Avoiding Key Legal Mistakes in Startup Companies: Part 8
Part eight of our blog series on common legal mistakes made by startup companies focuses on the importance of crafting appropriate internet and data privacy policies because this is one of the most common mistakes that startups make in their operations. This is understandable given that many startups are small, cash-strapped ventures primarily concerned with getting to market in order to generate revenue. However, a startup subjects itself to a substantial risk of legal liability and lost business opportunity by failing to adopt and abide by internet and data privacy policies.
8) Craft Appropriate Internet and Data Privacy Policies
Digital activity and communication take place 24/7 and it is important to proactively manage the startup’s founders’ or employees’ digital activity through the use of an internet usage policy. A lot of communication on the internet is quite casual (social media in particular), and it is easy for individuals to get carried away and inflict significant harm on an organization without ever intending to do so. Think “loose lips sink ships.” Address this potential risk up front by creating an internet usage policy that lays out what is expected of founders and employees while using the internet or engaging in social media activity that may reflect on the company itself.
Terms of Service/Use
In addition to setting these internal expectations, it is important for every startup business to create a “Terms of Service” or “Terms of Use” in order to govern the general public’s use of the startup’s website. A Terms of Service or Terms and Conditions document operates as a binding contract between a company and its online visitors and customers. This document is especially important for a number of reasons. For example, a Terms of Service sets the rules that users must agree to in order to use the website, it secures the company’s right to the intellectual property displayed on its website, and it limits potential legal liability of the company. Creating an appropriate Terms of Service should be a top priority of any startup company with a digital presence.
Privacy Policy
A data privacy policy is the next necessary piece for a startup’s online operations. A privacy policy is a user-facing document that discusses a company’s established practices for collecting, using and sharing user data. Virtually every company that operates a website, accepts credit card payments online, offers a mobile application, issues an email newsletter, or uses social media is generally collecting some form of user data. Creating an appropriate privacy policy is extremely important because it is a legal requirement of many states. For example, California’s Consumer Privacy Act (2018) has a broad reach and is applicable to most companies that conduct business online or engage in other online activities. Failure to comply with these state laws can subject a business to increased scrutiny and substantial fines. Beyond the legal requirement to have a privacy policy in place, consumer sensitivity to privacy practices has increased over the years and many consumers now expect to see a privacy policy whenever they interact with a business online.
For more on privacy policies and how to go about creating one, check out our blog here.
Summing it Up
Startup companies often have limited resources and many different obligations fighting for those resources. However, neglecting to create appropriate internet and data privacy policies is not something a startup should do. It is important for every startup to be proactive when it comes to its online operations and retaining an attorney to assist with these operations should be a top priority.
Contact us today with any questions you have regarding internet and data privacy policies for your startup company.
In case you missed it, check out our whole series on avoiding key legal mistakes in startup companies: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, and Part 7.
Photo by Glenn Carstens-Peters on Unsplash
*The material and information in this blog is for general informational purposes only. In no way is this information to be construed as legal advice for a particular situation.*