New York Small Business Law

Pimp Your Site (with Legalese): Part 1 - Terms of Use

Having a web business does not save you from the normal perils of having a brick and mortar business, such as being sued, robbed or getting caught in not complying with the law.  In many ways it is more dangerous than having a real life location.  You expose your business to millions of users, many different laws and court systems.

Thus, pretty much every website has a lot of legalese greeting the unsuspecting web surfer, also known as "Terms of Use", "Terms of Use Agreement", "Terms and Conditions", "User Agreement" and similar terms.  The idea of having Terms of Use posted on your website is that you limit your liabilities and responsibilities to website visitors, and visitors' rights to content on your website, by making them agree to such terms before being allowed to use the website.

One important issue you want to address in your Terms of Use is the danger of being hailed into court in States other than your own and being subject to laws other than your State's law.  Normally, you cannot be sued in States other than your own, unless you have certain "minimum contacts" with such States.  Is having a website that is accessible in a State minimum contact?  Is having customers in that State minimum contact, delivering goods, providing services?  Ideally, don't even get into that discussion, but try to limit the danger by employing these tactics:

1.    Make your website a brochure site with limited interactivity.  Just being accessible from a State is usually not considered to be sufficient minimum contact.  Granted, in this Web 2.0 world, this is like saying don't have a website at all.

2.    If your site solicits interaction from visitors, include language in the Terms of Use that limits use of the site to residents of your State and country.  If you are targeting customers in your State only, this might be a good strategy.

3.    Include provisions in the Terms of Use that limit jurisdiction to your State (i.e. where you can be sued) and provide that only the law of State X will apply to disputes between you and your visitors.  For example, see Section 30 of  Allbusiness.com's Terms of Use or Amazon's Terms under "Applicable Law" and "Disputes."

4.    If your website is really global, you may want to have different mirror websites targeted to individual countries in addition to stating on each such site that it is only intended for residents of that country. You may even prevent residents of country X from using the mirror website in country Y, by, for example, only excepting credit cards with addresses in the respective country.  Ideally, you should get advice on how to draft Terms of Use for each country.

Now, before you start copying all the legalese on allbusiness.com (which would be a violation of their Terms of Use, by the way) or any other site, remember that each internet business is different and you may need a whole set of other provisions.   Some of their provisions might be useless for your purposes.  For example, if you don't provide information that could be construed as legal advice, you wouldn't need Section 6 of Allbusiness' Terms of Use.  If you are selling and shipping products, you may need more specific terms designed for such products.

Finally, if you are in the business of distributing, selling or advertising stuff that is not really suitable for the under 18 crowd or otherwise regulated, there are a lot of other things to worry about.

Also see "The "Terms of Use" Trap for Web Businesses" by Jay Parkhill

**This post is for informational purposes only and does not constitute legal advice**

 

Transferring Assets to your new LLC

Another reader question:  "If you start a new LLC, but have web sites or other IP that you want to be “owned” by the new LLC, what needs to be done to make it property of the new LLC?"

The property has to be transferred to the new LLC, some say "contributed" to the LLC.  If the property consists of a website, you may write up a one page document that says something like "I hereby transfer all my rights to the domain name "www.minenomore.com" to New LLC.  I will do everything necessary to transfer such domain name to New LLC."  Then you should go to the host or other service where you originally registered your domain name and find out how to transfer the domain name to a new owner.

With respect to Intellectual Property, the process might be a little more involved.  If the IP is registered with the United States Patent and Trademark Office, you may have to record a transfer ("assignment") to the new owner.  In other words, first you create and execute the document that transfers the IP from you to the new LLC and then you effect any filings that need to be done to document such assignment and make it known to the rest of the world.

**This post is for informational purposes only and does not constitute legal advice**

Keeping your LLCs separate

Somebody asked me the following question: 

"If you start a new LLC, but have old business credit cards from a previous (but now closed) LLC, can you use those credit cards with the new business without causing problems?"

It is a little bit like asking, "If my grandfather died and left behind some credit cards in his desk, can I use those cards for my spring break vacation without causing problems?"  I think you know the answer.

Creating a business entity is like giving birth to a new being.  For the most part, everything that entity does and owns is separate from you and the stuff you own.  The same goes for bank accounts, credit card accounts and credit history.  Also, everything the entity does and owns is separate from any other entity.  If you want to transfer property from one entity to another, or from yourself to your LLC, there has to be some actual transfer, ideally documented in writing.

**This post is for informational purposes only and does not constitute legal advice**