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  1. #1

    WebHost liability

    Hi Everyone.

    For about 9 years now I have run a very small reseller business with about 7 clients. It started as a way to give some music artists that I knew an inexpensive service through someone they knew. What I charge them is just enough to pay for the reseller account.

    I was giving some thought about trying to seek more clients and making this into a bigger venture.

    The question is: I currently don't have a business registered. I run this myself. So what can I do to protect myself from any liability or lawsuits? Should I register a business? I would rather not have to for something this small.

    Any advice?

  2. #2
    Will the terms of service be enough to keep me protected as is?

  3. #3
    Join Date
    Sep 2003
    Posts
    3,854
    A good ToS is a must. Registering a LTD/LLC will limit your liabilities to your business assets only. However, take what you hear lightly. Ultimately you should contact a lawyer.
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  4. #4
    Join Date
    Jun 2006
    Location
    North of Atlanta
    Posts
    12

    * Legal Issues

    Hello Musicstar,

    I am no lawyer but have run my own consulting business. In addition to what Rameen said, depending on the severity of a breech of law, even if you have incorporated it is possible for a lawsuit to extend beyond company assets into your personal assets. This I have been told by my attorney. I, like you, host for a small group of acquaintances. I do not think personal assets would enter the picture unless it was proven that you did something intentionally detrimental to a client. Keep disclaimers in your TOS, AUP and privacy policies.

    As an additional matter, you may wish to check for a registered trademark of any name or logo you use for your business. You can do so at http://tess2.uspto.gov/bin80/gate.ex...ate=7td7n5.1.1

    You can register your businesss with your state or incorporate it in another state which may give you certain advantages. Your attorney and accountant would know best. You can also just operate as a sole proprietorship and not be taxed twice. That is my choice for a web hosting business. You can learn more about business structures online. Here is an example site: http://www.nolo.com/resource.cfm/cat...5B8AB/111/182/ Just google "businesss structures."

    You might also be required to obtain a local business permit even if working out of your house. These usually run about $25 or so. That has been my experience and again, I am not a lawyer so please take everything with a grain of salt. Good Luck to you.

    ~~Ray
    "There but for the grace of God go I"

  5. #5
    Thanks a lot guys. Ray do you have a business registered for handling your acquaintances?

  6. #6
    Join Date
    Jun 2006
    Location
    North of Atlanta
    Posts
    12

    * Registered Business

    Hello Musicstar,

    No I do not. While I have a reseller account, I have not formalized it into a business yet. I have recently moved to a different state and will be moving shortly again. When I am "settled" I will register my webhosting as a business and focus on growth.

    I am planning on a sole proprietorship and keep it simple. I know I will have to run an article in a local newspaper for 2 weeks of my intent to do business under whatever name I decide. After filing for a local business permit, I then can DBA (do business as) whatever name I chose which has not already been taken. I will then register that company name in whichever state I end up in. If I were forming a corporate structure, Delaware is a popular state for registering corporations in because of their favorable tax rates laws toward corporations. Other states like Nevada and Florida also have their advantages too. Once again, consulting a lawyer or accountant is mandatory to establish a solid legal/accounting foundation. Some folks are happy to form their corporation themselves. Anyone can do so by purchasing an "Incorporation" kit from any office suppply store. With a simple sole proprietorship, I will see exactly what is required locally and do so myself. That is my preference and choice.

    Keep all your receipts as it may come in handy should another company from outside your state contest you using your business name. As long as you can demonstrate that you have been doing business as "whatever" before the date someone else trademarks the same name, you will be able to continue operating under that name in your current scope of service. The other company would then be expected to pay for your expenses to change your company ID if it ever came to that. So, keep those dated receipts.

    I hope that does not blurr things for you but provides some insight into possible options for your new endeavor.

    ~~Ray
    "There but for the grace of God go I"

  7. #7
    Join Date
    Oct 2002
    Location
    Langley, BC
    Posts
    2,046
    Don't worry about it musicstar... you'll be wasting your time and money. Go for it when you reach your 300'th customers or so... when you run everything with a good ethic of business... nothing will go wrong.
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  8. #8
    Is that what you did with yours webhostshift?

  9. #9
    Join Date
    Jun 2006
    Location
    North of Atlanta
    Posts
    12

    * Business Registration

    Hello Musicstar,

    I mostly agree with what jrianto said. You have been doing this for near 9 years now with your 7 clients. Like me, you probably still loose money on your reseller account. It is not like the IRS is going to come after us when we can only show a loss.

    All the poop above about business structure was just to give a better idea of business structure possibilities. Ultimately you have to decide which you will choose. Your case is also different from mine in that I also do web design.

    People will write out a check to me. To be a viable business and interact with other businesses in that way it is best for their checks to be written out to another business instead of a person. This is from an IRS/Accounting point of view. I can get into very deep trouble with the IRS with businesses writing checks made out to my personal name. The IRS would not know where my personal income stopped and the business income began. Their fines and penalties would not be worth the extra income or effort.

    To date, I am not aware of any bank that will cash a check made out to a business unless it is deposited into that businesses own business account. In my case, I have had clients make out a business check to my personal name and got audited by the IRS for it. They discovered me through the client business's bank records. That is rare but it does happen. There was a larger issue that got me red flagged by the IRS but this minor issue became a part of it. I should be so lucky at the lottery.

    Many online "businesses" I know of today get paid via PayPal or similar service and it seems the IRS is staying away from that area for now. I believe this is part of world governments incentive to promote internet growth. That is also why it is not being taxed yet. They want it to get big and juicy then they will tap into it. I'm rambling, I am sorry.

    Even running your business with a good business ethic is no guarantee that nothing will go wrong. "Murphy's Law" has a way of excerting itself. If I were you doing simple webhosting, I would continue as is and grow while receiving payments thru PayPal or the like. Please keep all your dated receipts however no matter what you do.

    ~~Ray
    "There but for the grace of God go I"

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