If you are looking into ways to market your business online, you have undoubtedly come across articles extolling the virtues of social media marketing. Sites like Facebook, Twitter, and LinkedIn allow businesses to target certain groups of consumers with pinpoint accuracy, interact with them directly, and build brand recognition. Furthermore, there are often no costs associated with creating social media presence for your business and there are certainly ways to engage in social media marketing without spending money on paid ads. If your business posts a piece of content that goes viral, it could easily result in millions of views from individuals who may become paying customers or clients.

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Unforeseen Liability

Before you rush out to join the social media marketing frenzy that is in progress, you should consider some of the legal issues that may be implicated. The good news is that it is completely possible to engage in social media marketing without incurring legal liability; it is important, however, to determine whether there are any legal problems that could potentially arise. Here are some of the potential issues to consider:

Types of Crowdfunding for Investors

Like other types of investments, all crowdfunding campaigns are not created equal and one campaign can vary significantly from the next. There are two main types of crowdfunding investments on which we will focus here: reward-based crowdfunding and equity crowdfunding. However, it is important to realize that these are not the only types of crowdfunding available for investors in today’s market.  In addition, there are many guidelines, requirements and regulations differing for each type of crowdfunding.

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Reward-based Crowdfunding

Last year, the Department of Labor (DOL) set forth a new “Final Rule” on overtime requirements that gave millions of Americans the right to time-and-a-half overtime pay. The law in place for years gave automatic overtime rights to non-exempt individuals who earned $455 per week ($23,660 annually). The new rule approximately doubled this threshold to $913 per week and was set to go into effect December 1, 2016.

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On November 22, 2016, a judge in a Texas federal district court issued a preliminary injunction on the overtime rule, which halted it from taking effect. The DOL initially sought an expedited appeal of the matter and all of the briefs in the appeal of the injunction were to have been filed by January 31st. However, the litigation is on-going so what will happen to the law is still very much uncertain.

The change of administration only complicates the matter further, as the Trump administration opposes the rule. In reality, the new leadership of the DOL could drop the appeal and simply let the injunction remain permanently.  Having an experienced employment lawyer who is up-to-date with these laws can help you understand the rules and mold your business accordingly.

Foreclosure of a Charging Order

Limited liability companies (LLCs) provide their owners (members) a number of protections that do not exist for partnerships or sole proprietorship’s. One critical protection is limited liability protection.  Because an LLC is considered a separate legal entity and its assets and debts are separate and distinct from any assets or liabilities that its owners may have, a creditor of an LLC member typically cannot reach or interfere with the LLC and vice versa. However, California law does provide a tool for creditors to try to reach a judgment debtor’s LLC interest. The tool is called a charging order.

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A charging order is roughly akin to a wage garnishment, but instead of directing an individual’s employer to pay over a portion of the individual’s salary to the creditor, it directs an LLC in which the individual judgment debtor has a membership interest to pay over any distributions that would otherwise be made to the member to the creditor. Notably, a charging order ordinarily cannot compel an LLC to make a distribution to a member and does not confer any management rights, instead extending only to distributions made to a member. For this reason, charging orders do not always result in payment to the creditor. Nonetheless, a charging order can still be effective because they can cut-off an LLC member’s rights to receive any distributions from the LLC and may impact the member’s dealings with the LLC and its other members.

A start-up or entrepreneur looking to raise capital is willing to do almost anything to accept capital from an investor.  As a corporate and business law attorney, experience with more successful clients has led to some observations about what an entrepreneur might also want to look for or consider in an investor besides capital only.

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Consider the following observations when looking to attract investments.

Build Friends Not Just Investors

The Terms of Use for a website is critical to maintaining control of how users access and use the information on the website, and in limiting liability for unapproved uses. Regardless of whether users actually read the Terms of Use – many don’t because it typically contains complex legal jargon – the Terms of Use binds users to its terms by virtue of their use of the website. The Terms of Use constitutes a contract between the business and the customer. That legal jargon protects from liability from users and allows control over the information contained on the website.

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Businesses with an online presence — whether it be social media, e-commerce, mobile, static or interactive site — should always craft a carefully written Terms of Use. These terms are written to include a variety of different subjects relating to the business, the customer, information that is exchanged, information received and how that same information may be used.

Avoid Using Boilerplate or “One Size Fits All”

Starting a business is a difficult endeavor. While many people want the opportunity to start their own business, the time and commitment required to establish, develop, and grow a successful business are not for every potential entrepreneur. Instead of starting their own business, some individuals may look to another alternative: resale franchise.Fotolia_62005718_Subscription_Monthly_M-283x300

A resale franchise is an already-established franchise business that the current owner is looking to sell. The current franchise owner may be selling his or her franchise for reasons such as a divorce, a death in the family, or even for purpose of retirement. Whatever the reason, a resale franchise provides an opportunity to dive into a business without building it from the ground up.

Investing in a Resale Franchise: Pros

What is Crowdfunding?

Crowdfunding refers to entrepreneurs seeking relatively insignificant financial contributions from a large number of people, often via social media or other internet networks, to fund the start or growth of a business venture. According to one report, more than 600 crowdfunding sites exist and raised billions of dollars for various types of businesses in 2015 alone, worldwide.

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Types of Crowdfunding

When the shareholder of a corporation files bankruptcy, the shareholder’s stock becomes part of the debtor’s bankruptcy estate and will generally be subject to liquidation by the bankruptcy trustee for the benefit of the debtor’s creditors.

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However, when a limited partner in a limited partnership (LP) or a member of a limited liability company (LLC) files bankruptcy, the debtor’s ownership interest may well be treated differently because interests in LPs and LLCs are typically considered and treated as more contractual in nature.

Membership Interests in LLCs

If your company sells products or services online, the purchase process almost certainly includes a click through agreement, also known as “clickwrap,” “web-wrap,” or “click and accept” agreements. This refers to the button the consumer must click to indicate they accept all of the terms of the sale. If they choose not to accept, the sale will not go through. This agreement often includes intellectual property protections for the company, license restrictions, liability limitations, disclaimers involving warranties, among other standard contract terms.

The large majority of online consumers often click through without carefully reading the terms of the agreement. If a consumer later contests a term in the click through agreement, will a court uphold and enforce the terms of the initial agreement? This is important to know, as an unenforceable agreement can result in liability and losses. Consulting with an e-commerce attorney is the best way to guarantee a legally binding contract.

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Court Ruling on “Shrinkwrap Agreements”