I want to advertise a product on the Internet. Are there any rules that I must follow for this kind of advertising?

Wed, 31 Dec 2008 01:56:14 GMT

With Internet sales and advertising continuing to rise as a predominant force in today’s marketplace, it is essential that you market your product or services on the Internet in order to be successful. However, as with any type of advertising, there are a number of rules that you must follow in order to comply with the law as enforced by the Federal Trade Commission (FTC).

The basic rule for Internet advertising is that you must tell the truth, and avoid misleading the customer in your advertisement. Plus, if you make any claims about your product, such as a claim that it was voted the most effective new product by a certain magazine last year, then you must have the evidence to back up your claim.

More specifically, both the producers of a product and any advertising agencies or third parties that place information about the product on the Internet can be liable if the advertising is false or misleading to the customer. So, if you are creating a website for a particular product, make sure that you have information to prove any claims that you’re making about the product, and that you are not misleading the customer in any way. If you are going to make a disclaimer or disclosure to your customer about a product, you must do so very clearly, so that the customer has a clear understanding of what your product, for example, can do and not do. Likewise, if you include a demonstration of the product, then you must provide a demonstration that would occur under normal circumstances. Plus, if you state that you will provide refunds for dissatisfied customers, then you have to provide the refunds as promised.

While you are currently not required to do so, it is also good practice to clearly advise your customer as to how you collect personal information from users of your website, and how that information is used. The FTC provides voluntary guidelines that can help you combat the public’s increasing concerns about privacy issues on the Internet.

Furthermore, if you are marketing a product toward children, you must comply with the Children’s Online Privacy Protection Act (COPPA). This law requires that if you are directing your website to children under thirteen (13) years of age, or to a general audience that you know results in the collection of information from a child under this age, then you must obtain parental permission before collecting that information from the child.

Additionally, the FTC enforces a number of other laws related to advertising a product on the Internet. For instance, it is deceptive to represent that your product provides some general benefit to the environment. If you advertise a product as “buy one, get one free”, then you must provide the second product free, and the first product at its regular price. There are also special advertising rules that apply to the sale of jewelry, continued automatic shipments of merchandise, shipping timeframes, and wool or textile products. If you are interested in learning more about these specialized rules, you can visit the FTC website at www.ftc.gov.

Choosing your Business Entity Structure

Fri, 06 Jun 2008 00:09:36 GMT

Businesses can operate in a variety of structures, such as a sole proprietorship, partnership, limited partnership, corporation, or limited liability company. Each of these forms of incorporation provides certain benefits and also certain limitations. The legal structure of a business determines how it is managed, how it is taxed, and what regulations it must follow.

So how do you know what form of entity is the right one for your business? Things to take into consideration include:

Company Size– Do you plan on keeping your business small or do you plan on expanding by adding employees and locations? How many existing employees do you currently have and how many owners will there be, does every owner own an equal share? Some corporate structures require additional formalities. For instance the corporate form requires a board of directors, annual meetings, shareholder approval, etc. Smaller companies may consider more flexible forms of business, such as an LLC or even a sole proprietorship.

Business Purpose– Will your business make and sell a product or will you provide a service? Some states only allow personal services providers to register as LLCs or LLPs.

Liability –Some forms of doing business offer the protection of limited liability, which eans the owners are not personally responsible for the debts of the business. Business structures offering limited liability protection include corporations, limited liability companies (LLCs) and limited liability partnerships (LLPs). Sole proprietorships and partnerships do not have limited liability.

Taxes – Profits and losses for businesses are treated differently for each type of business entity. Profits from sole proprietorships and partnerships pass through to the owners and are treated as personal income. This means the profits are taxed one time. Profits from corporations and limited liability companies do not necessarily go directly to the owners, but are taxed when the company distributes dividends to the owners. There are some exceptions and alternatives depending on the entity structure.

The main types of business entities are:

1) A Sole Proprietorship is a business which is completely owned by one person and which the business does not have a separate legal identity. The owner personally owns all of the assets and profits and may not be required to register with the state.

2) A Partnership is a business that has two or more owners who agree to share the profits and has not formally registered as a corporation, LLC or other entity type. The general rule in a partnership is that each partner owns an equal share of the business unless there is a written partnership agreement giving one of the partners a majority interest. In most states formal steps may not be required to create a partnership, but complying with certain formalities is usually recommended.

3) A Limited Liability Partnership (LLP) is a business that is organized and run just like a partnership but limits the liability of each partner. Some states only allow licensed professionals to form an LLP, like architects, accountants or lawyers while other states allow anyone to form an LLP. Most states require LLPs to register and pay a registration fee, and include “limited liability partnership” or “LLP” in the business name.

4) A Corporation is a business that has a separate identity from its shareholders, and may be organized for any business purpose. The general requirements are that there must be at least one shareholder and the corporation must have a director(s), president, secretary and treasurer, though in some states the same person may hold all of those positions. Unlike a partnership or sole proprietorship, a corporation continues to exist even when its ownership changes hands.

5) A Limited Liability Company (LLC) is a hybrid of a corporation and a partnership. Unlike a corporation the owners of an LLC are called members, and LLCs. LLCs offer limited liability, while requiring fewer formalities than a corporation. Other features which may be provided for include continuity of life if a member dies or sells their interest, centralization of management, and free transferability of an owner’s shares.

To determine what the best structure for your business is you should consult a business law attorney today.

How To Name Your Business

Tue, 17 Nov 2009 22:38:40 GMT

Coming up with a business name may be harder than you think. First, think of ideas for your name that are descriptive of the business, standout and grabs customers’ attention, and are easily remembered. You should come up with several ideas because most business names are registered trade or service marks, granting the business the exclusive use of that name in a certain geographic area or for a certain type of business. Your local or state government may also have laws dictating how certain types of businesses must be named.

Step 1 – Is it Legal?
The first and easiest step is to make sure you are allowed to call yourself what you want to call yourself. If a license or other credential is required to engage in the occupation do you have that license? A quick way to get into legal trouble is to mislead customers into thinking that you have a credential that you do not actually have.

Step 2 – What Type of Company?
Next, what will your business structure be; will you be a sole proprietorship, a partnership a corporation? How you decide to organize your business may affect what you can call yourself. In some states a sole proprietorship is required to do business under the owner’s name. Most states allow an exception if a “doing business as” or “fictitious business name” registration is filed. A fictitious name is any assumed name or designation other than the legal name of the business, so if you want to call your business something other than your real name you should file for a fictitious name.

Partnerships usually must include the partners’ names in the business name, corporations usually are required to include “Inc.” and limited liability companies must include LLC or Limited Liability Company in the business name. The legal reason for this requirement is to inform your customers as to whom they are doing business with. If a business that has limited liability does not advertise that fact to their customers the owners may lose their limited liability protection and be held personally liable if they are sued.

Step 3 – Register your Mark
A business does not have to register its name to operate under the name but a registered name does provide more legal protections in case you do have to sue a similarly named business. In your state either your state Secretary of State or Lieutenant Governor is responsible for registering business names. The United States Patent and Trademark Office (USPTO) is responsible for the registration of all trade and service marks and provides a free search of currently registered marks.

Step 4 – Get on the Web
Once you decide on your legal and business name you need to get a website, called a domain name. Even if you do not plan on doing business on the internet a web page is now an essential business tool. When you look up a business on the internet and cannot find their web page do you inherently think twice about doing business with them?

Business owners of course would like to register the same web page name as their business name, but that is not always possible. While every page on the internet must be uniquely named not every business in the world has a unique name. You may need to get creative by adding additional characters or words to your business name to create a suitable internet home.

Internet domains are sold by Domain Name Registrars, such as Go Daddy, Network Solutions and Register.com. Different domain categories such as .com, .edu, .net, .org etc… may be sold by different registrars. You can also search for available web site names at each of the Registrars’ web sites.

Hopefully this How-To has helped explain the legal steps to create a business name. Remember, create a name that is available, legal and fits your business structure.

I want to start my own business. What sort of small business loans are available to me, and how do I apply for them?

Thu, 12 Mar 2009 01:39:35 GMT

Starting a new business is never easy, and, unless you’re independently wealthy, you’ll need some money to get started. If you aren’t lucky enough to be able to borrow money from family members or friends to start your new business, you’ll need to borrow money from a bank or other lender.

You can finance a business solely using your personal credit, at least to some degree. Credit cards, personal loans, and home equity lines of credit are all ways that you might get money to start a new business. However, depending on your credit history, personal income, and assets, your ability to obtain personal credit may be limited. Plus, if your business would happen to fail, you might be risking the loss of substantial personal assets, such as your home, if you use those assets to secure a loan.

The other option for financing a business start-up is to seek commercial credit, or business loans, which differs greatly from personal credit. Short-term business loans, which typically must be paid back within a year, are a common source of initial funds as you begin to get your business established, or when you need relatively quick cash flow. You can also apply for intermediate-term loans, which usually extend from one to three years, and long-term loans, which are reserved for major capital expenditures and improvements. A long-term loan, unlike the shorter-term loans, generally is repaid through monthly or quarterly installment payments. Finally, you might also apply for a line of credit, which gives you the freedom to borrow money only when you need it, up to a certain credit limit, without having to reapply for a loan.

When you apply for commercial credit, you’ll have to provide the bank or lender with more documentation than you would if you were simply applying for personal credit. In particular, you need to have spent some time developing a very specific business plan, which will show the reason that you need the loan, how much you will need, how long you will need to pay it back, and how you will repay it. In your business plan, you must describe your business, how you envision it operating, and your qualifications to start such a business. You also should have formulated a detailed budget and any supporting documentation of assets and capital that you already have devoted to your business, as well as a personal financial statement. Typically, the bank or lender will require that you personally guarantee the loan, and may even require that you obtain a co-signer or a government guarantee, such as is available through the U.S. Small Business Administration.

Once you have applied for commercial credit, the bank and/or lender has 30 days in which to make a decision on your application. However, it is often more difficult to obtain commercial credit than you might think. Since many small businesses ultimately fail, banks and/or lenders may be cautious about extending commercial credit. If you are denied commercial credit, however, don’t be discouraged. The bank or lender must give you the specific reasons that you were denied credit, so that you can perhaps reevaluate your business plan and later reapply for credit.

What Happens When a Contract is Broken?

Tue, 21 Oct 2008 18:11:25 GMT

A contract is a legally enforceable agreement between two or more parties. So, how do you enforce it if it is broken by one of the parties?

That depends on how exactly the party breaches the contract. A minor, or nonmaterial, breach of contract entitles the non-breaching party to actual damages suffered. Therefore, if your mechanic used a different brand of oil that was of at least the same quality as that named in your contract, then you likely would not have a material breach of contract. You did not suffer any damages and may have, in fact, received a better product.

If, however, a party significantly or materially breaches a contract then the other party is entitled to either force the breaching party to perform his or her responsibilities pursuant to the contract or to pay damages for the breach. In the example of an auto mechanic adding oil to your car, if the mechanic failed to put any oil into the engine after cleaning it and your car broke down as a result of that mistake then you have suffered damages from the mechanic’s material breach of your contract and you are likely entitled to damages.

Here are some things to think about when deciding whether a party’s breach was material:

The extent to which the breach has caused the nonbreaching party a denial of benefits under the contract which he or she reasonably relied upon;
Whether the injured party can be compensated for the breach;
The likelihood that the breaching party will correct his or her failure. (When considering this likelihood it is important to consider all past performances by the party as well as any reasonable assurances the party has provided);
How the breaching party’s behavior comports with fair business and good faith;
Whether the breach was under the breaching party's control or whether the breach was due to outside influences.

If a party materially breaches a contract then non-breaching party can consider the contract to be terminated.

Ultimately, a material breach of contract is one that goes to the very core of the contract. If you hire a videographer, for example, to take a video of your wedding and that videographer forgets his video camera and instead shows up with a point and shoot camera then the videographer has materially breached the contract. You hired him to make a video of your wedding, an event that cannot be recreated, and he did not do that. Since the videographer materially breached the contract you can consider the contract void and refuse to pay him.

However, it is important to remember that a material breach is a legal term and if you have any doubts about whether a breach was in fact material then you should contact your attorney. Otherwise, if the breach is not in fact a material breach then any failure to perform your own obligations pursuant to the contract could make you liable for damages!

For more information on broken contracts, contact a business law attorney today.