Apr 15, 2011

A large portion of our clients would define themselves as business customers, and while they depend on us to ensure that their data, application, or website run without a glitch, our abilities to provide them with world-class business advice are limited.

Even so, as one of the fastest growing IT companies in the nation we have grown our rolodex of great partners and wanted to share some of their wisdom with you, our customers.

First up is David Snead, a lawyer whose practice is focused on internet infrastructure providers. In his eleven years in this practice, he has represented clients including multinationals and middle tier hosting companies. In a quip to many web entrepreneurs, who once also included SingleHop’s founders Zak Boca and Dan Ushman, David also states that he also proudly represents web companies with “two guys, a server, a T-1 and a huge MasterCard balance.”

David has been kind enough to write an excellent article packed with information on how to get the legal basics of your web business in order. This is the first of a multi-part blog series which will give you inside tips and suggestions on what to watch out for as your grow your own online business.

Please be aware that David’s advice in no way constitutes a lawyer-client relationship with you, nor does it constitute specific advice for your situation as virtually all businesses legal needs vary in several ways.

Hey guys, David here. So let’s start with the basics- most companies worry about legal issues.  Unfortunately, they often fail to turn that worry into something proactive.  SingleHop has asked me to provide some insight, into what you might do to get your legal house in order.  What follows is a general summary of “good housekeeping” tips.  These are just the start of a process to get things moving.

The first thing you need to do is figure out your organizational documents and structure.   This is important because organizational issues are difficult, and VERY expensive, to fix down the road.  It also makes your company more difficult to sell if you do not.  For example, even before approaching you, the buyer may do a quick online search to determine your corporate status. When the buyer finds that your charter has been revoked, your ability to run your business is cast in doubt. It may seem ridiculous for you and your cofounder to meet once a year and pass resolutions, when you sit across the desk from each other every day. However taking the half an hour per year that this may require pays a lot of dividends down the road.

Second, stop worrying about hypothetical liability.  These worries tend to be based on anecdotal fears that come from friends of friends.  Except in a few cases, there aren’t many areas in which an online company will have significant liability. However, the problem with worrying about hypothetical liability is that you may simply give up trying to mitigate real liability. Rather than worrying about the three million dollar jury verdict your friend on WebHostingtTalk told you about, you should identify those incremental steps you can take to change the way you do business. This will cause the frequency and severity of those problems you do have to subside doing more to mitigate liability than worrying.

There are two areas where online companies tend to have more liability than others:  backup and security.  I always suggest to my clients that they spend additional time, and often resources, making sure that their backup systems function properly. This means doing actual backup and restores using content your customers may keep you your servers.  It also means that it’s important to tell your customers how your backups work.  They need to know what you do, and do not, back up; how they should configure their backups; and, importantly, what their data will look like when its restored.

Thanks for reading, and make sure to come back to catch David’s second part on the legal basics to keep in mind when running your own web business.

 

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