Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Ask HN: What is legally required to run a small service-based web application?

news.ycombinator.com

Post reply on HN
Print view View original

31–40 of 63 posts

Re: Ask HN: What is legally required to run a small service-based web application?

#31

Post by arethuza »

bradleyland wrote: post #24
patio11 wrote: post #11

You don't need a legal structure to charge people money. Sole proprietorship is the most common form of business in the United States -- by quite a large margin. For example, BCC is structured as a sole proprietorship: when someone pays me for bingo cards, they're really paying me for bingo cards. You will probably find that no B2C customer actually cares about the structure of your business, legally. Your website de…

You're 100% right from a technical standpoint, but I disagree with your opinion on the liability issues. I know it seems inconceivable when you start your business, but being sued is a possibility for just about anyone. It's entirely possible for your business to be sued because of the actions of an employee, for example. If that happens, and you're a sole proprietor, you are the one being sued. This might sound like…

Having been a co-founder of a company that was on the receiving end of IP litigation I can say that I found the whole experience incredibly stressful - I hate to think what it would have been like if it was me personally, rather than the company, being sued.

Fortunately the case was completely groundless - but it still took months of time and quite a bit of money paid to lawyers to make it go away. That's the thing that really sucks about being sued - the chances are that even if you are completely in the right you may well still end up having to spend a chunk of money on lawyers.

Re: Ask HN: What is legally required to run a small service-based web application?

#32

Post by damoncali »

Paypal is a nightmare compared to real merchant accounts. Talking to customer support there is like smashing your hand in a car door.

In the long run you're better off with either Braintree (which is fine all by itself) or Auth.net + Chargify/Spreedly/etc. I would switch to one of those options as soon as you validate the business, as the cost is significant early on.

Re: Ask HN: What is legally required to run a small service-based web application?

#33

Post by nborgo »

IgorPartola wrote: post #17
haploid wrote: post #12

Why paypal/google instead of a real payments gateway like authorize.net?

I was under the impression that using something like authorize.net would impose more restrictions on my application (e.g.: require it to be PCI compliant, etc.) and require more work to get going.

I just set up Braintree and it was very easy. Probably not as easy as PayPal + Spreedly, though. If you want to go with a "real" payment gateway, I highly recommend it.

If anything, using Braintree removed all sorts of restrictions. They keep all the credit card information. Let them worry about PCI Compliance, not me.

Re: Ask HN: What is legally required to run a small service-based web application?

#34

Post by patio11 »

bradleyland wrote: post #24
patio11 wrote: post #11

You don't need a legal structure to charge people money. Sole proprietorship is the most common form of business in the United States -- by quite a large margin. For example, BCC is structured as a sole proprietorship: when someone pays me for bingo cards, they're really paying me for bingo cards. You will probably find that no B2C customer actually cares about the structure of your business, legally. Your website de…

You're 100% right from a technical standpoint, but I disagree with your opinion on the liability issues. I know it seems inconceivable when you start your business, but being sued is a possibility for just about anyone. It's entirely possible for your business to be sued because of the actions of an employee, for example. If that happens, and you're a sole proprietor, you are the one being sued. This might sound like…

So, having looked into this a few times, my personal opinion is that a quickie instafigleaf will wilt like the fig leaf it is under legal scrutiny. Regardless of whether it is a LC or not, my software business has substantially less in assets than a taco truck, and any tortious behavior it carries out is definitionally certain to have been carried out by me personally. My expectation is that a lawsuit means I get held personally liable and that means bankruptcy. I could drop five hundred bucks tomorrow and be BCC LLC, but that does not change my estimate of risk of bankruptcy.

I would certainly get something formal if I had partners, like you did. I sincerely hope it works out for you.

Re: Ask HN: What is legally required to run a small service-based web application?

#35

Post by noodle »

haploid wrote: post #12

Why paypal/google instead of a real payments gateway like authorize.net?

fwiw, to provide a counterargument, i'm stuck with paypal. i applied to a "real" payment gateway and was denied due to low estimated processing volume.

Re: Ask HN: What is legally required to run a small service-based web application?

#36

Post by sunchild »

patio11 wrote: post #21
IgorPartola wrote: post #16

Earlier quoted context omitted.

Thank you for a detailed reply. What do you recommend as a source for the Terms of Service. Is it worthwhile to get it from a lawyer or is there a sort of "industry standard"?

You have permission to rewrite (any of) mine, if you want them. Wordpress also has theirs available under a very permissive license. NOLO presumably has one available in their books. If you pay a lawyer $1,000 to draft terms of service, your lawyer will have $1,000 more in his pocket than he otherwise would.

IAAL. If you do the self-service route for terms of service, make sure you do your homework. If you do a search/replace on someone else's terms (even those offered under CC or other permissive licenses), make sure you at least run some Google searches on the rationale behind each clause of the terms. There is a HUGE amount of common ground from one site's terms to another's, but you can still get badly burned if you miss something on liability, IP rights, user generated content, etc.

The one area that I recommend you learn about is enforceability of online terms. Make sure you understand concepts like unconscionable terms, conspicuous notice, valid assent, and so on. These are big, ugly words, but the concepts behind them are not difficult to grasp. Every online transaction is a balance between disclosing important terms to users on the one hand, and not being obnoxious about it on the other hand.

Same advise applies to privacy policies, although it's worth noting that those are typically just plain language disclosures of your practices (at least in the U.S.)

Anyway, I'm curious because I'm considering offering review/preparation of website terms and privacy policies as a fixed fee service: what would you say is a fair price for that?

(Obligatory: My comments above aren't intended as legal advice and I don't represent anyone on HN.)

Re: Ask HN: What is legally required to run a small service-based web application?

#37

Post by [deleted] »

patio11 wrote: post #34
bradleyland wrote: post #24

Earlier quoted context omitted.

You're 100% right from a technical standpoint, but I disagree with your opinion on the liability issues. I know it seems inconceivable when you start your business, but being sued is a possibility for just about anyone. It's entirely possible for your business to be sued because of the actions of an employee, for example. If that happens, and you're a sole proprietor, you are the one being sued. This might sound like…

So, having looked into this a few times, my personal opinion is that a quickie instafigleaf will wilt like the fig leaf it is under legal scrutiny. Regardless of whether it is a LC or not, my software business has substantially less in assets than a taco truck, and any tortious behavior it carries out is definitionally certain to have been carried out by me personally. My expectation is that a lawsuit means I get hel…

[deleted]

Re: Ask HN: What is legally required to run a small service-based web application?

#38

Post by bradleyland »

patio11 wrote: post #34
bradleyland wrote: post #24

Earlier quoted context omitted.

You're 100% right from a technical standpoint, but I disagree with your opinion on the liability issues. I know it seems inconceivable when you start your business, but being sued is a possibility for just about anyone. It's entirely possible for your business to be sued because of the actions of an employee, for example. If that happens, and you're a sole proprietor, you are the one being sued. This might sound like…

So, having looked into this a few times, my personal opinion is that a quickie instafigleaf will wilt like the fig leaf it is under legal scrutiny. Regardless of whether it is a LC or not, my software business has substantially less in assets than a taco truck, and any tortious behavior it carries out is definitionally certain to have been carried out by me personally. My expectation is that a lawsuit means I get hel…

That's a valid point regarding partners and mitigating risk. If you're a one-man company, it's a lot easier to manage the risks, so forming a corporation may be superfluous. I think it depends on your product as well. The chances of being sued while providing a simple product like bingo cards is minimal. If you're providing a service to businesses, you stand a much greater risk of being sued. It's all a balance.

BTW, I'm not suggesting that you should form a corp. Just to be clear on that. I do think this conversation is beneficial for the topic starter though.

I hear the "weak corporations are worthless" argument a lot. I will say that our simple little corporation is holding up really well, and we didn't spend a bunch of money forming it. We did not use one of those insta-corporation sites though. We paid a local attorney, with whom we sat down and met with, to establish our corporation and provide guidelines for maintaining it. It cost us less than $1000.

IMO, the bottom line with litigation is that it comes down to who has a bigger war chest. A weak corporate structure doesn't appear to be the shot that will sink our ship. Being unable to sustain the fight is the top threat.

When the personal lawsuit hit the door, the first thing I did was investigate bankruptcy. It is possible to discharge debt resulting from a judgement, but it depends on your circumstances. I definitely lack the depth of understanding required to explain it fully, but the gist of it is that receiving a discharge for a judgement isn't always as straight forward as something like credit card debt. Anyone engaged in a business with non-trivial risk of legal exposure should understand the implications before dismissing the benefits of having a corporation.

Re: Ask HN: What is legally required to run a small service-based web application?

#39

Post by euroclydon »

patio11 wrote: post #25
messel wrote: post #23

Earlier quoted context omitted.

I'd just like to add that there are costs to doing business that you can claim that are well within your right. I'm not a tax or legal specialist but things like servers, shipping costs, and your unpaid time may all be deductible to balance against your revenue. It's worth it to hire an accountant to make sure your business is crystal clean, and that you're not penalizing yourself unnecessarily.

your unpaid time Not deductible in the US. It isn't a close question, either.

When talking about time and pay, it's important to remember that if the business has revenue, there better be someone getting paid, for corporations that is.

Re: Ask HN: What is legally required to run a small service-based web application?

#40

Post by Mikushi »

patio11 wrote: post #19
tsycho wrote: post #15

Earlier quoted context omitted.

For a "sole proprietorship", is it necessary to register a company at all for doing what the OP asked (starting a website as a side project), or can he just do it as an individual and just pay taxes on the profits as regular income? PS> I am thinking of doing something similar to the OP, and not sure if this complicates things, I am on a H1 visa.

There may be local rules which require some form of business registration, but in the US the typical case is that the first -- and only -- time the government hears of the existence of a sole proprietorship is on Schedule C attached to the individual's tax return, which documents its income and expenses, calculates the profits, and tells you what other pieces of paper to copy the profit number onto to figure out how…

About the H1, you are right, friend of mine lived in San Fransisco on for a couple of year, on an H1 visa, he had a full-time job, and had a small revenue from his website, paid his taxes accordingly, never had a problem. (It's actually the same in Canada, i'm in locked visa, and i do contracting from time to time, never had a problem)
Post reply on HN