If this happens to you, you should consult an attorney before making any payment to see if there are any defenses available to you.
Generally, the main thing that courts consider when determining whether a TOU is valid and enforceable is evidence that the user actually “assented” to abide by the terms of the agreement. That is, you must show that the user read and understood the terms and voluntarily agreed to abide by them. Additionally, “conspicuous” or obvious notice of the agreement’s existence prior to the user accessing your product or service is very important.
Here are a few guidelines to ensure that your agreement is enforceable if ever called in to question in court.
- Match your agreement to your business. The value of each sale or service should be considered in light of how big of an effect a breach of the agreement would have on your business. For example, a simple “I agree” may be sufficient assent by a consumer, but if you are dealing with another business, it might be worthwhile to require more evidence of “assent,” such as an initial on each page or requiring the user to write out the full name of the business after reviewing the document.
- Keep track of updates to your TOU. If you update your TOU, make sure you note the date of the change and what changes were made, so that you know what version was in place at any given time. If you are changing key terms, keep in mind that a large prior customer base may not be subject to them, so you should advise them of the update and, of course, require a new consent.
- Consider re-confirmation of assent at various times. It may be wise to consider sending out the TOU to major customers at regular intervals and requiring them to acknowledge ongoing consent of the terms. While this seems burdensome, it can protect your business in the long run.
- Traditional contracts concepts still apply. Even if your TOU follows all of the foregoing guidelines, if it violates traditional rules of contract it may still be unenforceable. Again, the importance of having your attorney draft the TOU is key.
- Users should be given the opportunity to reject the agreement. This seems obvious, but if the users’ only option is to select “I agree,” this will weigh against your argument that the user voluntarily consented to the terms.
- Consider how your Agreement is affected by other third parties contracts that you have — for example, credit card processors may not recognize the validity of TOUs or the agreement may otherwise conflict with yours.
This post does not constitute legal advice and is intended to act only as a guideline on the foregoing topic. You should always consult an attorney regarding any legal issue that might affect your rights, and you should research your attorney’s background and credentials before hiring them.
© Junilla Sledziewski, 2014
Deciding on a legal structure for your business is a critical first step. Here are the most common structures and some details about each to help you decide.
1. Sole Proprietorship:
A sole proprietorship is, essentially, a one-person operation without any formal structure. You may have a sole proprietorship without even knowing it. For example, if you are a musician that plays gigs on the weekends or a nature photographer that sells your photos at local festivals you are likely considered a sole proprietor. However, you are not exempt from carrying the necessary local business licenses or paying taxes on your income. You are also personally responsible for paying any debts of the business. For example, if you were to lose a lawsuit or fail to pay a vendor, that person could come after your home, your car, and your valuables. Finally, if you operate under a name like “Bob’s Band” you must register the name of your business with the state.
2. Limited Liability Company (“LLC”):
A LLC offers protection for your personal assets because it shields you from personal liability for business debts. However, there are certain formalities that you must comply with, so speak with an attorney about how to make sure you are protected. Also, not all liability can be avoided with a LLC – for example, if you personally injury someone or personally guarantee a bank loan, you are still personally liable. Your taxes are reported just like they are for a sole proprietorship (but you can make different elections). Running a LLC is easy and does not have many of the formalities that operating a corporation requires. LLCs are a great option for small, family operated businesses or partners.
Some people just cannot resist putting their hands in the proverbial company cookie jar. Read on for tips for what to do if you have concerns that your business parter is stealing money or goods from your business, or using them for his or her personal use.
First, you must act quickly and carefully to protect your interest and to keep yourself out of hot water. The first thing you should do is locate a copy of your operating agreement, partnership agreement, or bylaws. If you never got around to reducing your agreement to writing, perhaps now you are realizing why that step is so important. Even if you do not have a formal agreement, gather any emails, letters, napkin writings, whatever, that will be helpful to prove the agreement with your partner. If you do not have any formal agreement, Florida’s “default” LLC rules will apply to you.
Next, read the agreement (and consult an attorney) to see what it says about obtaining books and records of the organization. Many business agreements contain detailed information about when and how the partners or members are allowed to review the books and records. You still need to comply with “the rules” of your agreement during the time you are investigating your partner, but that doesn’t mean you can’t use all options available to you to obtain the information that you need. For example, review (and print or save) the bank accounts of the company directly (if you have that access — as a partner or managing member, you should), talk to loan officers that work with your company, or even speak with vendors or employees of the company if you think it may be done appropriately. Also consider whether company records on the cloud or at remote locations might be easily corrupted or deleted without your knowledge.
Every Friday, I ask my Twitter followers to submit a legal question to be answered anonymously the following week. Here is last week’s question:
I just filed a single-member LLC for my flower business. Do I really need an operating agreement if it is just me running the business?
The answer: Yes, you should have one. It sounds crazy, since you have no one to agree – or disagree- with but yourself. However, an operating agreement is an important document that confirms the limited liability status of your business. It clarifies the status of your business as separate from you personally — do not be fooled into thinking that simply filing an LLC and going about your day is enough.
Why should you care and why spend the money for this simple document? Well, if you do not maintain your “corporate personhood” as separate from you personally, you might expose your personal assets to collection from your business creditors. A sharp lawyer on the other side will try to convince a court that you are running the business personally and should be made to pay the debts of your business from your personal assets. This is called “piercing the veil.”
A court will look at many factors to determine whether you were actually operating a legitimate business, and things like maintaining separate bank accounts, using your corporate name in all transactions, and having an operating agreement will be crucial for maintaining your limited liability status. These things may seem like silly “legal” distinctions, but under state and federal law those minor factors can carry big weight. You have an LLC — now use it for the purpose it was created — limiting your liability.
An operating agreement for a single member LLC must contain certain provisions that are more important for its purposes than a multi-member LLC. Consult with an attorney to make sure you have all of your bases covered.
—- by guest author Melody Cobbe @CobbeLaw
The business communities, including small businesses, are always looking for methods to become more efficient and as result, increase their profitability margins. “Outsourcing” is a creative option available to small business owners. Whether the goal is to remain self-sufficient or position your business for an eventual merger or acquisition, businesses must become smarter about where to cut costs. By “outsourcing” essential needs of your business, such as legal assistance, accounting, secretarial work, and marketing, a business owner is given the flexibility of having a job function fulfilled without the long-term cost of having an employee fill that position.
1. Disclaimer/Limitation of Liability
You will want your agreement to limit your liability for the user’s use of your online product or service. Of course, you cannot simply put a provision in your TOU that limits all liability, but there are certain categories of damages that you may be able to limit by contract. Consult an attorney for more detailed information.
You make certain promises about your product or service to your customers. That is good and sensible business practice. There are also certain warranties provided for by law. However, there are certain limitations you may want to place on those warranties through your TOU and you should do so to the extent permitted by law. These must be clear and conspicuous to your customers, so consult an attorney to draft them for you.
Each Friday, I ask my Twitter followers to send me their legal question via private message or email. I choose one question to respond to anonymously each week. Below is last week’s chosen question:
“I am starting a business with three friends to develop a video game. We are confused about the difference between a limited liability company and a partnership. Can you help us out?”
There are a number of important distinctions between a partnership and a limited liability company (“LLC”). You should discuss the details of your business’s goals with an attorney, but the following will give you an idea of the main advantages and disadvantages of each type of business.
The defining characteristic that distinguishes a partnership from an LLC is the LLC members’ limited liability. A partnership is a business operating under its owners’ names (although a trade name might be used). The partners are personally responsible for the debts of the business. That means they could lose their personal assets, such as a home, car or certain investments to satisfy the partnership’s debts. Also, if the partnership owns assets, such as a building or vehicles, the individual partners also personally own those assets in proportion to each partner’s contribution to the business, or as arranged in a partnership agreement. If no agreement exist, the statutes dealing with partnerships will apply standard rules.
An LLC, however, is an independent legal entity and owns property, enters contracts, and loans or borrows money separately from the individual members. The members will generally not be liable for the LLC’s debts or obligations. It acts as a “corporate person” and all traditional duties of a business are carried out in the name of the LLC only. Members must be careful not to “commingle” their personal assets with that of the LLC, or a court might determine that the LLC is merely a “shell” for the members’ personal use and find the members liable for obligations of the business.
Forming the business
Partnerships are formed as soon as two or more individuals begin doing business. No formal filing is necessary to “start” the business. However, it is always advisable that a partnership agreement is in place to outline the contributions, distributions, and responsibilities as they relate to each partner. Further, a business license or fictitious name registration may be appropriate.
An LLC can be owned by one or more people, known as “members.” An LLC is generally created by registering with the state of formation, as well as any states where it is conducting business. Paying a fee is required, although this fee is generally quite low. An LLC should always have an operating agreement, even if it has only one member, to lend legitimacy to its corporate status. Read more about this HERE
An operating agreement governs the financial and functional operations of your business. It is a contract that is binding on the members of the LLC and ensures uniform and consistent handling of business matters.
Here are four reasons why your LLC needs an operating agreement:
1. Liability: An operating agreement helps give the members of an LLC protection from personal liability and confirms the LLC’s status as a true business entity. Having a clear operating agreement ensures that the LLC is not confused with a sole proprietorship or partnership. Simply filing your LLC with the state does not prevent you from being held personally liable for the debts of your business. Courts will look to many factors to determine whether your LLC is merely a shell for your personal use, such as whether company and personal funds are kept separate, whether the business was adequately capitalized, and whether an operating agreement is in place.
2. Misunderstandings among members: Perhaps your and your best friend are starting a flower business together. Or maybe you and your brother are finally opening up that restaurant you always talked about. You can never imagine arguing with this person over the operation of the business. Wake up and smell the reality: misunderstandings, disputes, and even expensive lawsuits result when people do not take the simple step to develop an operating agreement. You need to memorialize things like how much money each person is contributing to the business, how you will get paid when the business begins to take off, who will manage the day-to-day operations, and so on. There are many things to consider, but speaking with a qualified attorney can narrow the issues that are important to your type of business and make the agreement as basic as you like, or as detailed as necessary.
The Limited Liability Company (“LLC”) has gained popularity in recent years. Often thought of as a merger between the corporation and traditional partnership, creating an LLC is an important step towards legitimizing and protecting your business. Here are five things to consider before you get started.
- Your Goals: An LLC is one of the most flexible business entities you can create due to drawing the best qualities from partnerships and corporations. For example, LLCs provide the limited liability protection of a corporation and tax benefits of a partnership. However, members can elect for the LLC to be treated as a corporation for tax purposes, and a single-member LLC will result in the owner being taxed as a sole-proprietor. Members are free to decide how management will be structured, how contributions and distributions will be allocated, who has managerial control, and whether or when capital calls will be necessary. An LLC is limited in some respects. For example, if you ever plan to take your company public you will have to convert to a corporation, which may result in tax consequences. Also, LLCs may not be attractive to companies that need to raise significant funding from investors or venture funds, as tax consequences to those outside investors may be problematic.
- Choosing a State for Organization: LLCs are recognized in all 50 states. While states like Delaware, Nevada, and Wyoming are generally considered to be favorable states for registering an LLC, if you do business in any other state you will need to re-register as a foreign company in that state. In the interest of keeping costs low, you should generally register your LLC in the state that you intend to conduct most of your business. Florida’s LLC fees are relatively low and registration is easy. Continue Reading