Internet-Based Startups: Legal Considerations
The Digital Age is here. Startups have shifted their focus and have taken advantage of the widespread accessibility offered by both the internet and mobile devices. In fact, studies now show that over half of all internet traffic is done over mobile devices. Led by companies such as Facebook, Amazon, and Netflix, internet and mobile-based businesses are the norm, thanks in large part to lower overhead costs and easy access to the ultimate consumers across the globe.
Still, as startups continue to move their business to the internet, it is important that startups consider the new and ever-changing legal landscape developing online. The digital market, by allowing greater access to other countries across the globe, requires careful consideration and compliance with various laws at the state, federal, and perhaps even international levels.
When a startup is considering making a potential move towards an internet or mobile-based platform, it is important that the startup consults with an experienced business lawyer. Working together, the startup and the lawyer can identify potential legal considerations that will need to be addressed, either now or in the future, and then structure the startup in order to best minimize potential legal risk. Some of the more important issues related to starting an online business are discussed below.
Selecting the Best Business Entity for Your Startup
A startup should always select a business entity that will best meet both its short and long-term goals. Business entities such as corporations and limited liability companies provide owners and shareholders with insulation from personal liability in business matters; as a result, the startup’s business debts and liabilities are the responsibility of the startup while the co-founders personal assets are insulated from the debt and liability of the business. Selection of a business entity is also important as it will have tax implications for the startup and its owners. Selecting the appropriate business entity depends upon a variety of factors, including the type of operation you are running, as well as your plans for growth and scaling up the business.
Note: A limited liability company is a US-specific business entity. If your startup is anticipating international expansion, it is important to discuss these plans carefully with an experienced business attorney who is capable of advising you in light of such goals.
Complying with Laws and Regulations
Startups are required to comply with state and federal regulations in order to operate and this includes internet-based operations. Given the national (and perhaps international) accessibility to the startup via an internet-based operation, the startup must be prepared to address and remain in compliance with regulations that may differ in each state or country in which the business is conducted. A business attorney can also help prepare for the startup legal language regarding a choice of venue, waiver of liability, and arbitration in connection with its transactions with customers.
Selecting a Unique Name for Your Startup
A name is very important for any startup. A name is carefully chosen to set the product or service apart from competitors. This is true for competition, as well as for legal purposes. A startup’s name (as well as a logo) cannot legally resemble that of a competitor because doing so may be encroaching and infringing upon a competitor’s intellectual property. The accessibility of the internet makes it so that startups with similar names cannot share a name simply because they exist in different regions as customers could be confused. In order to avoid potential lawsuits, startups should consult an attorney to help verify the startup’s desired name is available and to avoid any infringement issues. When available, the startup should consult with an attorney to help determine what needs to be done to trademark and protect its proprietary interest in the name.
Protecting Your Intellectual Property
Startups create and implement novel business ideas. Many times, the product or service provided is a new or innovative item or technology. In order to protect its interest in its innovation, a startup should work with an attorney to develop language and seek legal protections that will protect the startup’s ownership, naming, and property rights.
Contact Startup Company Counsel for a Consultation
Although the internet has made doing business easier, it has also increased the number of legal risks a startup should address. Seeking the advice and counsel of an experienced business attorney will allow your startup to be better positioned to make a splash as an internet or mobile-based company. Contact us at Startup Company Counsel to schedule a consultation with one of our experienced business attorneys. Please call us at (408) 441-7555 today.