Web Hosting Talk : Web Hosting Main Forums : Running a Web Hosting Business : TOS

[Micky]

I have been researching reselling and as I said in my previous posts, I have it narrowed down to two hosts. Before narrowing it down further, I decided to talk to an attorney about whether I should incorporate or not, and about the terms of service.

He made real sure I was reselling and not leasing a server. When I told him I was definitely reselling, he confirmed that I did not have control over the computer. I said no, I did not have root access (I think that is what he meant).

He said to use the same TOS that the hosting company uses since I can not deviate from that...which is fine. Then he said there was no real purpose in incorporate for the purpose of protecting my assets because I am a reseller. I have no control over the server, so if it crashes someone's site, or whatever, the hosting company is responsible, not me, because I have zero control over the situation. The example he gave...if a company has e-commerce, and they report to me their email is down, I in turn, see it is a server problem and contact the main hosting company about it, then notify the client it is being worked on. If the main hosting company never fixes it, I just have to make sure that I did as much as I could, via contacting the main host, to inform them of the problem. If a lawsuit arises due to the fact their email was down for 2 days and they lost X amount of dollars, then the main hosting company would be responsible. Then he said that the TOS should protect me from anything else.

Does this sound right? I thought I would ask here first before I seek out further legal advise. I know what is presented here will not be from attorneys, but I am curious.

[etLux]

Originally posted by Micky
I think that is what he meant

That's a really dangerous situation with an attorney... lol.

[Micky]

I know...lol...but I am sure that is what he meant. He kept asking me if I had access to the files.

It did get me to thinking though...to resell you have to be very careful. To me, it seems like the TOS should be rock solid to waive you of ANY responsibilty what-so-ever..if that's possible.

[etLux]

Micky, Internet law is a specialty, and few attorneys are even vaguely familiar with it.

Seriously, if the attorney you choose can't code in Perl and JavaScript... lol... you may wanna wonder if he knows enough about the technology to serve you well.

[Chicken]

Mickey, you should also note that although the fact that you are a reseller may sheild you from the *outcome* of a lawsuit, I'm not so sure it would be able to prevent you from being sued. Anyone can file a motion against you, though it may get thrown out. You just never know. Check out LLC as it seems to be a bit less formal than incorporating (yet offers the same protection).

[cbaker17]

I would suggest getting inc anyways if you are going to have your own business registered, as if you were to get big and for what ever reason something fell through and you went bankrupt, they only could take your business assets and not personal.

[etLux]

Some form of incorporation (standard type C, the now less-used type sub-S, or the newer limited liability corporation or LLC) is generally a good idea for most businesses, these days.

However, which structure to chose depends on the financial details of your operation, and also differs from one state to another. It's probably a good idea to have a quick talk with your accountant about this, as he or she will know the workings of your business well enough to properly advise you.

And yes, though incorporation will normally protect you from losing your socks and underwear if you do get sued, it doesn't actually protect you from being sued in any way. Anyone can sue you at any time -- whether or not they have a good reason.

Incorporation also does *not* protect you, personally, from what most states call "willful malfeasance" or "deliberate negligence" (I love that one... lol).

Especially in cases where "intent to deceive" can be clearly shown, the officers of a corporation are *personally* liable, to the full extent of the law.

[zenboy]

Originally posted by Micky
Then he said there was no real purpose in incorporate for the purpose of protecting my assets because I am a reseller. I have no control over the server, so if it crashes someone's site, or whatever, the hosting company is responsible, not me, because I have zero control over the situation.

Hi Micky,

I don't agree with this reasoning. I don't see that being a reseller gives you any special protection from liability. While the hosting company is theoretically ultimately responsible for keeping the server up and running, you could have a risk of personal liabilty if a customer sued you and could prove that you were negligent in providing your service to them or that you breached your contract with that customer.

In general, I like to use three layers of protection. The first is a form of business entity (a corporation or limited liability company) that protects you from personal liability for the debts of the business.

The second is a very detailed TOS with appropriate disclaimers and limitations of liability.

The third is adequate insurance coverage.

The idea is that you build three strong fences around your yourself to protect you--and, to some extent, the business itself--from liability. If a problem happens and someone is sues you and makes it through one "fence," the likelihood of him getting through the other two "fences" is considerably less.

Best regards,

[Tina J]

I think your attorney is confusing what you are doing. I believe he thinks you are merely sending the host business. Make sure he understands that the contract is between YOU AND YOUR CUSTOMER. That YOU are agreeing to provide your customer with services that you are purchasing from someone else.

Using your attorney's logic, I am responsible for the actions of my 1000s of resellers. Not true. We provide our resellers with services...we do not have a contract with their customers and are not obligated to provide their customers with anything.

--Tina

[joshuayip]

Well said Tina. Therefore the TOS should consist terms related to the customer's use of your service or web host (though you are resellering) , and under what condition should your services be used, and what constitute breach of web host service.

I think if your server provider does not allow hosting of adult content, you should have the same clause there too.

Joshua