It's an exciting time for online businesses. The internet makes online innovation and entrepreneurship an easy endeavor. But if you're contemplating starting an online business in California, there are many legal considerations you should take into account. And it doesn't end with simple contracts for business ventures. You'll need to consider the legal ramifications of every decision you make, from your business entity to online data privacy.
Forming a Business Entity
First, you'll need to consider the best option for your business entity and where you should form the business. A simple organization like a limited liability company or S corporation may work for you and provide your personal assets some legal protection. But if you intend to accept venture capital funding, a C corporation may also be an option for your business. Corporations are attractive for venture capital firms because of the ease with which the organization can create securities to attract investors.
When forming your new company, you'll also need to carefully consider and draft your Founders Agreement if you have partners in your new venture. Everyone in the company needs to be on the same page concerning equity, business interests, and ongoing commitments. Your Founders Agreement should also consider what happens if a founder leaves the company and how equity in the company will vest.
Two important state laws for businesses to understand are the California Consumer Privacy Act (CCPA) and the California Online Privacy Protection Act (CalOPPA). Both acts are data protection laws intended to protect California consumers.
- California Consumer Privacy Act
The CCPA regulates how businesses around the world may handle the personal information of California residents. It applies to any for-profit business that sells the personal information of more than 50,000 California residents annually, has a gross revenue of more than $25 million, or derives more than 50% of its revenue from selling California residents' personal information. Under the CCPA, California residents can: (1) opt-out of having their information sold; (2) request disclosure of information already sold; and (3) request that the company delete their data.
- California Online Privacy Protection Act
Every business should consider how they will protect their intellectual property, whether through patents for new technology and business processes or copyrights and trademarks to protect the company name and branding. Before choosing a name, you'll want to ensure that the business name is not already in use. When you're just starting, an experienced business attorney can advise you on a plan for protecting your intellectual property from the beginning and as your company grows.
As you can see, there are many legal considerations when you're starting an online business in California. If you're contemplating the start of a new business, you should discuss your plans with an experienced California business attorney.