Truth in Advertising on Social Media

The idea of a white lie or exaggeration might be acceptable when it comes to complimenting a friend’s unfortunate haircut but, there’s no grey area when it comes to false and/or misleading advertisement. Now that we are social media centered in our marketing and advertisement, avoiding posts that are misleading or just plain false is critical, and it also applies to those that post for you. We’ve compiled an easy to reference list that can help keep your posts on the truthful straight-and-narrow both now and in the future when introducing a new product or service to the internet.

 

Five ways you can avoid a false advertisement claim on social media:

 

  1. Keep it honest and avoid dramatics in your advertisement language, unless you can back it up with real evidence. Don’t fluff up a product or service and end up misleading consumers. If you are in the wellness community, be wary of making definitive statements without reliable medical backing. The recent Goop lawsuit is a great example showing the importance of marrying products and factual information.

 

  1. Utilizing influencers is a great way to gain exposure and grow your business. Monitoring your brand and policing what is said on your behalf is an important business practice. Statements made by influencers or consumers online who are representing you need to be true and not include misleading information. If endorsers are receiving a gift, payment or any incentive, it needs to be disclosed to followers. (When in doubt, hashtag it out. #ad #sponsored) It’s recommended to have a blogger policy linked on your website and keep endorsements updated.

 

  1. Document all efforts of guidelines and police false information. It’s a, “better safe than sorry” situation. If you see false advertising on your behalf, reach out with clarification and instruction on how to resolve this falsified information, and save this exchange. If you end up in a worst case scenario, you have records of your efforts and attempt to follow guidelines on your side.

 

  1. Avoid a defamation claim and don’t criticize competitors in efforts to boost your ratings. In light of apps like Yelp, we have become obsessed with reviews, whether they are negative or positive. You may feel tempted to knock your competitors down a peg by paying for negative reviews, but this is a form of false advertisement. If you do decide to proceed with a forum for consumers to review competitors’ products or services, monitor it closely. You can be liable for the information you did not create, so set guidelines and be certain reviewers are staying within them.

 

  1. Make sure your payment policies and guidelines stay consistent and easy to understand. For example: If you are requiring a monthly payment from consumers for $50.50, don’t surprise them with a hidden cost of $110 for annual membership fees, unless this is clearly stated from the beginning. This would classify as false advertisement and a quick way to get into trouble is taking money unannounced.

 

 

The key to keeping the truth at the center of advertisement is over-communicating guidelines to your employees and any endorsers. Make this your top priority. Protect your brand by doing your research and following up on who is representing it. These are simple steps to reduce your risk of lawsuits, defamation claims, or having regulators knock on your door.

Are You An LLC Or Some Other Business Entity?

A business entity formed for the purposes of housing a business, property, or even intellectual property. Business entities, like an LLC, are created or formed at a state level, often the applicable Secretary of State. They vary depending on your business structure, so it is important to know where your business fits. Generally speaking, there are four types of entities to choose from: 

LLC

 A Limited Liability Company, aka LLC, is a business entity recognized in all U.S. states. An LLC has some of the benefits of both a sole proprietorship and a corporation – from both a taxation as well as legal standpoint. It allows the owner to file a simpler tax return, and also limits the owner’s liability like a corporation.

When most people think about setting up a formal business entity, they almost always first think of an LLC, because of an LLC’s reputation of being “easier” overall to run. But, always consult your accountant or CPA before selecting this entity, as it may not give you the tax benefits you were hoping for. From a legal standpoint, an LLC does get you the limited liability most people want in a formal entity. 

Conversely, sole proprietorships are subject to unlimited liability. This means that in the event your business ever ends up in hot water from a legal perspective, all your assets – including the owner’s personal assets – are on the hook. On the other hand, most formal business entities carry the added benefit of “limited liability,” meaning that the owners of the company won’t be personally liable for any legal missteps the company makes. 

Sometimes LLCs are mistakenly referred to as “Limited Liability Corporations.” But don’t be confused, an LLC is not a corporation. They have completely different structures, ownership, and rules governing them.

An LLC is easier to form over a corporation because no by-laws or corporate charter is required. Also, LLCs are creatures of contract, meaning however the members -or owners- of an LLC agree to run the LLC will govern. Typically, this is handled by way of an operating agreement, effectively the governing document of the LLC.

Operating agreements are considered more flexible than corporate bylaws, which is why some prefer LLCs to corporations. Additionally, there are no meeting requirements imposed by statute like there are with corporations. Nevertheless, An LLC is still watched closely by state and federal agencies to make sure it is being operated separately from the owners’ personal financial and tax lives.

There are two types of LLCs: domestic and foreign. If you form an LLC in the state which you plan to conduct business, you are forming a domestic LLC. If your LLC does business in another state, but is registered in your home state, you may wish to register your LLC as a foreign LLC in the states in which you are transacting business aside from the home state. 

Corporations

Corporations are businesses that are separate and distinct from their owners. Corporations are comprised of shareholders, and typically a board of directors, but it’s the shareholders who own the corporation. Shares can be held by a few individuals, or they might be offered for sale to the public, making them “publicly held”. Corporations are either non-profit or a for-profit business. They can also be formed for a specific short-term purpose. 

There are two basic types of corporations; those with stock and those without no stock. Corporations can also be C-corporations and S-corporations. Most people worry about setting up a corporation because of the dreaded “double-taxation.” However, S-Corporations (referring to Subchapter S of the tax code) are not subject to double taxation. If a corporation issues no stock, most likely it will be a non-profit corporation. Corporations are considered older, more traditional business structures.

They’re less likely to be audited by the IRS, and are often the preferred structure for investors. There are annual meeting requirements imposed by statute, but these are relatively straightforward and painless, depending on the number of shareholders.

Sole proprietorships

A sole proprietorship is an unincorporated business owned by one individual. It is the simplest form of business to start and operate. It is also the most popular form of ownership, with over 20 million sole proprietorships operating in the U.S. and Canada.

Unlike an incorporated business or a partnership there is no legal separation between the business and the owner for a sole proprietorship – the business is an extension of the owner and so the owner is personally responsible for any debts or liabilities the business creates.

If you operate your business under your own name, with no additions, you don’t even need to register your business name to begin operating. This is an ideal choice for business startups, self-employed contractors, part-time and home-based businesses. You own 100% of the business and get to make all the decisions. You’re also not required to hold shareholders’ meetings or take votes on management issues. Basically, you get full control! 

Unfortunately, some businesses, government agencies, and consulting groups will not work with unincorporated businesses suggesting their legitimacy or professionalism fall at a lower level. You can also run into difficulties raising capital or selling your business. As with anything in business, there are pros and cons. 

Partnerships 

There are various types of partnerships: general partnerships, limited partnerships, limited liability partnerships and limited liability limited partnerships. In general, partnerships in business is similar to a personal partnership. Business and personal partnerships involve: pooling funds, sharing skills and resources and sharing in the rise and fall of business.

A business partnership is a specific kind of legal relationship formed between two or more individuals to operate a business as co-owners. Each partner is an owner of the business who have invested their time and/or capital in some way. Some partners work in the business, while other partners have limited participation, and even limited liability for the debts or lawsuits. 

Generally speaking, a partnership is not a separate entity from the individual owners. The income tax is paid by the partnership, but the profits and losses are divided and paid by partners based on their initial agreement. They are referred to as a pass-through business, meaning the profits and losses of the business pass through to the owners.

However, some types of partnerships need to be registered with the applicable secretary of state. Partnerships almost always use an agreement to clarify the relationship between the partners, the roles, responsibilities, and their respective shares in the profits or losses of the partnership. This is known as a “partnership agreement.”

Before you start a partnership, you will need to decide what type of partnership you want, and this can be tricky as the different types of partnerships impute different liability/participation to the partners. 

How do you know which one is right for you?

Whatever business entity you ultimately choose will shape your journey as a business, and choosing the best structure for your company requires time and consideration. Each business entity comes with its own pros and cons.  The key is to figure out which structure gives your business the proper advantages to help you achieve your personal and financial goals. 

A formal setup and proper partnership/corporate documents are vital to the structure and function of your business. Without knowing your options you could miss out on an opportunity to establish yourself best as possible, contributing to a long-lasting and successful business from the very beginning. 

https://www.stitcher.com/podcast/stupid-easy-paleo/harder-to-kill-radio-2

Listen here for a recent interview with Kristen Roberts on Harder to Kill Radio

https://www.stitcher.com/podcast/stupid-easy-paleo/harder-to-kill-radio-2

“I don’t want to be pigeon-holed. A lot of law firms, when you work at a firm, there’s this goal. The goal is to always become a partner, become a part owner. Well, how do you become a partner? Traditionally speaking, you bring in business and you build up a good business. That’s what makes you valuable to a company. I looked at that and I went, if I’m going to do that anyway, why don’t I just do it for myself? Then at least I get to call the shots and make the rules.”

The Importance of Creating A Protectable Brand

Creating a protectable brand is at the heart of any startup business. Not only should your brand be marketable, it should also be protectable under trademark laws. The easiest way to know your brand meets both criteria is creating a strong brand. That starts with your name.

Naming your business is an important first step and the foundation you build from. If you choose a weak brand name, your chances of protection are low. So what constitutes a strong brand name? How do you gain exclusive trademark rights?

The spectrum is split into two categories: descriptive and generic trademarks: your weaker marks, and fanciful, arbitrary and suggestive: your inherently descriptive trademarks.

Trademark protection will provide a type of safety net for your business or services. If you are in the beginning stages of branding, these four trademark categories will help you gauge exactly how strong your brand is.

A Generic Trademark

A generic trademark is a trademark or brand name that, due to its popularity or significance, has become the generic name of – or synonymous with – a general class of product or service. Did you know the trampoline was originally intended to be sold by a single individual, Larry Griswold?

Without specific language it is nearly impossible to protect that form of branding – usually against the wishes of the business holder. Nowadays anyone can create and sell a trampoline. You don’t want to be the next Larry.

To know how best to choose your brand and then to protect it, it is an excellent idea to consult the professionals. They can help you find the best distinctive brand so that once you create it, you know you can protect it.

A Descriptive Trademark

A descriptive trademark is a word that identifies the characteristics of the product or service. It is similar to an adjective. An example would be “cold and creamy” for an ice cream business. An easy way to determine your trademark would be to ask yourself, “Does this word describe the product or service?” If the answer is yes, the mark is probably descriptive.

Here are a few reasons why you should shy away from descriptive words or phrases:

  • They are conceptually weak and hard to enforce, so are usually unprotectable from competitors.
  • They are expensive to defend, because they are weak.
  • The time and money involved to register a descriptive mark (if you succeed) is high.
  • Descriptive marks don’t have a high sale value if you decide to sell/license the trademark or business.

Of course, there are exceptions to the rule: American Airlines gained entitlement to a trademark because they had an established business and had proven their value in association to the trademark.

So unless you have been in a well-established business for a long time and can prove credibility, or your name is Kardashian, descriptive trademarks are not ideal.

A Suggestive Trademark

A suggestive trademark is a distinctive – but not descriptive – mark which does not describe a product, but suggests or references it. This requires consumers to exercise imagination to connect the mark with the product.

“7-Eleven” is a great reference to a suggestive trademark. They are a convenience store that was initially open from 7 AM – 11 PM. Another example is Greyhound Bus, which suggests the service is fast, like a greyhound dog (which is their logo). These both reflect what the mark is or does with a little creativity.

A Fanciful Trademark

A fanciful trademark is when names and brands are not associated with any meaning until the launch of their company. “Starbucks” is the perfect example of this. They took a word not commonly in existence prior to use of the brand. Now everyone knows what you are referencing when they hear it.  

Just like the fanciful name suggests, they are essentially made-up brands. This grants them an advantage when it comes to trademarking due to the uniqueness and lack of competition.

An Arbitrary Trademark

An arbitrary trademark is a common-knowledge English word used to describe a product that doesn’t have any connection to the common definition. “Apple” is an arbitrary trademark because their product has nothing to do with the actual word “apple.”

But now, thanks to its popularity, we can associate computers with the word. This lack of word association puts you in a near-guaranteed category of protection.

Marketing is key to growing a business – but without protection, you won’t get the momentum you seek. This is why it is a good idea to get an attorney involved in this process.

A trademark attorney can help you understand the strength of potential marks and what level of distinctiveness they have when handed over to the USPTO. Develop brand strength early and trademark protection will always be on your side. Contact Trestle Law today to make sure you are on the right path to creating a protectable brand.