Is Your Business Legally Registered?

[SenseiSteve]

I know this seems like a strange question, but I saw a poll on another forum recently where quite a few web hosts voted that they were NOT legally registered, yet were still advertising services online. Those services ranged from shared and VPS to dedicated servers. As a consumer, how would you differentiate one from the other? If you’re in Missouri, you can go to the Secretary of State’s website and search for Business Entities.

Why are so many web hosts not registered?

In spite that US businesses are legally required to be registered, designing and posting a web hosting business online has become so simple that hobbyist do this with regularity. Some of them are very resourceful, have well thought out business plans, and work their plans successfully. On the other hand, many of them have no understanding of general business principles, thus struggle, along with their unsuspecting clientèle. What happens when you sign a contract with a web host that is not legally registered? Does all the risk fall on the consumer? The answer as to why so many are not registered is varied. Many of these entrepreneurs are tech savvy, but not business savvy. The economy is forcing many to find supplemental avenues for generating revenue, and see web hosting as an easy sell. Providing support after the sale is the hard sell, and this is what leads to so many start up businesses failing in their first year.

How important is your data?

If you’re considering which host to select, ask yourself this, “How important is the data that I’ll be entrusting to my host?” Is it mission critical? If your host should disappear, would your data disappear with them? If you have an issue at 3AM on a Sunday morning, will your host have anyone on staff ready to take your call and resolve that issue, or will you have to wait until normal business hours M-F 9-5, or worse yet, in-between classes?

- Steve

 

[romes]

Great post steve, thanks for sharing.

 

[monsterjerry]

Right on the spot Steve! In fact in many countries cyber law is such a grey area that even the authorities have no idea what to do with cyber crimes.

I think it's important to select a web host that's resided in a country where online business are governed systematically.

 

[handsonhosting]

We had issues a few years ago with an incident. Our business was located in Fullerton California, our LLC is registered in Las Vegas Nevada, our servers were located in Houston Texas and the crime (hacking) happened from Turkey by way of a hosting company in Florida.

Local authorties were unable to help, state then said I had to contact Nevada. Nevada said it wasn't their issue as the abuse didn't happen in their state, it happened in Texas. Texas said that my business was from out of state and that it's a federal issue Needless to say, the FBI then got involved and what was a big mess to begin with dragged out into an even bigger mess for almost 8 months!

Registration of a business is vital. Securing an LLC is almost just as important to at least protect the owners and investors of the business from possible extortion. Soon enough there will be more Cyber divisions to handle issues, but it's all still very new to many places.

 

[nonparity]

yes

it needs to be

in reality if you are not a legal business you are just asking for big issues down the road

 

[codingscape]

My company is setup as an S-Corp to protect myself. I would highly recommend anyone venturing into hosting do something similar.

 

[coeplicltd]

Yes, Registered as a Ltd company. Also shows the customers your not a overnight host or makes it hard to run away.

 

[HivelocityJJ]

There are quite a few businesses that aren't registered. I don't think it's necessarily a good idea to let the public know your business isn't registered.

 

[coeplicltd]

We should just make a list of users who don't post in here

 

[LaneHost]

Great information Steve. It just makes sense to register your company if you plan on doing business.

 

[Turelio]

We are legal registered incorporation, it guarantee to your customers that you isn't some "one month" hosting provider.
However, It's not illegal to run Home Business, with that status you can work some smaller business without problems.

 

[kashirakaze]

Mine isn't because it simply doesn't make enough to be justified as one.

 

[HostLeet]

Very good post. There are definately plenty of topics and variables to discuss when it comes to online businesses, and making money online.

For example, there are 1,000's of eBay members that make $10,000+ on sales every month, and yet they have no registered company. Selling anything from web hosting, ebooks and web site templates, to clothing, electronics, ect..Others make even more selling just a single product on ClickBank, using a minisite!

What is the difference between them and someone selling web hosting? :dknow:

 

[Artashes]

there are 1,000's of eBay members that make $10,000+ on sales every month, and yet they have no registered company.

eBay has all kinds of insurance to protect buyers.

Mine isn't because it simply doesn't make enough to be justified as one.

You only need 1 disgruntled customers (with money) to sue you, and if such happens, you'll end up being personally liable if you are not incorporated.

 

[HostLeet]

eBay has all kinds of insurance to protect buyers.

True :agree:. But, we're talking about the sellers, and wether they need to have a registered business to sell anything online or not.

Personally, I don't use that to judge if a host will be good or not. Plenty of terrible fly-by-night hosts registered their business as an LLC, INC, ect..and still provide horrible service, downtime and run out of business. I've even seen 16 yr old kids have their parents register the company for them..

 

[Artashes]

True :agree:. But, we're talking about the sellers, and wether they need to have a registered business to sell anything online or not.

Well, I think that it comes down to a personal choice whether they want to operate as a company or as an individual. Different tax brackets, different levels of liability, benefits, etc. If a seller feels secure enough to operate as an individual and it meets his needs, it is definitely his choice.

 

[HostLeet]

Well, I think that it comes down to a personal choice whether they want to operate as a company or as an individual. Different tax brackets, different levels of liability, benefits, etc. If a seller feels secure enough to operate as an individual and it meets his needs, it is definitely his choice.

I agree with you 100%. :thumbup:

 

[Zachary McClung]

You only need 1 disgruntled customers (with money) to sue you, and if such happens, you'll end up being personally liable if you are not incorporated.

Artashes, this is such a true statement. There are three keys to a successful, happy and healthy business. A good lawyer, a good insuracne agent, and a good accountant. If you incorporate which I hope everyone does for their business, make sure to pick up a business general liability policy too.

While incorporation almost always gives you persona liability protection unless you use it for personal gain like using the same personal and business bank account having a incopration does not protect business assets. If someone sues your incorporated entity and they win you'll have probably no assets left and no business. For less than $300.00 a year in most states you can pick up $2 million in liability coverage that will save you from closing up shop as long as your running your business legally.

As a business owner, you take risk. Don't take a risk on your well being and your business well being.

 

[SenseiSteve]

Don't forget that you can get liability insurance without incorporating - hate paying that bill, but it's an absolute necessity. And always separate your business and personal accounts.

 

[solarbluseth]

All the hosting companies I work with are legally registered as LLC or DBA. You have to have a legal entity to do a lot of company day to day activities. Such as signing up for the BBB. Which improves cusotmer confidence.