Business, Contracts

5 Contracts You Need For Your Online Business

October 19, 2023

You’re ready to hit the ground running in your online business! You know you’ll need contracts, but knowing which contracts are necessary for your online business and the elements of each contract is unclear. In this blog post, we’ll discuss the five contracts you need for your online business, including an LLC operating agreement, client contract, independent contractor agreement, website terms, and privacy policy. Read on to learn more about these five contracts and why they’re so essential to safeguarding your online business.

1) LLC Operating Agreement

If you’ve set up an LLC for your online business (which you should), you need an LLC operating agreement. This agreement outlines the operational rules and regulations for an LLC. Even if you are a single-member LLC, meaning you are the only owner of the business, an LLC operating agreement is still important. This document serves to solidify your limited liability status in the eyes of the law and the IRS to protect you against personal liability. This is an important protection, as any liabilities incurred by the LLC can be contained within the LLC and not affect your personal assets like your home or car. By having a clear and comprehensive LLC operating agreement in place, your online business will be well-protected from any disputes that may arise.

An LLC operating agreement should include the following: 

• Description of the company’s activities 

• Allocation of profits and losses 

• Rights and responsibilities of members 

• Procedures for admitting new members 

• Requirements for dissolution 

• Dispute resolution protocols 

• Definitions of terms used in the agreement 

2) Client Contract

I’m sure you’ve heard horror stories about what can happen when you don’t have a client contract for your services. When running an online business, it is essential to have a client contract in place to protect yourself and your clients. Failing to do so can lead to many problems – a client may expect services you haven’t agreed to (infamous scope creep), or they may not be satisfied with your services and want a refund. Without a legally binding contract, it can be difficult to enforce the terms of your agreement. 

A client contract is an agreement between you and your client that clearly outlines the services that you will provide and the payment terms for those services. By having this document in place, you can ensure that both parties know what is expected of them and that any disputes that arise will be resolved quickly and easily.

When creating a client contract for your online business, it is important to include legal terms covering your services, payment terms, deadlines, confidentiality, and other relevant information. Additionally, you should also make sure that your contract includes specific clauses to protect your online business services from misuse or infringement. Doing so will help ensure you have the legal protection you need when providing online business services.

3) Independent Contractor Agreement

When it comes to running an online business, there are a lot of moving pieces. Hiring contractors like graphic designers, VAs, or copywriters to help execute your vision can save you a lot of time and allow your business to grow faster. It goes without saying that having a written independent contractor agreement in place is a must. Without this contract, you could be leaving yourself open to legal trouble if any disputes arise between you and your contractor.

This contract allows you to clearly state the terms of the arrangement and any expectations you have from the contractor. It also helps to protect both parties from potential liability related to copyright infringement for materials produced under the contract. For example, you could be sued by a third-party photographer if your graphic designer uses one of their photos without their permission. Your independent contractor agreement should include language that requires contractors to confirm that the materials they are producing for your online business are 100% original and don’t infringe on the rights of any third parties. In the above example, the legal liability would fall on your graphic designer, and not you, if this language were included in the agreement. 

Other key legal terms to include in your independent contractor agreement are: payment and invoicing, deliverables, deadlines, confidentiality, ownership of work product (work for hire), indemnification, and dispute resolution.

Note: If you hire a contractor that requires you to sign their service agreement, ensure that it includes all of the key terms mentioned above. It may be necessary for them to sign a separate confidentiality and work-for-hire agreement.  

4) Website Terms

Website terms and policies are an important part of any online business. They outline the rules, regulations, and expectations for the use of your website by visitors and customers. By having clear website terms and policies in place, you can help ensure that customers are aware of their rights and responsibilities when using your website and services. This allows customers to have a better experience when engaging with your business, which can help to increase customer satisfaction and loyalty. 

Another important aspect of website terms is protection against user misconduct. Examples of user misconduct include copyright infringement (i.e., copying images or blogs from your site) and posting illegal content to your website. Website terms help to ensure that users are aware of these prohibitions. Website terms also protect your online business by outlining any indemnification provisions that may be in place. This means that users who engage in activities that are prohibited by the website terms may be held responsible for any losses or damages caused by their actions. This can help protect online businesses from potential litigation and financial losses associated with unlawful activities. Website terms should also include information on how customers can contact the online business in case of a dispute. 

While website terms do provide some legal protection for your services, we always recommend having specific client agreements in place for your various services. 

5) Privacy Policy

A privacy policy is an important document that sets out how an online business collects, stores, and uses personal information about its customers. It’s legally required for any online business providing services to users in the European Union, as per the General Data Protection Regulation (GDPR). It is also becoming increasingly important for all businesses, even those outside of the EU, to have a clear and comprehensive privacy policy in place.

A privacy policy should set out clearly what kind of personal information your online business collects, why it needs to collect it, and what it will be used for. It should also detail how long your online business stores customer data, and explain how customers can exercise their right to access or delete their personal data. Finally, your privacy policy should outline the steps taken to keep customer data secure, including encryption protocols and other measures.

By setting out a clear and comprehensive privacy policy, you demonstrate to your customers that their data is safe with you and that you take data protection seriously. This will help to build trust between you and your customers and ensure that you remain compliant with the latest regulations.

Looking for a more comprehensive resource on all things legal for your online service-based business? Check out our Legal Guide for Online Entrepreneurs