One thing that concerns me most about starting a web hosting business are the chances of being sued.... or worse...!

say for example...... I am a reseller, One of my clients has sold 100+ accounts. One day I lose everything, Dont have any backups in place... my client(s) lose income.... can I be held responsible?


or worst... one of my clients is using their server space to host illegal content (illegal porn/music/movies/whatever!) what would happen to ME?

Is there a big risk? am I over reacting? Just wondering if other hosting companies have ever had to seek legal advice

The last thing I'd want is to have to travel the world trying to settle court cases

Many lawyers give first consultation for free, so I would suggest finding one to talk too. Although here you can get many opinions, talking to someone who knows the laws would probably put your mind at ease a bit more. Not sure where you are from, but in the states, every state has its own set of laws on top of federal laws. So it is important to learn about where you live.

To answer your original question, yes I think it is important to have a lawyer. Even though many people threaten to sue over some very petty things anymore, you can't plan everything, and sometimes things just happen you can't control.

One thing that concerns me most about starting a web hosting business are the chances of being sued.... or worse...!

say for example...... I am a reseller, One of my clients has sold 100+ accounts. One day I lose everything, Dont have any backups in place... my client(s) lose income.... can I be held responsible?


or worst... one of my clients is using their server space to host illegal content (illegal porn/music/movies/whatever!) what would happen to ME?

Is there a big risk? am I over reacting? Just wondering if other hosting companies have ever had to seek legal advice

The last thing I'd want is to have to travel the world trying to settle court cases

No, you're not over reacting. Any business will need a lawyer.

The answers to the questions you have asked depend on your local laws.

well I live in Australia, would probably rent dedicated servers in the US to target a world wide market

I know this is a question for a lawyer, but I dare say I'd have to abide by local laws to the where the dedicated servers are located (eg Dallas or Washington etc)

of course I haven't ruled out the possibility of renting an Australian dedicated server, to target just an Australian market(less competition but much harder as everyone just goes to the cheaper US hosting providers... but im going off topic now)

Do you have to have one on retainer at all times, no. It would be foolish though to go into business without the resources to hire and the initial consult of an attorney.

No, you're not over reacting. Any business will need a lawyer.

The answers to the questions you have asked depend on your local laws.
Spot on,
any business should have at least access to, a lawyer, an accountant and a bank manager.

The good news is you bothered to ask :cool: ,
the not so good, that you needed to.

In addition to the above, you should find the time, to develop a 'business plan',
otherwise your business venture will be like climbing Mt. Everest, naked, illequiped & starting from Neasdon. :blush:

Any business will require legal advice. It is recommended to have a lawyer.

If you're in the U.S., I recommend prepaidlegal.com. You'll get a large, reputable office at your disposal.

If you're in the U.S., I recommend prepaidlegal.com. You'll get a large, reputable office at your disposal.

well I live in Australia

Just thought I would point that out.

Is the only way to get information about local laws, through a lawyer? Or is it documented somewhere. Eg. I'm from UK (England), is there anything online?

it would be wise to have a lawyer.
But then you should first of all cover all your issues in you TOS + AUP etc.
Also you dont have to travel the world. As far as law goes (i am no pro) you can state all disputes have to be settled in xxx state/city's court in your TOC etc. I have seen a lot of agreement stating this (yes i read them :P ).

Is the only way to get information about local laws, through a lawyer? Or is it documented somewhere. Eg. I'm from UK (England), is there anything online?
Most likely they are available online, but understanding it is another thing. You may get the just of what it is saying, but a lawyer will be able to dumb it down so you can understand it, and help you protect yourself from the stuff you don't understand fully or at all.

Most providers have a clause in their TOS that waives all responsibility or liability for things like data loss etc. That should definitely be used lawyer or none.

What it comes down to is "covering your ***". Cover all your bases and make sure that your terms are stated clearly on the site, say them in more than one way, make sure that the average user can understand that you aren't responsible for things like that and services are at your own risk etc.

The problem is different laws apply in your country and the country you have your files. And the lawyer should be relative to hosting/internet matters for both countries. It is a bit complicated.

But, as long as you have a well thought and detailed TOS, then you cannot be liable (most of times I suppose).

One example comes to my mind:
- electric power at home, after many spikes, problems etc. some devices got fried / broken etc. I have heard that for those incidents there was some kind of compensation (so business were liable).

This depends of the size of the company. You don't want the legal advice to become your main expense and draw you in the red :)

This depends of the size of the company. You don't want the legal advice to become your main expense and draw you in the red :)


Which happens all too often when you try not to spend money on an attorney. Just like hosting, trying to save a buck usually turns out to be a very expensive mistake.

This depends of the size of the company. You don't want the legal advice to become your main expense and draw you in the red

These expenses would be reduced from the total taxes, so it would not be a problem.

Which happens all too often when you try not to spend money on an attorney. Just like hosting, trying to save a buck usually turns out to be a very expensive mistake.
OP take note this comment it 100%

I see your UK based.
We are very lucky in theUK, our banks are always hungry for new business's, go find a Bank Manager, the best tool you'll ever have.

Also the UK Gov. has literaly Tons of info. Online, CAB, Chamber of Commerce, Local Libary, Council Offices, Google and so many other places.

I would seriously recommend researching All those resorces for general business start up info first, then if you think hosting is the way to go, come back here for tarketed info.

Again 'good luck' & don't forget in the UK 'one' is a minor until 18, so if your younger than that, you will need an 'adult' to act for you in most instances.

A lawyer is helpful, but at the risk of running against the grain on this thread, not necessarily needed at the beginning. I'm all for attorneys, but if you're just beginning to run a web hosting business, putting the money into an attorney at the beginning could be a considerable burden.

That said, signing on with an established reselling program may be an idea during such an early stage, as the company you are reselling for may be able to make pre-written "TOS"es (Terms of Services) and the like available to you to help protect you.

-mike

That said, signing on with an established reselling program may be an idea during such an early stage, as the company you are reselling for may be able to make pre-written "TOS"es (Terms of Services) and the like available to you to help protect you.

-mike

What if you reside in a place other than where your hosting company resides? If you get sued, you'll have to settle your disputes in the court where your hosting company is located, or am I wrong?

Any serious business should have a lawyer. Spending a few hundred dollars a year to have a lawyer available is well worth it.

The problem with lawsuits is that it doesn't matter what the law actually says. If someone is mad at you and wants to sue you, they can do it whether they have a case or not. Lawsuits are very expensive to defend.

Besides talking to a lawyer to make sure you're on good legal ground, it's important to have Errors & Omissions insurance so that if you do get sued for data loss or some mistake that your company made, your insurance company will cover the costs up to several million dollars.

I know this is a question for a lawyer, but I dare say I'd have to abide by local laws to the where the dedicated servers are located (eg Dallas or Washington etc)

Yes you would, but that's different to retaining legal counsel. Your terms and conditions would stipulate what jurisdiction you are providing services under, and that's generally your own state. If a particular client wanted you to have representation elsewhere (e.g. their hometown) that would form part of their own contract with you.


Gary

One thing that concerns me most about starting a web hosting business are the chances of being sued.... or worse...!

say for example...... I am a reseller, One of my clients has sold 100+ accounts. One day I lose everything, Dont have any backups in place... my client(s) lose income.... can I be held responsible?


or worst... one of my clients is using their server space to host illegal content (illegal porn/music/movies/whatever!) what would happen to ME?

Is there a big risk? am I over reacting? Just wondering if other hosting companies have ever had to seek legal advice

The last thing I'd want is to have to travel the world trying to settle court cases

Whilst you are just starting there is no point in having a lawyer unless you have a million dollars and want to start you own datacenter up then yes that would be good to have one,

yes you would be responsible for backups and so you should be since you are hosting others sites and files then yes however since you are small there would be nothing stopping you from doing a runner and disappearing lol but you dont want that.

about your other question again whilst you are small it would be very easy to maintain your customers accounts and check over there accounts.

Doggins:

1. Having a lawyer on hand or at least access to one is never a minus. The question however, is it necessary? for a nickle-and-dime hosting business? (no offense)

2. To elaborate on what Mike - Limestone said, you need to make it clear to your potential customers what you will and will not be responsible for. This is typically done via the AUP/TOS. If you are buying services from someone else, it is generally acceptable for you to pass the AUP/TOS you are subjected to downstream to your clients. However, you should always write one that is tailored to your specific business.


All of this will be extremely helpful if you did end up in court over some dispute that escalated to the point of a lawsuit. However, this shouldn't happen if you have a process for resolving conflicts. Which generally means giving the client their money back and is usually the end of the story.


3. I agree with bqinternet on the following point: Most of are aware at least in the US that people can sue for anything. It doesn't matter if you did anything wrong or not. The problem for most is that it costs money to defend oneself. Therefore, some hosts especially those that:

3.1 Don't have access to capital (running on a shoestring)

3.2 Don't understand the laws or the limits of legal liability.

Are the hosts that get nervous to the point of freaking out at the very prospect of being sued.

A few words of wisdom:

4. The vast majority of "ligitimate" disputes can be resolved by returning a customers money. Just to be clear, this doesn't mean that you should put yourself in a situation where you return funds because someone mentions the word sue. Otherwise, you run the risk of being subjected to all kinds of scams, schemes and cons. In other words, if you give people an angle they will take advantage of it.

5. The vast majority of people who threaten to sue are full of hot air. Think hard and long about the following:

It's hard to imagine that a person paying $(insert some low number here.) Will take the time and bear the cost of suing anyone because at a minimum it will cost $(insert a three-digit number here + time + more money). Simple cost benefit analysis.

So instead, be prepared for any and all of the following:

5.1 Angry emails, chats and phone calls if applicable.
5.2 Bashing Threads on WHT
5.3 General web-based propaganda campaign against your business.

why? Because it's easier to engage in the aforementioned without actually having to spend any money to sue anyone.

Finally, any lawyer worth the shoes he's wearing, will not waste his time on such a matter.

You really need all these things!

Leeware, nice informative rational post.

Whilst you are just starting there is no point in having a lawyer unless you have a million dollars and want to start you own datacenter up then yes that would be good to have one,

I'm afraid if I had a 'spare' Million $ [or £], I'd not wast it investing in the hosting industry,
but thats just me, I could utilise a million in so many other / better ways. :cool:

Just make sure your wife works for a reputable law firm ;)
Luckily mine does but definately seek legal advice when you feel it is necessary (TOS, AUP, TERMS, etc.) and absolutely to form your business structure.

a lawyer when doing business is always good.

Spot on,
any business should have at least access to, a lawyer, an accountant and a bank manager.
I agree with this, for the most part. If you're doing this as a serious business venture, then have a lawyer, an accountant, and a bank manager you can talk to. You don't have to utilize their services right off the bat, or often, or possibly even at all - but be on speaking terms with them, and be prepared to use them if the situation arises that you need to.

If you're just renting one server and hosting a handful of people to make a few extra bucks, it's probably not worth it.

All business should have liability insurance which covers the costs of such losses in the event that its your fault..

In most countries its mandatory.

One thing that concerns me most about starting a web hosting business are the chances of being sued.... or worse...!

say for example...... I am a reseller, One of my clients has sold 100+ accounts. One day I lose everything, Dont have any backups in place... my client(s) lose income.... can I be held responsible?


or worst... one of my clients is using their server space to host illegal content (illegal porn/music/movies/whatever!) what would happen to ME?

Is there a big risk? am I over reacting? Just wondering if other hosting companies have ever had to seek legal advice

The last thing I'd want is to have to travel the world trying to settle court cases

Yes, as with any business being it online or not having a lawyer is always beneficial. You may also want to create TOS and include there that you are will not be responsible for lost data, aka. The downside with having a lawyer as a reseller is lack of funds, lawyers do charge alot these days :).