You have a business idea. You are excited. You just registered your first domain name and are getting ready to set up your website. You have a great idea for your business and want to start putting content out into the world.
But you remember reading somewhere that you need to do some legal stuff first…
Listen, I’m not trying to be a stuffy lawyer who tells you what to do, but that’s kind of what I do for a living.
My sole job, the way I get paid, is by protecting my clients from liability. And that liability can come in many forms - higher taxes, fines from the FTC, chargebacks or lawsuits from disgruntled clients and customers.
And for new entrepreneurs who are just getting started with their online business, 99% of their legal problems can be avoided with some simple contractual agreements.
Privacy Policy
A privacy policy is legally required in all 50 states, and outlines how your business collects, uses, and protects personal data from anyone that provides you with their contact information.
This could include casual readers of your website who choose to join your email list or download a resource you advertise, or people who purchase your products and services, this giving you additional contact information such as addresses, phone numbers and even credit card information.
If you don't have a privacy policy for your online business, you may face the following consequences:
- Legal penalties: In many countries, including the United States and the European Union, having a privacy policy is a legal requirement, especially for businesses that handle personal data. Failure to comply with these laws can result in hefty fines and other penalties.
- Loss of credibility: Not having a privacy policy can make customers and users doubt the safety and security of their personal information and lead to a loss of trust and credibility for your business.
- Liability exposure: Without a privacy policy, a business may be at risk of liability in case of a data breach or other privacy-related incident.
- Negative impact on sales: Consumers are becoming increasingly concerned about their privacy online, and lack of a privacy policy can negatively impact the perception of your business and lead to a decrease in sales and customers.
Website Terms of Service
A website terms of service outlines the terms and conditions that govern the use of your website or online services, including acceptable use policies, dispute resolution processes, and limitations of liability.
If you don't have a Terms of Service (TOS) agreement on your website, you may face the following consequences:
- Legal liability: A TOS agreement can help limit your business's liability in case of disputes or legal action. Without a TOS, the business may be at a higher risk of facing legal issues.
- Difficulty enforcing rules: A TOS agreement outlines the rules and expectations for using the website or service, including acceptable use policies and dispute resolution processes. Without a TOS, it may be difficult to enforce your own rules and resolve disputes.
- Loss of control: Without a TOS, your business may have limited control over how your website or service is used and may be unable to enforce your own policies.
- Negative impact on reputation: Having a clear and comprehensive TOS shows that your business is professional and trustworthy, and can positively impact its reputation. Without a TOS, customers and users may be less likely to use your website or service.
Website Terms of Sale
A Terms of Sale agreement is a contract between a seller and a buyer that outlines the terms and conditions of a sales transaction. For an online business, a Terms of Sale agreement typically covers the following items:
- Description of goods or services: A clear description of the goods or services being sold, including any specifications and features.
- Price and payment terms: The price of the goods or services, along with the payment methods accepted and any applicable taxes or fees.
- Shipping and delivery: Information about shipping and delivery, including estimated delivery times, shipping fees, and any restrictions or limitations.
- Returns and refunds: The policy for returns and refunds, including any conditions or restrictions, and the process for returning goods. (This is incredibly important in the event you receive a chargeback).
- Warranty and guarantees: Information about any warranties or guarantees offered on the goods or services being sold.
- Intellectual property rights: A statement regarding the ownership of any intellectual property rights, such as patents or trademarks, related to the goods or services being sold.
- Limitation of liability: A statement limiting the your liability in case of disputes or damages.
Professional Client Agreement
A client contract is a legal agreement between a business and a client that outlines the terms and conditions of a business relationship. A client contract is important for several reasons:
- Defines scope of work: The contract clearly defines the scope of work to be performed, including specific tasks, timelines, and deliverables. This helps to ensure that both parties have a clear understanding of the expectations for the engagement.
- Protects confidential information: Client contracts often include provisions for the protection of confidential information, trade secrets, and intellectual property. This helps to protect the business from potential exposure or loss of sensitive information.
- Sets payment terms: The contract sets the payment terms, including the fee structure, invoicing schedules, and payment methods. This helps to avoid misunderstandings or disputes related to payment.
- Manages liability: The contract may include provisions for limiting the liability of the business in case of disputes or damages. This helps to protect the client from potential financial loss.
- Supports dispute resolution: A client contract may include provisions for dispute resolution, such as mediation or arbitration, to help resolve any conflicts that may arise during the engagement.
A client contract is important for defining the scope of work, protecting confidential information, setting payment terms, managing liability, and supporting dispute resolution. It helps to ensure a clear and mutually agreed-upon framework for the business relationship, which can improve the chances of a successful outcome.
Is your Business Set Up for Legal Success?
These 4 contracts, (privacy policy, terms of service, terms of sale, and client contract) are foundational contracts that are necessary for every budding online business.
But this is just the beginning. Check out these other contracts that you can use for your online business.