What type of business is a dating app

1. Corporate Structure. The starting point for any business is its skeleton, or corporate structure. Operating as a sole proprietorship is strongly discouraged, and some form of corporate entity should be utilized when operating the online dating site. The type of corporate entity will vary depending on a number of factors, including tax considerations, the nature of the business model, anticipated revenues, and asset protection concerns. Various options exist for incorporation, including Subchapter “S” or “C” Corporations, Limited Liability Companies (LLCs), or Limited Liability Partnerships (LLPs). The owners of these entities can be individuals, trusts, or other corporate entities. Sometimes, more than one corporate entity is necessary to accomplish certain objectives such as diversification of risk. In consultation with your CPA and general counsel, the proper corporate structure should be discussed and implemented.

2. Business Plan. Often, many Internet entrepreneurs begin without some form of organized business plan. The days of being able to throw together a website and hope for the best are long gone. At a minimum, the business model should identify the target market, revenues, capital contributions, promotional activities, goals, competitors, and legal concerns. Various online resources exist to assist in creating a formal business plan. Many times, the creation of a business plan will help identify the strengths and weaknesses of the proposed business model and may result in critical alterations before the site is launched. The single greatest reason why most Internet businesses fail is the lack of a coherent business plan, along with insufficient capitalization.

3. Online Agreements. Implementation of properly drafted online legal agreements is critically important for the protection of your business investment. Users and members should be required to adhere to a set of Terms and Conditions which outline the relationship between the site and the user, and address such issues as disclaimers, waivers, limitations of liability, assumption of risk, dispute resolution, attorneys’ fees, intellectual property, and a host of other legal and practical issues. State law occasionally requires inclusion of certain notices or disclosures to users. Online dating sites should require users to provide a broad waiver of claims resulting from inappropriate and/or illegal behavior by and between individuals who meet through the dating platform. One jury verdict can destroy a successful business, however, a comprehensive set of Terms and Conditions, implemented in a legal manner, can save the site operator significant grief in the event of a claim. Other online agreements and policies should be considered, such as privacy policies (including new state law requirements), spam policies (necessary if the site is promoted by bulk email or affiliate marketing), affiliate agreement, DMCA Notice and Takedown Policy, subpoena policy, warning page, etc. With proper online agreements, an ounce of prevention is truly better than a pound of cure.

4. Age Verification. Online dating sites are generally only appropriate for individuals over the age of 18. The Child Online Privacy Protection Act (“COPPA”) also restricts the manner in which certain websites can interact with children. Therefore, some form of age verification should be implemented to screen minors prior to allowing users to access the site. Various tools are available to age verify users and members consistent with the site’s business model and risk tolerance.

5. Copyright Protection. Your text, graphics, logos, design and images, along with overall look and feel of your website, may be protected under copyright law. Generally, computer programs can also be copyrighted. Therefore, online dating site operators are encouraged to protect their business assets by registering all available copyrights with the United States Copyright Office. You should familiarize yourself with the ways in which copyright laws can help protect your business and prevent competitors from infringing on your intellectual property.

6. Brand Name Protection. Your trade name, generally your chosen domain name, is also your business brand, and the name by which you will be known in the industry. As your business grows more successful, that brand name increases in value, given the goodwill associated with it over time. Popular businesses are often imitated, and you can expect competitors to attempt to trade on your established business name. In the event you select a distinctive brand name, any competing use that causes consumer confusion may be a violation of your trade name or trademark rights. You should consult with an attorney early in the process, to choose a business name that is capable of trademark protection so that you can prevent competitors from using similar brands in commerce. Due consideration should be given to state and/or federal trademark registration and zealous enforcement of trademark rights, including protection against cybersquatters or typosquatters.

7. Promotional Liability. The Federal Trade Commission (“FTC”) is the federal agency with jurisdiction to enforce laws pertaining to unfair competition and/or deceptive trade practices by websites. The scope of what might be considered an “unfair” trade practice is broad, and dating websites have been a favorite target of FTC enforcement actions. Special consideration should be given to offers of “free” products or services, along with any consumer transaction where the user is surprised by some activity or charge. The FTC also imposes certain requirements on automatic rebilling of membership fees. Experienced advertising counsel can help identify legal concerns relating to promotional activities and your marketing plan in general. If any promotional activity occurs using unsolicited bulk email, advice should be obtained regarding compliance with the CAN-SPAM Act which highly regulates such activity.

8. Obscenity/ Indecency/ First Amendment Concerns. Many dating sites allow users to post sexually explicit images in connection with their profiles, and some tend to appeal to more erotic viewpoints. Any image depicting nudity or sexual activity that appears on an Internet dating site will implicate various legal concerns pertaining to obscenity, indecency, and the Records Keeping and Labeling Law, Title 18 U.S.C. § 2257. This is a complex area of the law, and one to be evaluated only by a specialist in the area. Under current federal law, all images depicting sexual activity published by a website need to be accompanied by a disclosure identifying the custodian of age records pertaining to the model depicted in the image. Failure to comply constitutes a five (5) year federal felony, with up to ten (10) years in prison for repeat offenses. The producers and publishers of such images also need to create and maintain certain categories of age verification documents associated with the performer. Some online dating sites can claim an exemption from this requirement, depending on their business model. While Section 2257 has been subject to numerous legal challenges, full compliance is recommended for all individuals or companies subject to the requirements.

Any sexually explicit image that is deemed obscene can result in a variety of charges under state and federal law; some with significant penalties, fines and forfeitures.

Careful consideration should be given to any dating platform that allows users to instantly post explicit images of themselves (or others).

Some images which are not obscene may still be considered “harmful to minors.” Laws restricting access to such images exist in many states. Congress passed two such laws – the Communications Decency Act and the Child Online Protection Act – but both were invalided by the courts. While the legal risks in this area are minimal, a dating site operator should evaluate options to restrict minors’ access to explicit images since these decisions can impact the availability of banking, credit card processing, and other third-party services.

9. FOSTA/SESTA. In April 2018, Congress passed FOSTA/SESTA (“FOSTA”) which creates civil and criminal liability for websites that promote or facilitate prostitution, or that contribute to sex trafficking. Prior to this law, website operators were immune from the vast majority of these claims under Section 230 of the Communications Decency Act. FOSTA changed the legal landscape for online dating site operators and requires careful moderation of user content. Any effort to use the platform for prostitution or sex trafficking can create massive legal liability for the operator. Every available effort should be taken to weed out users that abuse the dating platform to engage in these activities.

10. Employees, Wages, and Taxation. An online dating business is the same as any other business, in various respects. Those employed to perform services for the business must be properly categorized as employees, when appropriate, and paid wages with proper income tax withholdings performed. State and federal authorities will ultimately determine whether a specific individual is an employee or an independent contractor. Mis-categorization of employees as contractors can result in substantial claims against the operator by individuals or governmental entities. Careful consideration should be given to such matters as employee handbook creation, overtime, vacation and benefits policies, confidentiality and non-compete agreements, and other typical employment matters. Sexual harassment concerns occasionally arise in any business focusing on intimate relationships between human beings. Therefore, a specific policy pertaining to workplace environment and sexual harassment complaints should be considered and implemented.

11. Website Development Issues. Another area of concern relates to the development of the online dating site itself. If an independent website development company is chosen to create and maintain the website, appropriate legally binding contracts should be executed addressing issues such as who owns the copyright to the website content, how the developer will be paid, whose obligation it is to maintain/repair the site or defects therein, domain ownership, dispute resolution, and what happens if the relationship is terminated. Importantly, creators of expressive works such as websites are ordinarily presumed to be the copyright owner under U.S. copyright law. If the operator intends to own the site content, this should be reflected in a proper work-for-hire agreement.

12. Shareholder Issues. The final consideration on this legal checklist involves the relationship between the owners of the business. If one person is the sole owner of the operation, this last consideration may not apply. However, to the extent that various individuals are operating as mutual owners, shareholders, or partners in a business venture, their relationship between each other must be clearly set forth and agreed to in an operating agreement or a shareholder agreement. Inevitably, disputes will arise, and some method must be agreed in writing to address how those disputes will be resolved. The worst scenario is a corporation equally owned by an even number of shareholders, which allows for a deadlock in decision making to occur. In the event of a deadlock, the corporation or business entity may be thrown into receivership, whereby a receiver takes over the operation and decision-making functions, so that the business can continue to operate despite the deadlock between shareholders or owners. This is all expensive, time consuming, and emotionally draining on the owners, and should be avoided at all costs. The development of an operating agreement between the owners is a critical part of the creation of the business venture, and the best time to address difficult issues between business partners is at the beginning, when there are no disputes. Many issues typically covered in the shareholder or operating agreement are not often considered or anticipated by the owners, such as the event of death or disability of one or more of the shareholders, the desire to sell shares to a third-party, the rights of a divorced spouse to all or part of the business, and other such uncomfortable matters. Some of these concerns can be addressed by simple legal tools like insurance, trusts or incorporation of rights of survivorship into the ownership structure. All of these issues should be considered and addressed before any disputes arise to allow for the smooth functioning of the business and the efficient resolution of disputes or major decision making.

Conclusion

The above checklist represents some of the typical legal matters commonly encountered by online dating sites. The best time to address these legal matters is before an issue arises, forcing the business into “emergency mode.” Many legal emergencies can be avoided with minimal preparation, whereas failing to address important legal concerns can result in major disruption, or even destruction of, an online dating business venture.