Does my startup need to be incorporated for the terms of service to hold up?

QUESTION:

If I am launching a social networking site, do I need to incorporate it in order for the terms of service, terms & conditions, privacy policy and all that stuff to hold up?

ANSWER:

Antone Johnson

Antone Johnson

by Antone Johnson at Bottom Line Law Group

No, but it’s highly advisable to form a limited liability business entity (either a corporation or an LLC) to operate this kind of business, to protect your personal assets against any claims that could be brought against the site as a result of user conduct (or misconduct) or content posted on the site. Although two provisions of federal law (Section 512 of the Digital Millennium Copyright Act and Section 230 of the Communications Decency Act) provide strong protection for site operators, they are not bulletproof, and the cost of defending even a meritless lawsuit can be significant.

Theoretically, you could operate this type of business as a sole proprietorship, filing a fictitious business name statement (also known as a DBA): “John Doe doing business as MyCoolSite.com.” Then you could use the name MyCoolSite.com in your TOS, Privacy Policy, when entering into contracts, etc. I’d advise against this for the reasons noted above, though. Also, regardless of the form of business entity, it’s important to file a form with the U.S. Copyright Office designating a Copyright Agent to receive DMCA takedown notices.

Tip: Consider using a filing service such as Legal Zoom where they file all the documents with the state, get your record book, and more.

Comments & Advice:
  1. mibi says:

    Good info. I always considered forming an LLC to be a given for any site or project that has any legs. It's pretty cheap to do so.

  2. Everyone in tech business should protect their intellectual property with incorporating their assets

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