5 Legal Risks of Being an Online Entrepreneur—A Must Read!

Are you ready to start your own business? Then there’s one more thing you should know before taking the plunge into online entrepreneurship. Read on to discover what the legal risks of being an entrepreneur are, plus how to avoid them.

Being an online entrepreneur is wonderful. The independence is like being handed the keys to your parent’s car, but it is much more exciting!

There’s creative freedom and flexibility in using your time and skills to do something that brings you meaning and success! You no longer have to answer to any superiors and can finally have the work-life balance you’ve been striving for. These rewards of entrepreneurship are indeed wonderful!

But there’s a catch people don’t talk about too often: being a business owner comes with lots of risks. There’s technology risk, market risk, and competitive risk that every entrepreneur faces. Of course, there’s the financial risk that makes you toss and turn at 3 a.m., wondering if you’ll make payroll this month. And, then there’s the big one: the legal risk of your business’s products, services, intellectual property, and practice.

I’m not here to scare you. Far from it! Instead, I want to help you succeed as an entrepreneur, legal risks and all. That’s why, today, I’ll be sharing a round-up of legal risks every entrepreneur must be prepared for and help you understand what you can do to ensure you sleep well at night knowing you are legally protected.

Why Is Risk-Taking Important For An Entrepreneur?

Let’s face it, business and risk-taking go hand-in-hand. They’re almost inseparable. Sure, you could play it safe, but that actually limits your opportunity for success. The willingness to take calculated risks is what separates the dreamers from the doers.

Think about it. Every groundbreaking innovation, revolutionary change, and billion-dollar success story started with someone willing to take a leap of faith. Successful business moguls like Steve Jobs and Elon Musk didn’t become who they are today by only taking the safest route or sticking to the status quo. They saw opportunities where others saw obstacles and were willing to take risks for the future market demand they envisioned.

Aside from the potential for great success, taking calculated risks is also an important tool for growth and learning. Risk-taking forces you to get out of your comfort zone. Consequently, you learn to adapt, innovate, and problem-solve in ways you could never even dream of before.

And, of course, we shouldn’t forget the psychological aspect of risk-taking. There’s something incredibly empowering about facing your fears and coming out on top. Each time you take a calculated risk and come out of it alive, you become a better YOU! Your confidence goes through the roof, your instincts become sharper, and you become a more formidable entrepreneur.

5 Legal Risks of Being an Online Entrepreneur

Let’s break down the major legal risks that could keep even the most fearless entrepreneur from pursuing their goals: 

Intellectual Property Infringement

It’s all fun and games right until you catch your idea on someone else’s social media channel (or worse, you see the product you worked so hard to create being sold by a content thief).  It’s a frustrating and disheartening experience, and it’s essential to know what steps to take and how to react appropriately. Having the right legal pieces in place is key to fighting a content copycat. To be proactive, consider registering your content with the US copyright office or trademarking your course, program, or business name. This will strengthen your legal position in case someone steals your intellectual property. Also, create a standard operating procedure (SOP) document with a step-by-step plan for dealing with copycats. This will save you time and energy if you have to go through this process again in the future.

On the flip side, it’s important to know how you can share content legallyso you don’t end up infringing on someone’s intellectual property (IP) – the consequences/penalties of even accidental infringement can be brutal. These may include lawsuits, top-dollar penalties, and a soured reputation. To prevent a messy situation, do your homework and ensure you have the proper rights to everything.

It’s recommended you conduct trademark searches before finalizing your branding. If you are utilizing someone else’s idea or intellectual property, make sure you have permission to do so. And most importantly, assume that just because something’s on the internet, it’s free to use.

You can learn more about IP in these posts: How to check if a song is copyrighted and how to use copyrighted material legally.

Contract Disputes

Most transactions are based on contracts, and they are essential to good business. However, if these contracts aren’t carefully written and signed appropriately, you can run into serious problems. Whether it’s oversight on your part when reading the terms of a supplier’s contract or a client supposing you didn’t deliver on a contractual promise, these disputes can land you in the courtroom.

To protect yourself, always get everything in writing—and I mean everything. People’s words are no longer their bond. Verbal agreements are worthless, yet they can hurt you if you don’t have a physical defense like a written agreement. Having lawyer drafted contracts (rather than free ones from the internet) will ensure you have the key elements needed to be legally sound, and make sure deliverables, timelines, and payment terms are clearly stated so you and your client fully understand what you’re agreeing to or offering.

Employment Law Violations

Hiring employees or contractors are the backbone of your business. However, they can cause you serious headaches with legal actions if you don’t put certain things in place beforehand. Whether it’s protection from wrongful dismissal or discrimination claims, employment law can get you into serious trouble. 

To stay out of trouble, educate yourself on the basics of employment law. Be sure to have clearly stated policies and contracts for staff recruitment and dismissal, workplace conduct, and others. Also, treat everyone equally; don’t play favorites. And when in doubt, consult with an employment lawyer. You’re better off spending a stipend on legal advice now than paying a lot on legal defense later.

Regulatory Compliance Issues

Depending on the industry, every business is subject to a specific alphabet soup of regulations, be it GDPR, HIPAA, FDA, SEC, etc. Noncompliance with these regulations will attract fines and penalties, and in some circumstances, your business may be shut down.

The key to avoiding such a situation is ensuring you’re up-to-date with the latest regulations in your field. Financial planning should not be your only focus when drafting your business plans. Put in place proper systems and processes to ensure regulatory compliance at all times. You may also consider getting a compliance expert or consultant to assist you with the rules.

Liability Claims

Liability claims can sprout from anywhere. It could originate from a defective product causing injury, or even a disgruntled client claiming your service caused them financial harm. Just one big lawsuit can be enough to sink a small business.

To protect yourself, start with good insurance. A general rule of thumb for every company is to have general liability insurance. You may also need other types of insurance, like professional liability insurance, product liability insurance, or others, depending on your industry. In addition to insurance, implement good safety practices in your business and keep thorough records. However, if an incident does occur, handle it promptly and professionally.

In the world of entrepreneurship, the only thing riskier than taking risks is not taking any at all.

Knowing these risks doesn’t mean you should be paralyzed by fear. Rather, it’s about being prepared, being smart, and yes, taking calculated risks before you launch a new product or service. After all, that’s what business is all about, isn’t it?

Taking calculated risks entails monitoring market trends, conducting SWOT (strengths, weaknesses, opportunities, and threats) analyses, leveraging key performance metrics, and maximizing price marketing and distribution. It may seem like there’s so much to do, but it can also be highly rewarding.

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