When launching a social media marketing startup, getting your legals correct gives you a strong foundation for acquiring clients and attracting investment. There are three key issues a social media marketing startup must consider:
- Protecting your intellectual property
- Drafting your client agreement
- Deciding the right business structure
This article explains each so you can grow with confidence.
Protecting your Intellectual Property
As the founder of a social media marketing startup, you understand the power of brand names. The first step to creating a strong brand name is to ensure that it is legally protected by a registered trade mark. Many confuse this with registering a business name, which is different and does not provide the same level of protection.
Registering a trade mark means that you can prevent other businesses from using the same or similar name. If you register a trade mark, other businesses are not permitted to trade under a name or logo that might lead a client to confuse your business and their business.
On the other hand, registering a business name does not allow you to prevent other businesses from trading under the same or a similar name. If you register a trade mark, you can claim damages or request an injunction from a court to stop another business from using a similar name. You can’t do this with just a business name.
Drafting your Client Agreement
Your social media marketing startup needs a client agreement because it will help you get paid. The client agreement also helps ensure that your client doesn’t think you’re providing extra services above and beyond what was actually agreed.
Every social media marketing firm should ensure that their client agreement covers:
- intellectual property;
- access to social media accounts; and
- guarantees you provide.
How you deal with intellectual property (IP) will depend on the services you provide. For example, if your firm is responsible for writing blog posts or posting to social media, then it’s likely that this content will need to be assigned to your client. Assignment means that your client owns the content and you no longer have any rights to the content.
However, if you regularly provide reports to clients about their social media results, then it’s likely you’re using a template report you use for other clients. It’s important that you control the IP in this template. You do this by providing a licence to the client that allows them to use the report, without giving them ownership of the report template. This allows you to keep ownership of the template so you can use it to service other clients.
It’s important that your client agreement gets IP protection right. Even large organisations have failed to do this. For example, WIN — a regional television broadcaster — licensed content from Channel 9 to broadcast in rural areas. However, their licence did not protect them against Channel 9 streaming the content to the same viewers. WIN started losing viewers. However, WIN lost in court because the licence from Channel 9 had not been drafted as WIN intended.
Access to Social Media Accounts
A successful social media marketing startup will form ongoing relationships with clients. Your client agreement should reflect this cooperation, outlining that:
- the client must provide you with access to social media accounts including logins and passwords; and
- the client must comply with your reasonable requests in a timely manner.
With most clients, everything goes smoothly. However, if a client fails to cooperate, leaving you unable to provide services, you may need to terminate the relationship. To do this you would rely on the clause that says the client must cooperate. This is a last resort, but if the relationship is becoming impossible then the client agreement is pivotal in allowing you to terminate the relationship.
Client Guarantees and Disclaimers
The Australian Consumer Law (ACL) entitles your clients to consumer guarantees. These guarantees include that:
- you will provide social media marketing services with due care and skill; and
- the services are fit for the purpose you advertise.
The ACL also prohibits businesses from engaging conduct that is likely to mislead or deceive a consumer. For example, advertising a service is ‘free, no conditions attached’ when in reality, a client needs to buy another service first.
The most common way a dispute about misleading conduct can arise is if both you and the client have different expectations about what you’ll provide. To help prevent this, your client agreement should contain disclaimers such as:
- you don’t guarantee social media engagement will increase; and
- you are not at fault if the client’s actions affect their engagement.
For example, in 2012, TESCO, a UK supermarket chain, sold horse meat to unsuspecting customers. A well-drafted client agreement ensures your firm will not be held responsible for client-inflicted PR disaster.
Furthermore, before starting work for any client, you should also set out, in a written proposal, the scope of work to be performed.
Deciding the Right Business Structure
Your goals will determine what business structure is right for your social media marketing startup. If you have goals for strong growth and potentially searching for investment, then it’s better to run the business through a company.
Running the business through a company is also beneficial because it limits your personal liability. If something goes wrong, then the company is liable to remedy the defect or pay the debt. Your personal assets, such as a mortgage, will be protected. In contrast, if you run your social media marketing startup as a sole trader, you are personally liable if something goes wrong and your personal assets may be on the line.
On the other hand, running the firm as a sole trader imposes fewer startup costs. This may be an advantage if you’re running the business part-time on the side of your full-time job.
Getting key legals in place early on lets your social media marketing startup focus on growth. These key legals include trade mark protection, a well-drafted client agreement and choosing whether to run the business through a company or as a sole trader. Getting them right avoids suffering preventable problems down the line.
If you need further advice on starting your social media marketing firm the right way, call LegalVision’s startup lawyers on 1300 544 755 or fill out the form on this page.
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