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Protecting Yourself From Internet Business Partners

By Internet Lawyer, Website Lawyer, Website Legal Documents

internet business partners texas shootoutAs a business and technology lawyer, I represent e-commerce businesses that are owned by several individuals and/or entities, i.e. there are multiple Internet business partners.

However, as a practical matter it rarely makes sense to co-own a startup with anyone else (except a spouse if you have one). Whether it’s a true partnership, corporation, or a limited liability company, having more than one partner* is generally a recipe for disaster.

Why?

The primary problem with multiple Internet business owners

Because individuals are unique, it’s almost impossible to find two who are 100% on the same page, have the same commitment and the same goals for a new ecommerce company. Even the motives tend to be very different.

For example, one person sees the Internet startup as an escape from long hours at a hated job. Another is looking to create the next Google with the expectation of working 100+ hours per week to get there. One plans to bootstrap the venture to success through sweat equity. The other wants angel investors to foot the bill during the early years.

Disaster strikes and the Internet startup falls apart

Even if you and your Internet business partners are on the same page with a common work ethic, compatible skills and share a single vision for where you want to take your ecommerce venture, the odds are Murphy’s Law will kick in and screw up your plans.

What do I mean? Here are some common situations that mean the death of an Internet startup.

  • One partner’s work ethic or priorities change when there is a divorce, death, or illness in the family.
  • Cash flow isn’t sufficient to support two owners during the early stages of the venture so the partners start fighting over income or look for things to do outside the company to get paid (e.g. a new job or freelancing).
  • One partner is addicted to chasing the bigger better deal (BBD), disappears to chase the next something-for-nothing get-rich-quick scheme, but still wants to get paid for doing nothing.

Don’t trade Internet business equity for skills

Although it can seem cheap at the time, in the long run it’s very expensive to part with a startup’s equity to someone who is providing tech, marketing, or other skills.

If cash-strapped, it’s better to do the work yourself until you can afford to pay freelancers for their services as independent contractors (preferred) or hire employees (freelancers are often better for a startup’s early phases than hiring employees).

What to do if you insist on having Internet business partners

To increase your chances of success, there should be one decision-maker. And that reality should be documented in a signed written agreement between you and your partner. Input from others can be valued but ultimately you want to be the one calling the shots if there’s a difference of opinion on major decisions your ecommerce company must make.

In addition, you’ll want a written buy-sell agreement that describes when and how you and your Internet business partners will part ways in the future.

Related Article – 7 Keys To Picking The Right Internet Lawyer For Your Business

For example, if your partner files for bankruptcy, is convicted of a crime, or simply decides it’s time to sell, you want a written roadmap in place that can be followed to ensure equity changes hands with minimal disruption to your ecommerce company. There are numerous ways this can be structured. The important thing is that the plan is agreed to by you and your partner and documented in a signed binding contract while you’re on good terms so that if things change, your Internet business can survive even if you’re no longer speaking to each other.

Related Article: 5 Ways To Resolve Internet Business Disputes Without Going To Court

Do most Internet business partnerships fall apart?

Most companies, online and offline, disappear over the years for many different reasons. For Internet startups, it’s an uphill battle to grow a company when there are co-owners whose goals and circumstances change over time. For an online venture to survive, this often means someone has to leave. By putting the right legal protections in place, you increase the odds of surviving and thriving instead of ending up in court destroying the company because of disputed with your Internet business partners.

* Because it’s common to do so in ecommerce, I refer in this article to multiple equity owners of an Internet business startup as “partners” even though they may actually be corporate shareholders or limited liability members instead of actual partners.

It All Comes Down To Getting Legal Advice From An Internet Attorney You Trust

By Internet Lawyer

What’s In An Internet Attorney Anyway?

An Internet attorney can be a transactional lawyer who is devoted to keeping your business away from lawsuits, disputes, and government investigations.

An Internet attorney who is skilled in Business law in addition to Internet law can provide many services to your business including but not limited to performing website legal reviews, helping you buy, broker, sell, and lease websites, and preparing customized website legal documents. Among others, all of these services are critical to the success of your business and website. Putting your trust in an experienced Internet lawyer can be an investment of a lifetime that can take your business to the next level and save you a great deal of money.

I Already Have An Attorney, So What’s So Special About An Internet Attorney?

You may be asking yourself why the distinction between an Internet lawyer and all others is so important. The truth is, an Internet attorney is the only type of lawyer who has the knowledge in the area of Internet law that is applicable to your website. For this reason, getting legal advice from an Internet attorney who has knowledge in this specialized subject matter in addition to general expertise in helping you run your business only makes sense.

It is important to note that the legal services that an Internet attorney can provide are not limited to issues surrounding Internet law. Other legal services that an Internet attorney can provide to add to the value of your business include creating joint ventures and licensing agreements, drafting SEO marketing and web design agreements, and aiding in business entity formations. Those who have hired an Internet legal professional can agree that the benefits of adding a lawyer skilled in this area to your team are endless.

When Would I Need The Help Of An Internet Attorney?

There are a few resurfacing legal issues that an Internet legal counsel may see frequently. For example, common areas of ecommerce legal representation that an Internet attorney may see include Internet-related business documents, customized website ownership documents, website-related service agreements, and Internet speaking and coaching agreements.

When it comes to legal matters in this area of law, prevention is indeed the best cure. Put your trust in an experienced Internet attorney and avoid potential disputes, legal issues, and criminal liability before they happen.

How you can avoid Starbucks’ mistake

By Internet Lawyer

Internet attorneyAs an Internet Attorney, I know that when you’re putting together joint ventures for your online business, it’s important to consider your long-term interests.

Here’s a costly brick-and-mortar biz example from Starbucks on what not to do.

Several years ago, Starbucks wanted to distribute its coffee in grocery stores and other places beyond its cafes. Because Kraft already had the distribution network in place for its food, Starbucks signed a contract to have Kraft distribute its coffee too.

The mistake?

The contract was designed to last forever without an easy way to get out of it. But times change, people change, and so will your business needs. Plan accordingly.

Now Starbucks is trying to weasel out of the contract. If Kraft can enforce the agreement, Starbucks will end up paying out billions to escape and set up its own distribution network for stores.

No matter how attractive a joint venture deal looks, be sure you put in place the right contract language that lets you walk away when it is profitable to do so. There are at least a half dozen ways that your Internet attorney can help you do this both legally and ethically.

To your online success!

-Mike the Internet Attorney

Negotiate a Better Deal

By Internet Lawyer

negotiateIf your economic circumstances have changed because of the recession, don’t breach your contracts (joint venture agreements, leases, car loans, mortgages, etc.). You can almost always negotiate a better deal with the other party instead.

Here’s why. Most people prefer something over nothing. If agreeing to better terms keeps you from walking away from a deal, realists will cut that deal if there’s not a better alternative.

Contrary to popular belief, price and terms can be renegotiated after a deal is signed. But you need some leverage to get what you want. The other side must believe that you’re willing to walk on the deal (or even go bankrupt) unless the terms of the deal are changed.

You can still create a win-win relationship with a new deal that reflects current reality in contrast with the way things were when the original deal was signed. If the other side doesn’t want to decrease price, for example, you can propose to extend the payment term (and pay additional interest over that term).

If you’re looking at having long-term ongoing relationships, don’t try to renegotiate a deal unless you’re truly in a bind. If you’re trying to pull a fast one now, the other party is unlikely to trust you in the future.

Joint Ventures – Should You Use Them?

By Internet Lawyer

A joint venture (JV) is a partnership formed by two or more persons or business entities (such as corporations or limited liability companies) for the purpose of completing a single project. JV partners share profits and losses and each partner has some control in how the project is accomplished.

Joint ventures benefit partners when each adds an important piece to the project puzzle. Before you invite someone to become a JV partner, consider if something of value is really being brought to the table that can’t be obtained by less expensive means such as outsourcing to third parties.

You should also consider the potential legal liabilities that can be incurred by the actions of your JV partners on behalf of the joint venture. This is particularly important if you are a partner as an individual (personal liability) instead of having your corporation or limited liability company serve as JV partner.

Weigh the business pros and cons (risk versus reward) and run the proposed JV by your lawyer before agreeing to form the venture.