How many of you who have ded. servers and those who reseller web hosting actually have a dba or another form of legal document? Is it really necessary?

Ignoring the question of whether your local laws require a dba or other business licensing, if you want to get a business checking account under the name of your hosting company, the bank will most likely require you to have the appropriate documentation for, at the minimum, a dba / assumed name.

Please remember that the dba / sole proprietorship form of business ownership affords NO liabilty protection in the unfortunate (and usually inevitable) event that you are sued.

There have been numerous previous discussions in the forum, where various opinions were advanced as to what the best form of business ownership was. Popular suggestions were the S-Corporation, the C-Corporation, and the Limited Liability Company (LLC). Most threads concluded that because of the varying local and tax laws, it is best to seek advice from both a competent tax accountant first and second from a "smart lawyer" (is that an oxymoron?). ;)


Best of luck,

Keith

But in terms of a webhosting co., who's has actually been sued?
Most Hosting co., have on their tos that they are not liable for what their clients post on there site. And also most starting co. having a reseller account rely on their personal bank accounts.

Assumining all this, is it advisable to get at least a dba or should one wait a few months to see how the business will grow?

Originally posted by jmc67
Assumining all this, is it advisable to get at least a dba or should one wait a few months to see how the business will grow? You don't get it...

The dba affords NO lawsuit protection for you. It's only purpose is to comply with local and state laws requiring you to file a dba ("doing business as") so that consumers and legal authorities can hunt you down if you start taking advantage of people. Most entrepreneurs don't even know about the requirement until they go into their local bank to open a business checking account.

So the downside to not getting a dba is: (1) you will possibly be in violation of your local/state laws requiring it and may be subject to a possibly high fine; (2) as discussed, no bank that I know of will open a business account for you; and (3) usually you are prevented from filing lawsuits in your business name against your customers or others (you can usually defend yourself if you've been sued but, for example, you can't go after someone if they have bounced a check they gave to you <--- and yes this HAS happened to me).

So, no, you don't have to file a dba if you are doing business as "ABCDHosting.com".

<sarcasm>Likewise, you don't have to file an income tax return on April 15th, you don't have to wear protection when having sex with strangers; and you don't have to look both ways while crossing the street.</sarcasm>

But there may be consequences.

I'm sorry if I got a bit sarcastic above. You can't understand how upset you can get about the subject of lawsuits until you have been involved in one. Unfortunately, the truth of the matter is that there really are greedy people who sue for ridiculous reasons. You may win the lawsuit but the legal expenses can be outrageous.

Originally posted by jmc67
But in terms of a webhosting co., who's has actually been sued?On this forum, I know miami_g has been sued. My webhosting company is still in diapers, so I have not been sued there yet.

But I have been sued three previous times in my various business interests and, while I have prevailed in every suit against my businesses, I cannot say that I won. Each lawsuit has cost me a substantial toll in legal fees, wasted time, lost energy, and stress.

Originally posted by jmc67
Most Hosting co., have on their tos that they are not liable for what their clients post on there site.But this is just one reason you could get sued. Say you host an ecommerce site and your server starts acting up just before Christmas. Emails to this ecommerce site are being bounced back by your server to potential customers and you experience embarrasing downtime. This company might sue you to recoup the potential millions of dollars of revenue that they assert they lost because of your negligence. Worse yet, you have a promise of 99.9% uptime stated on your homepage and yet, you don't properly define what that means in the TOS and what the specific refund will be to the hosting customer.

Here's what you need IMHO:

(1) A strong, carefully worded Terms of Service Agreement which basically covers everything that could happen and limits your liability. The last part is the most important. If you want to guarantee uptime, fine, but then define what happens if you don't meet that guarantee. Is the customer entitled to a refund of one month's hosting fees or are you liable for all lost revenue that they might have made during that downtime? Better you agree up front than have a judge choose later.

(2) Have the TOS signed. This is cumbersome in today's electronic world, but being able to produce an agreement signed by your customer that shows that they agreed to limit damages to $30 when they started the service may stop a future lawsuit dead in its tracks, saving you $10,000 in legal fees.

(3) Try to comply with your local laws and with the tax laws. It's not fun or easy, but if you do get caught, the penalties can be outrageous. As an accountant, I saw many small businesses go under because they got behind in complying with just payroll taxes.

(4) When you start making money, or have other assets to protect, then get serious about forming a corporation or limited liability company (LLC).

(5) If you have some serious assets, then look into dividing them up into family limited partnerships, trusts, etc. Lawyers rapidly loose interest when they find out that there will be no gold at the end of the rainbow.

(6) Try to be overly fair with your customers. If your customer has a legitimate complaint, then ask them what will make them happy. 80% of people will ask for nothing or very little. These are the people you really want to keep, so give them what they want and a little more. If they ask for one week free hosting, then make it two weeks free. The other 20% will ask for the moon... get rid of them politely. Tell them that you are sad to hear that they are so unhappy and then suggest that they might be happier hosting with someone else. Then offer to give them the next month for free while they move to another hosting service. People who ask for the moon are the ones who end up calling lawyers when things do go really bad (like when you get hacked).


Best of Luck and Sorry to All for the Long Post,

Keith

Sorry for being 'ignorant' but what exactly is the meaning of "dba"? What does it stand for?

Thanks!

The Fish

Originally posted by TheFish
Sorry for being 'ignorant' but what exactly is the meaning of "dba"? What does it stand for?

Doing Business As...

- MystiX -

Thanks!