The journey from social media influencer to tech entrepreneur

10 January 2022

Social media has revolutionised the way in which we interact with businesses and each other and has shown that it can be a generous friend to business owners and entrepreneurs, helping them to harness a following, build their brand and grow a worldwide customer base. The success of widely known brands, such as the Body Coach, Huda Beauty and Glossier, are testament to this; their founders capitalised on the reach of social media to plant the seeds of, and then scale, these now highly successful businesses. 

The UK has long been a place of innovation, and the pandemic seems to have catalysed this further. During the recent lockdowns many discovered (or rediscovered) talents, skills and ideas, or simply dedicated more time to their existing passions. Through sharing posts on social media they gained attention, traction, and even sales. You might be one of these people, and as the world adapts to the new normal, now may seem like an opportune moment to leverage your following and, like the founders of Floatplane, take steps towards launching your own digital platform or online business that allows you to supply digital content, goods or services independently of the mainstream social media channels. 

In this blog we lay out some of the key practical and legal considerations to help get you started.

Business vehicle and setup
The first step in setting up any business is deciding what kind of business vehicle to use. You can conduct business as a sole trader (i.e. where you own and operate the business as a self-employed individual) or by setting up a corporate entity such as a private company limited by shares, and there are pros and cons to both options. 

No registration is required as a sole trader because there is no separate legal entity created but you will have to file an annual tax return each year in respect of your revenue. However, since there is no legal distinction between you as the owner and the business you will have unlimited, personal liability for the business’ debts. 

Conversely, by trading as a private company limited by shares, the owners (i.e. the shareholders) will have a separate legal personality to the company. If you are the only shareholder and director of the company then your personal liability as a shareholder will equal the nominal value of the shares that you own (as opposed to the market value of the shares). As such you are likely to have minimal liability for any debts of the company. That said, you should be aware that there are certain limited circumstances where a company director may incur personal liability for their actions such as wrongful trading.   

A private company limited by shares can be set up easily and will require you to provide certain information to Companies House (for example, a registered office address as well as details of the directors and shareholders). There are however certain administrative costs and obligations that come with operating through such business vehicle, including the annual filing of company accounts, the need to keep accurate internal records, possibly register for VAT, complete corporation tax returns and pay corporation tax. For further information about establishing a business in the UK please see our dedicated webpage here.

Domain names and setting up a website
Once the company is set up you will need a website to direct your social media followers to so that they can buy whatever goods, services or digital content you are offering.  For this you will need to buy a domain name (i.e. a unique URL for the website to be accessible from a particular web browser). You can buy domain names from various domain registrars such as Go Daddy and Bluehost. Once purchased, only you will be able to use the specific domain name (subject to renewal). You might start with a “.co.uk” domain but if you want to engage customers outside the UK you should consider buying additional domains e.g. “.fr” (France). You may also decide to register domain names that are similar to your trading or company name to reduce the potential for cybersquatting. 

Website design and development
Next you’ll need to go about setting up the website. Unless you have the skills to design and build a site yourself, you will need to engage a web designer to do this for you. When engaging a designer you should be sure to enter into a clearly written website design and development agreement (“Agreement”) with appropriate safeguards to protect your business interests. Some of the key things you would want to cover in such an Agreement and keep in mind for the website include:

1. A project plan
Both you and the web designer need to be clear on the website specifications and the timescale for completion of the work. A website specification could be included in a project plan annexed to the Agreement. The project plan might include information on how you want any software developed by the designer to operate, your target audience and any specific website design requirements that you have in mind (for example visuals, sounds and layout).
 
Your project plan should also provide a road map to completion and set out the various steps that the website developer will take in order to meet the agreed specifications. For each stage, it is a good idea to explicitly note the agreed timeframes for completion. You might also wish to pay following completion of each development phase (in which case you should provide for a breakdown of the payment plan) or on acceptance of the website. 
 
2. Compliance with website legal requirements  
Under the E-Commerce (EC Directive) Regulations 2002, a service provider with an online presence has to clearly identify itself to customers and website visitors, including by providing contact information together with a company registration number and VAT number if applicable. The E-Commerce Regulations as well as the Consumer Contracts (Information Cancellation and Additional Charges) Regulations 2013 require you to provide an explanation of the steps necessary for the customer to conclude a contract with your business as well as details of how to amend a contract or order before concluding it. This content will need to be displayed prominently and clearly brought to the customer’s attention as part of the ordering process. 
 
Importantly, the website must also be designed in a way that makes it easy to navigate to help ensure that it satisfies the requirements of the Equality Act 2010 which makes it unlawful for UK service providers to discriminate against a disabled person. 
 
3. Intellectual property (IP) rights
In the absence of a lawfully binding written agreement to the contrary, the IP rights in the website including its content and any underlying software will belong to the web designer or its licensors. It is therefore imperative that you include a clause in the Agreement whereby the designer expressly assigns all the IP rights in the website to you or your company (depending on whether you’re operating as a sole trader or via a company) (or at least all IP rights in the website save for a third party’s IP and the rights in its developer tools which can instead be licensed to you). Such an assignment will only be valid where it is set out in writing and signed. Without owning (or at least licensing) the IP, you will not have full control over the use of your website.
 
To protect yourself from losses arising from a third party IP rights infringement claim, you could also ask for an indemnity to be included in the Agreement from the designer. If you want to use a third party’s IP rights on the website (such as images or music) then you must obtain the requisite permission before doing so.
 
4. Acceptance testing 
Acceptance testing is crucial for ensuring that the website meets the agreed functional and technical specifications. It is up to you to agree the form the tests should take and provide for them in the Agreement. A right for you to end the Agreement and obtain a full refund will be advantageous if the website fails the acceptance tests and does not pass after an agreed number of re-tests. An escalation process for dispute resolution is also a good idea for a large development project where it would be difficult for a replacement designer to take over. 
 
Once your website is finalised you will need to engage a website host in order to run the website on a server so that it can be accessed via the internet. To this end you will need to enter into website hosting agreement with a host, for which many of the issues covered in this blog will again be relevant such as specifications for the server on which the website will be hosted and acceptance testing. 
 
Online terms of business 
Whether you are planning to use your website to sell goods, services or digital content or if you want people to subscribe for regular access to your website, you will need a watertight set of online terms and conditions. Such terms will need to meet certain fairness and reasonableness requirements depending on whether the offering is aimed at business or consumer customers. We provide top tips for drafting online consumer facing terms and conditions in our video here
 

Data protection
When you collect personal data from visitors and customers through their use of the website you will need to tell them how you look after their personal data and set out their privacy rights pursuant to the core principles of the UK GDPR. Please visit our data protection resources for more information about how we can assist you with data protection compliance and other privacy related matters. 

Kingsley Napley has a dedicated team of corporate and commercial lawyers with extensive experience setting up companies, advising entrepreneurs and drafting commercial agreements and we will be able to assist you with all your business needs, from inception onwards. 

For advice, or further information on the above, please do not hesitate to get in touch.

ABOUT THE AUTHORs

Alex advises entrepreneurs, startups and established companies on the legal issues arising from the drafting and negotiation of a variety of commercial contracts including supply of goods and services agreements, commission agreements and data protection notices as well as technology contracts such as platform terms of use, software licences, consultancy arrangements and R&D agreements.

Jordan joined Kingsley Napley in September 2020. She is currently a trainee solicitor in the Criminal Litigation team. Jordan's previous seats were in the Medical Negligence and Personal Injury department, where she assisted with litigating cases arising from serious injuries and fatal accidents; and in the Corporate and Commercial team.

 

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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

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