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Legal Issues for an Online Business

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Running an online business can be a cheap and easy way to launch your entrepreneurial career. However, ensuring you get on top of several basic legal requirements from the outset is important. A lack of legal diligence when launching your business may lead to substantial costs. This article outlines some legal steps for setting up an online business.

Draft a Website Development Agreement

Most business owners lack the technical skills to build a functional business website. Unless you bring on board a technical co-founder or have a developer who works in your organisation, you will have to work with an external development agency or freelance developer. It is recommended that you enter a written contract with them, setting out the terms and conditions under which they will develop your website and associated code. This document is called a website development agreement.

The main issue to look out for is that agreement will assign the intellectual property the developer creates to your business. Ideally, they will assign this intellectual property to you immediately upon creation. However, the commercial arrangement may be that the intellectual property is assigned to you upon payment. Occasionally, developers will try to retain control over intellectual property rights. This means that they retain much of the value of your business and of what is being developed. If they effectively control your website, you may lose the ability to make changes, affecting future investment prospects.

Additionally, ensure the developer provides a warranty that they are not breaching a third party’s intellectual property rights. They should confirm they have all necessary permissions to sublicense or incorporate any intellectual property into the website. Further to this point, you will want to include that the developer indemnifies you against any claims from a third-party regarding use of their intellectual property. This protects your business from third-party claims over which you have no control.

Register Your URL Immediately

Register the URL you choose for your website as soon as possible. URLs get snapped up quickly, and running an online business without a URL is impossible. When selecting your URL, you should check that you are not infringing on trademarks or copyrights. This means checking that the name is not being used by another entity.

If launching a business from scratch, check whether the URL is available before settling on the business name. The two searches you should make when deciding on our business name and URL are a business name search with ASIC and a trademark search with IP Australia.

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Website Terms and Conditions

Every website should provide its customers or visitors with terms and conditions. The website’s terms and conditions govern the terms under which visitors may use the website. It will cover things like:

  • your business details and your ownership of the site;
  • ownership of intellectual property and content on the website; and
  • limitations on liability.

You can also provide a cancellation policy and a refund policy if you are selling goods or services on the site. Having such a document in place ensures that customers know how to use your website. It also specifies the responsibility you take for any problems that might arise with the site. Having a good set of website terms and conditions is a way to reduce the risk of a visitor or customer initiating legal action against you.

Privacy Policy

Having an up-to-date website privacy policy is also crucial. This document allows you to disclose what information you may collect from your visitors and how you will use that information. The Privacy Act outlines the Australian Privacy Principles, which set out:

  • how you must manage personal information;
  • what visitors are entitled to concerning their information; and
  • the purposes for which you may use information.

These principles may or may not apply to your business, depending on its size and the kind of information you collect. Having a lawyer discuss your obligations and draft your privacy policy to ensure you comply with the law is best practice.

Key Takeaways

Starting an online business can be a great way to generate revenue and start your entrepreneurial career. First, however, you must protect your legal interests by drafting the necessary agreements accurately and avoid infringing on other parties intellectual property rights.

If you need help ensuring your online business is legally compliant, our experienced e-commerce lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What should I do about online reviews of my business? 

Reviews can be an excellent promotion for your business or something that drags you down. The Australian Consumer Law (ACL) has established some guidelines for managing online reviews. You need to be careful not to allow false or misleading reviews on your website, and the law clarifies that it is your responsibility. 

What should I do about having a contract with an overseas developer? 

Offshore developers are often a cheaper alternative to engaging a local developer. However, it will be essential to perform due diligence on the developer, who they are, whether they are reputable and what kind of work they do. In addition, you will need to make sure any agreement you enter with a developer outlines the governing law (ideally Australian) and what will happen in the event of a dispute. 

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