchasing software applications is so difficult. In a nutshell, it’s the software licensing. According to Bridgwater,

“74 percent of software producers utilize subscription models for some or all of their products, compared to 65 percent utilizing perpetual licenses, 59 percent leveraging usage-based…and 47 percent using outcome/value-based models.”

As a practical matter, most startup software companies don’t really have a clue about their options when it comes to software licenses. They may understand the big picture (e.g. SaaS v. desktop application) but rely upon incomplete information when deciding how to monetize their applications. In short, this means picking a less profitable licensing model more often than not.

Of course, software customers (business and consumer) typically purchase software licenses with even less knowledge than that possessed by the companies selling them. And this frequently leads to the customer paying too much for the wrong type of license.

If you want help with software licensing contracts or other application agreements (e.g. software development agreement), set up a phone consultation Software Lawyer Mike Young today.




Website Design Contract Scope Of Work

By | Website Lawyer, Website Legal Documents | No Comments

website design contractAs discussed in “3 Things You Should Know About Website Design Agreements,” a website design contract’s scope of work is essential to the success of the project — both for the web designer and the client.

The scope of work should include, at a minimum, the following information…

  1. What is being done
  2. When it will occur (e.g. milestones with deadlines)
  3. Who is doing the work (designer, subcontractor, etc.)
  4. When payments are made (e.g. triggered by milestones achieved)
  5. What is excluded from the design project (e.g. article writing or other content creation)

Related Article – 10 Keys To A Great Website Design Agreement

The more detailed the scope of work, the less likely there is to be a disagreement between designer and client as to performance of the website design contract. If you need help with website legal protection, set up a phone consultation with Attorney Mike Young today.



3 Things You Should Know About Texas Gym Membership Agreements

By | Business Contracts, Business Lawyer | No Comments

texas gym membership agreementsDo you own a fitness center, gym, or martial arts studio in Texas?

If you’ve answered, “Yes” then you need to protect your business (and yourself) from unnecessary fines, penalties, and lawsuits with proper agreements. You may not know it, but Texas strictly regulates the fitness center industry. Whether you own a health club, fitness center, gym, or martial arts studio, your business must comply with the Texas Health Spa Act.

1. What You Need to Know About the Texas Health Spa Act

The Texas Health Spa Act is a consumer protection law designed to minimize risks for gym members and prevent the use of shady sales tactics. While you may not consider your business a “health spa” this law applies to all Texas businesses that offer memberships for instruction in or usage of a facility for physical exercise.

The penalties for non-compliance with the Act are nothing to take lightly. Not only does the Act allow for civil penalties (including actual damages, equitable relief, punitive damages, attorney fees, and court costs) you can be charged with a Class A misdemeanor! You can also face an investigation, lawsuit, and penalties with the Texas Attorney General — something that could destroy your business and personal finances.

Depending on statements made in your marketing materials and sales pitches to potential members, you could also be liable under the Texas Deceptive Trade Practices Act. All of these risks are on top of the threat of losing your state gym registration.

There are a number of requirements you will need to implement in order to comply with the Health Spa Act. First, you will need to register your gym with the State and you may need to post a surety bond. Then you need to ensure all members sign a written membership contract. These membership agreements must contain highly specific statutory language. This language is discussed in item #3 below.

2. The Types of Contracts You Will Need to Protect Your Business

To comply with state law and protect your business interests, you will need more than one type of gym contract. You will want a standard membership contract that complies with the Health Spa Act, as well as a Waiver, Release, and Assumption of Risk Agreement that protects you from member lawsuits. Because exercise always involves some risk of injury (especially if your member is not using the equipment properly) you want to protect your business from unnecessary personal injury lawsuits.

You will also want your members to sign a Media Release if you plan on taking before/after photos or any pictures of your gym/studio “in action.” Chances are you will want to include images in your marketing materials, so you want to ensure you have the appropriate permission from members to use their photos in any capacity. If you use personal trainers, you may even need a personal trainer contract as well between your business and your trainers (and possibly between the personal trainers and your members).

3. What You Need to Include in Your Texas Gym Membership Agreements

The Health Spa Act is lengthy and highly specific. Fortunately, there are some common fundamentals that will apply to most gym and martial arts studio owners.

Your membership agreement must state the term (or length) of the contract and Texas law prohibits terms in excess of 3-5 years (the term caps differ based on whether membership is financed through a retail installment contract).

You must also permit cancellation and detail the procedures for cancellation using the appropriate statutory language and provide for refunds under certain circumstances. This should include an option for members to cancel within three business days of signing the agreement and outline how refunds will be handled in the event of gym closure or the death/disability of a member.

If you pass finance charges on to members, you must outline these charges in your contract and include statutory language regarding a member’s legal claims and defenses. You also must provide a comprehensive list of all available membership plans upon a member’s request.

Last, but certainly not least, if you are pre-selling memberships prior to the grand opening of your fitness center, you must include language in your contract about the member’s rights if the gym doesn’t open or closes within 30 days.

As you can see, free gym membership contract templates you find online could put your Texas gym (and you personally!) at risk. Contracts that work for gyms in other states likely won’t comply with the Texas Health Spa Act. Plus you could run into intellectual property theft issues if you copy other contracts without appropriate permission.

Do You Need Help With Your Texas Gym Membership Contracts?

If you are unsure if you’re following Texas law or need gym membership agreements drafted for your business, it makes sense to discuss your options with an experienced business lawyer. Schedule a phone consultation with Attorney Mike Young today to ensure your gym or martial arts studio is protected.

Software Agreement: Can You Be Sued For Using An Old Software Version?

By | Software Agreements, Software Lawyer | No Comments

software agreement licenseUsers of Adobe’s Creative Cloud were apparently told this spring that they couldn’t use older versions of the software. To do so, would violate the end user license agreements they agreed to when purchasing a license to use this software-as-a-service (SaaS).

If Adobe is correct, that leaves the users with two options:

(1) stop using the older version of Creative Cloud; or

(2) upgrading to a new SaaS version.

Of course, when one upgrades software to a newer version, there may be an upgrade fee for the new license.

When you sell or buy a software application license, it’s important to understand what’s being sold (and what’s excluded) from the transaction. Be sure to read the fine print of the application’s license agreement.

If it’s your app that’s being developed or sold, a good software attorney can prepare a software agreement that’s right for you. If you need help, schedule a phone consultation with Software Lawyer Mike Young.