7 Keys To Buying An Online Business

By | Website Lawyer, Website Legal Documents | No Comments

couple buying an online businessAre you interested in buying an online business? Before making the final decision to purchase an Internet venture, knowing as much as possible about the company to be acquired can help set you up for success after the papers are signed.

Here are seven important factors to consider as part of your pre-acquisition due diligence…

1. Internet Businesses Are Not Just About The Website

Buying an online business means looking deeply into the metrics and data provided by the seller to tell you more about how the company operates and its current sources of revenue.

As the prospective purchaser, the seller must be prepared to ask your difficult questions regarding sources of site traffic, revenues, expenses, vendor relationships, labor relations (employees and independent contractors), etc.

2. The Importance Of Non-Competition Agreements

Although the seller of a business often wants to move on to retirement or an unrelated venture, don’t assume this is the case.

Instead, you’ll want to use non-competition agreements to ensure the seller(s) and key employees don’t walk away and use their insider knowledge to directly or indirectly compete against the company you’re buying.

3. Verify Guarantees And Potential Liabilities

Products and services offered in the past by the seller should be carefully reviewed when thinking about buying an online business. As part of this due diligence, check out old versions of the company’s website(s) from the owner (e.g. Wayback Machine).

Why is this important? Because the seller may have made commitments that you could be on the hook for if you buy the company.

For example, the seller might have offered lifetime guarantees on a product or service. Customer claims could come back to haunt you as the new owner. There are ways that an experienced Internet business attorney can eliminate or limit your potential liability exposure for such hidden liabilities.

4. Beware Of Access Issues

Although you’ll want to make certain every password is changed when you’re buying an online business, there’s more than that involved for internal security and website legal protection.

For example, you’ll want to limit internal access to essential personnel. And if there’s been custom coding, you’ll want to make sure that the developers didn’t leave any hidden back doors to access the company’s site(s) post-purchase.

5. Check Out Merchant Bank Requirements

If you already have a business (online or offline), you may already have a merchant bank that processes credit cards. You should see what additional requirements (if any) need to be met to use the same processor for the acquired venture. However, if you’re planning to use the same merchant bank as the seller, you should see what you’ll need to do to make that happen. Will the bank require personal guarantees? What about transaction fees? These costs can be important, particularly when profit margins on products/services are small.

6. Decide If You Need A Business Valuation Expert

For many acquisitions of Internet ventures, a business valuation expert isn’t retained. There are common methods of valuing such a company without paying for an expert to do it. You can discuss these with your Internet attorney and/or CPA. And, let’s face it, the market value at time of purchase is what a buyer is willing to pay.

However, it may make sense in some instances to hire a business valuation expert, particularly if you’re paying seven or eight figures for the company. The data supplied by the expert can be used for negotiating a better deal.

7. Check Out The Seller’s Email Marketing

If email marketing is integral to the online business, you will want to know how and when the seller acquired the names and email addresses on the company’s lists. This will help you avoid legal liability for unsolicited commercial email (spam) and determine monetary value of such lists based on a variety of factors (e.g. prospect v. customer, freshness, open rates, etc.).

In addition, you’ll need to determine the portability of the lists to you as the purchaser. For example, in some asset purchases, a third party autoresponder service will not transfer the lists to a new owner. On the other hand, if the selling entity’s equity is acquired (instead of the business assets), then the autoresponder service will likely let you continue to market to the lists because the entity purchased still owns the lists.

Do You Need Legal Help Buying An Online Business?

If you are serious about purchasing an Internet venture, it’s probably time to speak with an experienced online business attorney. You can schedule a phone consultation with Internet Lawyer Mike Young using our online booking system or by calling 214-546-4247.

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.

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.

 

 

7 Things You Should Know About Website Privacy Policies

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

website privacy policiesOne of the questions we hear the most from business owners is if we provide a “standard privacy policy template” for websites. It is great that business owners recognize the need for website legal documents, but most are still under-informed when it comes to website privacy policies.

Read on to learn the 7 things you should know about website privacy policies in order to protect yourself, your business, and your audience.

1. Your website NEEDS a privacy policy.

If you collect personal information from your website visitors, you need a Privacy Policy. Not only do these policies build trust with your audience and position your website as legitimate, many third-party services require that your site have a Privacy Policy. Your policy will govern the use of your website by visitors and how you collect and store information. It should also protect you by decreasing the likelihood of lawsuits or fines.

2. You Can be Held Liable for Violating Laws in OTHER Jurisdictions.

Some states and countries legally require website owners to have a Privacy Policy. Even if you do not live in one of those jurisdictions, you are still responsible for complying with laws where your visitors reside.

For example, if you collect data from European or California residents you’ll want to add the GDPR (E.U.’s General Data Protection Regulation) and CCPPA (California Consumer Privacy Protection Act) in your website privacy policy.

If you are a small or medium-sized enterprise, you may not have to comply with the CCPPA but it is important to explicitly outline why your business is not regulated by the Act. An experienced internet attorney can help you steer clear of government investigations for failing to comply with laws that you may not be familiar with.

3. Legal Form Generators: Buyer Beware.

You can readily find legal form generators online if you do not have the funds to pay an attorney for a custom privacy policy. However, buyer beware.

Because sometimes legal form generator software is unreliable or out-of-date. Even worse, there have been cases where the creators behind the legal form generators stole work that was created by another attorney (this is copyright infringement-and can lead to hundreds of thousands in damages).

If you want to use a form generator look for software that legally uses forms prepared and updated by an internet lawyer. Our firm recommends using Website Legal Forms Generator because the software is updated annually by an experienced Internet lawyer.

4. Privacy Policies are Intellectual Property

Many business owners think they can simply copy and paste privacy policies from other websites.

This could land you in an expensive lawsuit, because privacy policies are copyright protected. Intellectual property lawsuits can lead to fines of $150,000 per infringement: enough to destroy your business and personal financial situation.

5. Some Personal Information Requires Additional Protection.

Certain personal data, such as full names, credit card numbers, and home addresses are considered sensitive personal information (or personally identifiable information) and subject to stricter privacy regulations.

Even if you do not purposefully collect this type of information, it is possible an unsuspecting visitor may reveal personally identifiable information in blog comments or forum posts. You will want to be clear in your Privacy Policy that other visitors who read this type of information cannot abuse it or share without the owner’s express consent.

6. You Need to Address Laws that Protect Minors.

Even if minors are not your target audience, you need to address the privacy of minors who may stumble upon your website for the same reasons listed in #2. You can be held liable for privacy violations under COPPA (the Children’s Online Privacy Protection Act) even if your site is not intended for children.

That’s why it is important to clarify whether minors under the age of 18 should be using your site in your Privacy Statement (and elsewhere on your website). You should also put safeguards in place to ensure you’re not collecting data from minors.

7. Health industry websites (doctors, hospitals, clinics, etc.) require extra compliance.

If your website collects or deals with patient health information in any capacity, you need to make sure your Privacy Policy references and complies with HIPAA (the Health Insurance Portability and Accountability Act) and HITECH (Health Information Technology for Economic and Clinical Health Act). This is especially relevant if your website includes a Patient Portal!

Bottom Line: your website’s privacy policy is nothing to take lightly. You want to ensure you’re protecting yourself (and your site visitors) with a well-drafted website privacy statement that is tailored to your business’s needs.

If you have the funds, it is always worthwhile to get customized documents prepared by an experienced Internet lawyer. Our firm offers a Website Legal Protection Package for a flat fee where we’ll review your website, discuss your needs, and provide you with customized legal protection for your website.

3 Things You Should Know About Website Design Agreements

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

Website Design AgreementsAre you a web designer? Or a business owner who is interested in website design agreements?

If you are a business owner, you understand that a company’s website is your online storefront. Your site is often the first thing potential clients see and informs their first impression of your business. The design of your website can also influence your search engine ranking, setting you apart from your competitors.

If you are reading this article, chances are you already understand the importance of good web design and want to know exactly what to look for in  website design agreements to protect your interests.

While you will have slightly different needs depending on whether you are the purchaser of design services or the designer, there are a number of common contract issues you will want to familiarize yourself with:

1. Your web design contract should outline the scope of work, deadlines, and payment.

The “scope of work” section is the bread and butter of any service contract. Identify, in detail, all the deliverables, the deadlines for receipt of the deliverables, and when/how much payment is expected.

Scope of work is one of the greatest risks for dispute, so include as much detail as is possible in order to predict and steer clear of common disagreements. As a designer, you may want to specifically exclude certain design and development tasks that you have not included in your quoted price.

2. Your agreement should address warranties, disclaimers, and change orders.

Clearly describe any warranties or disclaimers being provider by the designer. For example…

  • Does the designer warrant that all content used is royalty-free and you have full permission to utilize the content on your site?
  • Does the designer warrant satisfaction? Does the designer want to limit liability for content that you may add to your website after the initial design is complete?
  • Also consider how you will handle edits, change requests, or work that you would like to add that falls outside the original scope of work.
  • Do not forget to address changes in deadlines and pricing that will occur due to the additional work.

3. Your agreement should discuss intellectual property (IP) ownership!

Do not assume you automatically have ownership of your website design (whether you are the designer or purchaser). Clearly address intellectual property ownership in your website design agreement.

First of all, you may have to pay to license certain content like stock photography or custom fonts. If you want exclusive ownership of the design elements used on your website so that your designer cannot create a similar website for competitors, you may have to negotiate a higher premium to ensure your content is not recycled for multiple clients.

When you find common ground on which elements a designer may recycle and which should be single-use only, be sure to commit your agreements to writing.

4. Your agreement should consider how you will handle disputes.

If service disputes were rare, there would hardly be a need for website design contracts.

Don’t fool yourself into thinking that a dispute won’t happen to you. Instead, proactively avoid disputes by determining how you will handle conflict from the start.

You should include a clause in your contract that outlines how disputes will be handled, whether you have a preference to use arbitration or mediation to save on court costs, and where your dispute will take place. You also want to state what laws will govern your agreement (such as, “the laws of the State of Texas” if your business is in Texas).

The last thing you want is to be summoned to an out-of-state court over a dispute that could otherwise be handled in your backyard.

Just as web design is unique and varies from client to client, so should your website design agreement. The look and functionality of your website is important to create the professional image you want your business to portray. Unfortunately, it is not hard to find low-cost web designers who will sell you a low-quality website. Don’t fall into this trap. Clarify your expectations from the outset to create a positive, working relationship with a professional web designer. Chances are, you will want to develop an ongoing relationship with your web designer so that your site will continue to stand out among competitors for years to come.

Finding high-quality web designers and creating a positive relationship starts with a rock-solid website design agreement. You’ve taken the first step by getting informed.

If you find that you are ready for the next step of drafting the contract, consider contacting an experienced Internet lawyer for recommendations, advice, and an honest review of your agreement.

At our Internet law firm, an experienced attorney can professionally review any website design agreements before you sign to make sure you are getting the best possible terms for your money. We also offer customized website design contracts for those that would like us to handle everything.

Either way, we’re in your corner. To get started, just schedule a phone consultation today.