10 Online Business Legal Myths Busted

There are so many legal myths and misconceptions on the internet about what you need (and don’t need) to legally get your business up and running. And I know it can be downright confusing to weed through all the (mis)information about business legal topics that are out there!

Since I’ve been in online business, I’ve seen and heard some wild rumors about what you have to do to legally protect your online business, grow your business, and everything in between. To help you avoid following incorrect legal information, I’ve rounded up the top 10 common legal myths you need to know to keep yourself out of trouble – and have peace of mind you’re setting your online business up for legal success.

It’s certainly not easy to keep up with the ever-changing laws about digital media, copyrights, and other legal issues. But not knowing the law doesn’t excuse you from the legal implications – which is why it’s important for digital content creators and other entrepreneurs to educate themselves about the legal requirements for online business.

While some of these myths may seem relatively harmless, they can really hurt you and your business. Here are the top 10 online legal myths you may have heard – and the truths you really need to know about them so you can legally protect your online business.

Myth 1: It Can Wait

The most common legal myth I hear about online business is what I call the “it can wait” myth. For example, registering your business can wait. Getting business insurance can wait. Getting contracts can wait. Hiring someone the right way can wait. You get the point.

I’ve heard all the myths about waiting. As well as several variations of those myths, such as “I have to make $10,000 before I register my business”, or “I don’t even have to pay taxes until I make $10,000”.

Fact:

Here’s the real deal when it comes to waiting to legally protect your business: You only get legal protection in your business from the time that you establish something moving forward. You can’t retroactively apply legal protection.

For instance, if you get a legit contract, only your future clients or the clients that have signed that contract moving forward will be protected by that contract. Past clients who either didn’t sign a contract or signed a cruddy one – unfortunately, they won’t be covered. That’s why it’s important to get a legit contract in place sooner rather than later.

I understand many people wait to properly set up their business legally due to the cost involved. But this isn’t something to put off, so I encourage you to plan for and prioritize the legal and financial setup of your business as part of your startup costs.

Please don’t wait to get all your legal ducks in a row.

Myth 2: I Can’t Get in Trouble for Free Content

The second legal myth I hear about running and growing an online business is that if you say it online, it can’t hurt you. For example, if you post something on Instagram, host free live workout classes, or create free recipes for your blog readers, you’re protected from any sort of liability.

The issue here is the false assumption that you can only get in trouble for things you say or do that you get paid for. At least in America, that’s simply not the case.

Fact:

Unfortunately, we can be held liable for things we say or do for free on the internet. Anything you say or do that people can implement in their life, business, finances, relationships – whatever it is you help people with – you can be held liable for.

Even if you frame your content clearly as your own opinion, you can be sued if someone claims that what you said, did or taught them caused them harm. . If a reader or follower experiences some sort of bad result and you don’t have the proper legal pieces in place, they can come back and blame you.

Please don’t make the mistake of assuming free content doesn’t expose you to legal liability just because you haven’t received payment for it.  

It does.

Myth 3: I Don’t Need an LLC

The third legal myth I hear most often is, “I don’t need an LLC; I have business insurance”. Or the reverse: “I don’t need business insurance; I have an LLC.”

This “either/or” myth, that if you have one you don’t need the other, is a huge mistake and plain old wrong!

Fact:

Business insurance and LLCs are two very separate things, with different purposes – which is why we can’t choose just one or the other.

Business insurance is what you get in the name of your business. So, you already have to have a business registered to get business insurance. Business insurance financially protects your business if you get sued. 

It provides you with a business defense attorney and pays the judgment or settlement that’s found against your business. This means, if your business is sued for something that’s covered by your insurance policy, your business insurance policy pays for the lawsuit AND the damages – minus your deductible, of course. 

Your LLC, on the other hand, is something that personally separates and therefore protects you from your business. An LLC is a  business entity type that you form which provides what’s called limited personal liability protection. This protection separates you and your business so you’re not personally liable for the actions of your business. 

When you establish an LLC for your online business – assuming you set up your business correctly and run it correctly – your business gets sued, not you. That means, your personal assets are safe and off limits to anyone who sues your business for something. That’s just the way we want it 🙂

Bottom line: You need business insurance and to properly register your online business so that you’re both financially and personally protected. They work really, really well together.

Myth 4: You Don’t Need to Separate Your Business and Personal Finances

The fourth common myth I hear so often is that you don’t need to keep your business money separate from your personal money. And I totally get that some people are really good at keeping track of their finances. 

But no matter how good you are at staying on top of your finances, you still need to keep your business and personal moolah as separate as your onions and potatoes.

Fact:

First of all, as your business grows, you’re going to have so many financial transactions that, eventually, you won’t be able to easily keep track of everything. Not to mention, you’ll be too busy to spend your time doing so!

But there’s a more important legal reason why you have to keep them separate. If you have an LLC, for example, it’s actually a legal requirement that you keep separate, organized, detailed financial records AND that you treat your business money like business money. Which means no commingling your Chipotle funds along with that payment you just got for your next coaching client

Make your life easier and keep business finances separate from your personal ones from the get-go. This doesn’t need to be complicated or fancy – you just need to have 2 separate accounts and keep bookkeeping records for your expenses and income. You can easily get started by opening a business bank account and using professional bookkeeping software with something simple like QuickBooks 

Myth 5: Contracts Scare People Off

This next myth is that contracts scare people off. I can tell you this –  I have thousands and thousands of customers and not one of them has ever said to me that a contract they’ve sent has scared someone off. 

In fact, it’s been exactly the opposite: customers have reached out to me and said their customers felt so much better when they had contracts in place. 

Fact:

Something that’s often lost in the online business community is that when people say they don’t provide contracts or don’t believe in contracts, they’re not providing their customers the opportunity to be backed by a contract.

A contract helps your clients feel secure about working with you. It gives them peace of mind that you’ll show up and do what you said you would do, too. Contracts aren’t only about protecting you – they’re about properly capturing the agreement you’ve both come to, so you both feel comfortable and confident working together. Contracts are a completely fair agreement between parties and shouldn’t be super one sided. The goal of a contract is to make sure you get paid as a business owner and that your boundaries as a business owner are protected, but also that the other person knows they’re getting what they pay for.

Side note: If somebody works with you and they never signed a contract, they can still sue you. It’s not like they can’t come after you because they never signed a contract.

Myth 6: I Don’t Need to Understand Contracts

Another myth related to contracts is that you can just copy and paste other people’s contracts without knowing what the contract says or understanding what it means.

There are two big issues with using sample contracts or “borrowing” one from someone else:

1)  They could be terrible and, therefore, just as bad as not having any contract.

2) You just take them at face value without having any idea what they say. Because of that, you’ll never feel fully confident in whether or not it actually protects you.

Fact:

It’s important for you to have a basic understanding of what your contract says and to be able to explain what it means.

Why? So that when your client asks you why a certain section is in your contract before they sign it, you don’t have to start sweating. Instead, you can confidently explain what that section does for you and for your client. Because, remember, contracts are meant to protect all parties.

(FYI – When you purchase one of my DIY legal templates, you get a how-to video tutorial where I walk you through exactly how to fill it out!)

Myth 7: Contracts are Complicated

Many business owners believe that for a contract to be good, it needs to be complicated. This couldn’t be further from the truth!

Fact:

The best contracts are clear, simple, and understandable – the opposite of complicated! There’s no requirement anywhere that contracts be long or super wordy.

As a matter of fact, complicated contracts are difficult to understand and make it hard for all parties to know what they’re agreeing to. The more straightforward the contract, the easier it is for everyone to know what their obligations are and what the consequences of a breach are.  

If you’re someone who’s afraid of contracts for one reason or another, believe me when I say they’re really not that scary! When you have a simple contract like my DIY templates, it creates peace of mind for both you and your clients.

Myth 8: There Are No Rules Online

This 8^th myth is a belief that online business is like an online wild, wild west. That you can do whatever you want, and nobody will come to shut you down.

The biggest part of this myth is that people (falsely) assume there are no rules. But there most definitely are.

Fact:

We know there are rules that online businesses need to adhere to. There’s the GDPR, privacy policy rules, contract laws and even consumer laws and fair practices. There are even refund laws in many states.

There are so many things that exist in concrete terms. And they do apply to you as a business, no matter how big your business is, how much money you’re making, and what type of business you run.

Myth 9: An Undefined Niche Has More Freedom

Related to myth 8, this legal myth incorrectly assumes that if there’s not a direct law or something that speaks to exactly what you do, you can kind of operate by your own rules.

For example, some coaches make the false assumption that just because their specific niche as a coach isn’t defined, it means they can say or do whatever they want without any issues.

Of course, that’s not how the law works.

Fact:

In reality, if there’s not a direct law for what you do, the legal system will find an applicable law and apply it to you. This means that you would probably be accused of the unauthorized practice of whatever it is that is licensed in your state or your client’s state..

For instance, financial coaches may be held to the legal standards of accounting and financial professionals, health coaches may be held to the legal standards of medical or counseling professionals, and so on.

In a nutshell, those who are in unregulated or undefined industries don’t have free reign. As professionals and online business owners, it’s important to understand our scope of practice – and to stay within our scope.

If you’d like to learn more about how to stay within your scope of practice and protect your online business, I go much deeper into this in my 1-hour free legal training, “5 Steps to Legally Protect and Grow Your Online Business”.

Myth 10: You Don’t Need Proper Disclosure on Your Website Until You Get More Visitors

A lot of business owners get their website set up but don’t bother to put the necessary legal disclosures on them. They either aren’t aware they need them, or they know about them but don’t think they apply to their business.

Fact:

There are privacy laws that require any businesses collecting personally identifiable information from visitors to disclose their data collection and usage practices.

What does this mean for you? Do you have email opt-ins? Freebies? Are you collecting personal information when selling a product or service on your website? If you answered “yes” to any of these questions, you need a privacy policy that discloses your data collection and retention practices to your visitors. 

Get my easy-to-use DIY templates for a website disclaimer, privacy policy, and terms and conditions.

Phew! That was a lot! But now that you’re aware of some of the actual legal requirements for online businesses, you can avoid falling for one of these common legal myths.

While it may not be the most fun aspect of running a business, contracts, agreements, and other legal documents play a huge part in running a successful and profitable online business!

Ready to set up a strong legal foundation for your business with essential legal templates and training videos that teach you how to protect your content, get paid, and much more? Get the Ultimate Bundle^TM and put all your legal anxieties to rest for good.