The Ugly Truth About Doing Business on Social Media

“Choice, not circumstances, determines your success.” — Anonymous

Before social media, the typical business in America was sued an average of three times during its lifetime. Now that we have people and companies doing business on social media, I believe that number will probably double.

Why do I say this? Because what I’m seeing more often than not, are new business owners balancing elephants on their shoulders while walking on tightropes over shark-infested waters with their eyes closed. And here’s the kicker- they don’t even know they’re doing this.

The truth is, social media and related tools make it easy to “start a business,” and that’s great. But the reality is that many people are beginning this journey without any formal business experience. Even with the best intentions, they don’t understand or appreciate the importance of complying with mandatory rules, regulations, and laws. They’re completely unaware of the elephants and sharks in their lives.

Be Smart. Make Good Choices.

I’m a lawyer, and when it comes to doing business on social media, I want you to make good choices. To give you some context as to what I’ll be recommending, please know that over the last 32 years, I’ve helped hundreds of people start their business. I’ve also represented hundreds, and maybe even thousands of clients, with business-related claims and litigation matters.

I’ve been there, and done that, and know what landmines you need to be aware of.

Now before I dive too far into this post, I’d like to remind you that while I am a pretty good California lawyer, I’m not your lawyer. No legal advice is being given in this article. Reach out to an experienced lawyer in your state with questions or legal needs. If you need a good lawyer but don’t know where to start, I’m a big fan of the inexpensive LegalShield business model (it’s kind of like Uber for the law) which offers small to medium size business owners access to affordable legal services.

See what I just did? That’s called a disclaimer. I do try and walk my talk when sharing online 😉

With the above in mind, let’s get started. The first thing I recommend that you do when doing business online is to following these six suggestions:

#1: Do Business as a Corporation or Limited Liability Company.

A great way to maximize profits and minimize your personal liability exposure is to do business as a legal entity. The advantages include:

Reduce Personal Liability — these entities can shield you from liability for business debt or lawsuits. There’s a protective wall between your personal and business life. This wall helps protect your personal assets such as your home, cars, savings, and investments.

Reduce Taxes — these entities allow you to deduct expenses that a sole-proprietorship or partnership may not let you do. This includes healthcare, entertainment and travel expenses.

Maximize Retirement and Pension Plans– these plans can be grown more effectively and maximized faster using these entities. Additional tax benefits are also available, and these benefits result in increased profits.

Add Credibility to Your Business– these entities show that you’re serious about your business which is now registered in your state. Factors like credibility, prestige, and permanence are all byproducts of doing business as an entity.

Raise Money and Build Credit– these entities allow you more options to raise money through the sale of stock or transfer ownership via the transfer or sale of stock. You’ll also be able to establish and build a new credit profile distinct from your personal situation.

Manage Your Company– these entities allow you to use agreements that define how you will run your company and resolve disputes. Laws also control what you and other people involved in your business can and should do to run the business each day. This protects everyone involved.

Pro Tip: Most online business owners make this big mistake- They do business as a sole proprietor or general partnership. You never want to do this. There is just too much liability exposure.

#2: Promote Your Product and Service as a Business and Not an Individual.

When communicating and engaging on social media (marketing, sales, social media posts, livestreams…), make sure your audience knows that you’re doing so on behalf of your business and not as an individual. When done right, this allows the protective wall mentioned above to Do this each and every time, and the protective shield I mentioned above will usually protect your personal assets from your business liabilities.

How do you do this? It’s pretty easy.

When you’re sharing on social or starting a live stream on Periscope or Facebook Live, let your audience know that your content is being presented and shared on behalf of your company and not you personally. You can do this by simply including something like the following at the beginning of your show: “Today’s Facebook Live is brought to you by YOUR COMPANY NAME.” It only takes a second and explicitly telling the audience that the message is being communicated by a company as opposed to you as an individual, can be a lifesaver. The same approach applies to all your other social media business and marketing posts.

#3 Use Contracts and Other Agreements.

Almost everything you do in business involves contract law. Be smart and communicate and confirm all deals, proposals, and agreements in writing. A phone call, email, text or DM is not sufficient to form a binding legal agreement. I understand that life would be a lot simpler if a digital wink is all that it took to create a binding contract, but it isn’t.

If you’re an independent contractor, then you need to be using an independent contractor agreement each time you provide a service for a client.

Brands, social media agencies, and influencers all need to make sure they are not assuming liability when they are promoting other people’s products and services. Agreements are available to help you do just that. State and Federal disclosure laws should also be followed. I shared important legal, business, and safety tips on this topic here.

If you’re not using nondisclosure, indemnity, and hold harmless agreements, think about adding them to your daily practice.

#4: Use Professionals and Get Liability Insurance.

Good advice from the right professional can make or break the success of your new business. Start building relationships with an experienced banker, CPA, and lawyer. Note that I’ve never seen a successful startup or business that didn’t have good financing, a good lawyer, and CPA holding their hand along the way.

Proper business liability insurance may offer additional protection to you and your business. Whether or not a claim has merit or is frivolous, it’s always good to know that there is insurance coverage protecting your business assets, income and in many cases, your future.

#5: Protect and Respect Intellectual Property.

Use Intellectual Property (IP) law (copyrights, trade names, trademarks…) to protect your products, services, and ideas. Take the necessary steps to protect your IP rights before sharing your idea, product, service with the world. At the same time, respect the IP rights of others.

#6: Embrace Technology and Provide Exemplary Customer Service.

Everything you do in your business must be focused on providing a product or service delivered in a way that creates an outstanding and memorable customer experience. If you fail to do so, potential customers and clients will simply tap, swipe or click and go elsewhere.

Another reality of doing business and litigation I’ve noticed over the years is this: Many consumers will file a claim or initiate litigation because of how they were treated by the business owner they were doing business with. I’m serious about this. I honestly believe that a majority of business claims can be avoided with better customer service.

One way to do this is to communicate with your customer the way he or she wants you to. If a customer spends her time on Facebook and wants to communicate with you using the Facebook Messenger app, then take the necessary steps to make this happen. Is your client someone who prefers texting? No problem. Communicate with text.

Keep your clients happy, and you’ll help keep your business running safe and sound.

Conclusion

Starting your new business on social media has never been easier. The high costs of starting a company, renting physical space, and marketing your product or service are no longer obstacles that online business owners need to be concerned with.

I’m a big fan of digital. It’s allowed me to expand my legal brand from local to global and meet fascinating people from all around the world. In some cases, they’ve become my clients.

I want you to enjoy doing business on social media as much as I do. Follow these tips, and you should be in good shape.


More About Mitch Jackson, Esq.

Mitch is an award-winning California trial lawyer and author of the new book, “The Ultimate Guide to Social Media for Business Owners, Professionals, and Entrepreneurs” (December 2018). If you’re not already on Mitch’s update list, you can do so by clicking here.

Author: StreamingLawyer

Live streaming law and life

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