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Internet Businesses - Isolating Risk

January 18, 2012 | Comments: 0 | Views: 125

Getting an online business up and running is a real challenge. Once you figure the process out, it is vital that you realize that one success does not necessarily guarantee a second success with other products or services. While you should investigate other profit opportunities, isolating your risk when doing so is critical.

Blogging is all the rage these days, so let's talk about a common situation that comes up. You start a blog and develop a strong following. Your blog covers some particular niche that you establish yourself as an expert in. You start making money through affiliate product sales and leads. To protect yourself, you form a business entity to hold the site. This is an ideal and typical approach on the web.

As your blog become more and more popular, you will start receiving unsolicited joint venture offers. Most are junk, but a few catch your eye and you investigate them. One looks like a really good idea that could bring in a good bit of money. You decide to move forward with the business relationship, but how do you deal with risk?

This is where most online businesses make a huge mistake. They don't isolate their risk. They enter into a contract using the business entity that holds their original successful website. Can you see how this might be a problem down the road? An example can show you how.

Let's say the joint venture involves putting together an all-in-one software package that will help people make money online. A nice sales page site is developed and the software is put up for sale. People flock to it and buy like mad. A year later, complaints start rolling in that it doesn't work. You don't have insurance or any way to deal with the complaints. Lawsuits start coming and your partner alerts you to the fact they don't have any money and are filing bankruptcy. You are now isolated.

Now things get ugly for you. You can't file bankruptcy because the business entity you used also contains your original money making blog. Well, you can file but you will lose the blog and all your income. That is a disaster by any measure.

I'll be the first to admit that doing business on the web has a certain informality built into it. Generally, there isn't anything wrong with this, but strategies need to be put in place to isolate risk. Exposing successful sites to the potential failure of new sites is not a smart move, so make sure to isolate your risk as much as possible. Doing so might require the use of multiple business entities or other strategies.

The web used to be a place where people could, shall we say, get away with anything. Those days are long gone. Protecting yourself is a must these days, so make sure you take steps to do so.

Richard A. Chapo is an internet lawyer with

Source: EzineArticles
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