Congratulations on starting your online business. Whether you have been running this business offline for a while or whether this is a brand new business to you, there are a lot of things to think about legally, especially for Canadian online businesses.
This article will help you understand what you need to do legally to protect yourself and your business and to set yourself up for success on a strong legal foundation.
The Four Legal Protections To Put On Your Website
When you have an online business, your website is where you welcome new people. It’s like your storefront on the internet. You may have spent some time making your website look sharp and tweaking your message and content, but you also need these four legal things:
Copyright laws protect your content. In an online business environment, intangible assets like copyright protected content take on additional value and importance for the growth of your business. Intangible assets are things that do not have a physical substance (e.g. brand, client list) versus tangible assets (e.g. computers, desks).
Copyright is the exclusive right to produce, reproduce, sell or license, publish or perform an ORIGINAL WORK or a substantial part of it.
To establish copyright protection in your content, you must be able to show the following three elements:
A copyright symbol © can be used to mark your copyright-protected content, like webinars, presentations and images, to indicate your ownership. Copyright protection is automatic upon creation (registration not required) and is worldwide through international treaties.
Four types of copyright protected content are
Copyright infringement occurs when a person, without the consent of the copyright owner, exercises one of the exclusive rights of the copyright holder, such as selling or reproducing a work.
You should ensure that you are not infringing on the rights of other people’s content and you should put in place procedures to police unauthorized use of your content. If someone uses your content without your permission, you can enforce your rights through a cease and desist letter and court action if necessary.
Trademark laws protect elements of your brand and the identity of your online business.
Trademarks can include words - like your business name, product names, slogans and course names, and design elements - like logos, shapes and colours or combinations or words and designs.
You do not need to register a trademark to use it (™), but your protection will be very limited compared to the protection of a registered trademark ®.
A trademark is a “mark” that identifies and DISTINGUISHES the source of the goods or services of one party from those of others. A trademark is specific to certain categories of goods or services.
It is not a requirement in Canada to mark your trademarks with the appropriate symbol, but it is recommended. In some other countries it is required. TM - indicates that your business has a common law (unregistered) trademark acquired by using words or symbols to distinguish your goods or services. R - indicates that your business has a registered trademark which you have the exclusive right to use in CANADA in connection with particular goods or services.
Trademark registration can be quite a lengthy process in Canada (12-24 months) and in general, a business has to apply for trademark registration in each country in which it wants protection. Businesses in the US often apply for trademark registration earlier in their business because the process in the US is less expensive and faster than in Canada.
There are 6 distinct steps in the trademark registration process in Canada:
Trademark registration in Canada is for 15 years and can be renewed. For a handy summary of trademark laws in Canada that apply to your online business brand, click to download the guide.
Email Marketing Rules
Email marketing is an important part of any online business. It helps you connect with prospects and customers and can be used as an important part of your sales process.
There are laws that govern how you can send emails (and other commercial electronic messages like DMs) from your Canadian business.
The Canadian Anti-Spam Legislation (“CASL”) went into effect July 1, 2014. If you're in Canada or send emails or other electronic messages to Canadian residents, you need to comply with CASL. CASL applies to all commercial businesses and all messages sent from Canadian computers and devices.
There are three key parts to CASL - Consent (Express or Implied), Identification and an Unsubscribe Mechanism.
Being an online business does not mean that you can forget about having your clients sign a written contract for your goods or services.
The importance of legal contracts is to be able to enforce your promises that you and your client are making to each other. Written contracts also help both parties to be on the same page from the beginning of the relationship or project.
You may have to think differently about how you are onboarding new clients with an online business, including having them sign your contracts electronically rather than in person. Creating a system to get contracts signed electronically will protect you from misunderstandings and help you get paid.
When you are running a business online, you will at some point need to hire people to help you grow your business.
It is important to understand the differences between hiring employees and contractors and the difference legal and tax implications for each.
When you are hiring a CONTRACTOR, you do not need to worry about employment laws (they do not apply) but you do need to get all the important details of the relationship and the work in the written contract. From a liability perspective, you can make contractors liable for their own work (and tax obligations).
When you are hiring an EMPLOYEE, you need to set out clear expectations with your new employee in terms of their job duties and the terms of their employment. Most employees are covered by provincial employment legislation while employees in some industries (banks, transportation, telecommunications) are covered by federal legislation. From a liability perspective, you are responsible for the actions of your employees and have certain tax reporting and filing obligations.
There are other important differences for online businesses between hiring contractors and employees, including in the areas of copyright ownership. Unless otherwise agreed in a contract, copyright protected works belong to the business and if created by contractors, the copyright belongs to the contractor. You can change this if written into a hiring contract.
Many online businesses hire virtual assistants (VAs), who are usually hired as contractors. Even if the VAs are located outside of Canada, you can sign a contract to establish clear expectations up front.
Online Courses or Memberships
Many online business owners are creating online courses and membership sites in order to scale their business beyond one-to-one services.
When you create content, such as an online course or membership site, you want to make sure all of the expectations are clearly set out, including protecting your content. This agreement is a type of licensing agreement that defines what content is covered, the purposes for which you are giving permission for use, and what terms need to be followed.
By using a legal template, you can place your terms and conditions on a stand-alone page on your website and users can agree to its terms via a checkbox on checkout.
It is important to understand why the legal structure of your business matters and what the three choices in Canada are.
Running your business as a sole proprietorship is the most simple and straightforward option. You do not need to create a separate legal entity, but it is required to register a business name if you are using a name that is not just your personal name.
With a sole proprietorship, you need to think about ways to protect yourself personally from business liabilities through contracts, waivers and commercial insurance.
If you are running your business with more than one owner, your choices are a partnership or a corporation.
A partnership is defined as two or more people carrying on a business in common,
with a view of profit. If a business meets the definition of a Partnership, the business falls into the default partnership rules, whether the partners intend to or not - even if you are not registered.
The big thing about running a business as a Partnership is that the Partners are jointly and severally liable for the liabilities of the business.
Each province or territory in Canada has a Partnerships Act which sets out the default rules for partnerships.
A Partnership Agreement is an agreement between the Partners stating how they will make decisions, share profits and expenses and how the partnership can add partners or end.
A corporation is a separate legal entity that is created by incorporation under federal or provincial laws, and has all of the legal powers of a natural person like signing contracts, owning property and hiring employees and contractors.
By creating a corporation to run your online business, you may be able to take advantage of liability protection that comes from having a separate legal entity. A corporation may also be able to use legit tax planning strategies to save and defer income tax (talk to your accountant about this).
A corporation is required to file its own income tax return (T2) and to maintain its own separate corporate records like a minute book.
You can use waivers in your online business when you are having people participate in a potentially risky activity being run by your business. This could be a regular part of your business (i.e. yoga, kayak rentals) or a special event (i.e. online contest).
Waivers allow you to LIMIT the potential liability of your business from the risks of this activity. The participant is agreeing NOT to sue you for any damages.
In order for the waiver to be ENFORCEABLE, there are three key things you have to follow:
To make sure that you are meeting the three legal requirements above, you should consider drafting a waiver template that you can use with your clients.
When you are creating either paid or free content for your online business, you may want to use contributions from other people. If this person can be identified, you generally need their permission for your commercial use.
By using a Content Release form, you are asking people to contribute to the creation of content of your business. This could include taking pictures or videos at events, recording a podcast or using client testimonials in your promotions.
If you have a group or community associated with your online business, you should establish group rules that all members agree to abide by.
Some group rules may include what types of content can be shared (and when) and what behaviour is unacceptable. As the administrator or moderator of an online community, you want to ability to remove members who are not following the rules.
Social Media Accounts
Social media can be great for many reasons including building your brand and connecting with customers but also comes with risks. Providing clear guidance will lessen some of these risks.
If you have contractors or employees, you can establish a Social Media policy to guide the proper use of social media accounts.
As a business owner, make sure that you maintain control over your social media accounts, which can be important assets of an online business. If you have contractors, such as a VA or Social Media Manager posting or creating accounts on your behalf, manage the accounts with appropriate passwords and administrative permissions.
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