Deborah Sweeney, Author at She Owns It

3 Myths About Outsourcing Payroll by @DeborahSweeney

October 19, 2016 by Deborah Sweeney Leave a Comment

by Deborah Sweeney | Featured Contributor

“I’m ready to outsource my payroll! Now what?”

If you recently made this statement, congratulations! As USA Today columnist Rhonda Abrams once famously put it, if you have one employee it’s time to get a payroll service. The benefits of outsourcing payroll are seemingly endless — no more bouncing the books around to employees to tackle, worrying that you might forget to file a quarterly report, or wasting time or energy figuring out finances when you could be focusing on growing your business.

However, not everyone is so quick to delegate these duties elsewhere. For as much good as a third-party service can do, there are still certain misconceptions that may make businesses wary about outsourcing this kind of confidential information, even to a trusted provider. Let’s debunk three of the most common ones.

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Deborah Sweeney

www.mycorporation.com

Is Your Social Media Campaign Opening You Up To Liability? by @DeborahSweeney

August 3, 2016 by Deborah Sweeney Leave a Comment

by Deborah Sweeney | Featured Contributor

Companies offering goods for sale have wisely embraced social media to get their products out to as many people as they can. Oftentimes, these companies employ creative marketing campaigns that draw people to their products. These marketing campaigns can help your business grow exponentially with some smart and flashy presentation. However, the words you use within your advertisements could be opening your company up to a much greater risk than you first anticipated.

It’s common for companies to want to show how much they believe in their product. If the product or company is new, they advertise in a way that shows the company will stand by its goods. Other companies use advertisements that talk about the benefits of their products in a clear cut way. Though this has been a common practice in marketing for years, certain expressions can constitute an express warranty of a product. When this occurs, a company may be held liable if their product breaks the promise the company made while advertising. These types of accidental express warranties can happen with thought out and long planned marketing campaigns. This means with the quick and fluid nature of social media, every advertising post or tweet can get you into hot water. However, there are some easy steps you can take that will keep your costumers engaged without you opening up yourself to unwanted problems.

Make Sure you are Puffing

“Merely puffing” is a term of art that is derived from an English court case from 1893. However, courts in the United States still use it to describe marketing speak for advertising. Basically, the courts use the term when they find that a company used claims in their advertising that was meant to sell the product by boasting or exaggerating the claims. These types of claims are ones that an average reasonable person will understand as statements being used to sell a product. These types of claims will never be held to be an express warranty. Most companies utilizing social media rely heavily on puffing as it is a great way to entice customers and advocate for your brand.

Statements like “this is the only non-slip mat your friends will ever want” helps convey the greatness of the product without saying anything too specific. A consumer will not be able to point to an express statement giving them a guarantee unlike “this non-slip mat makes it impossible to fall.” There are plenty of ways that a product can be advertised without ever mentioning the specifics of quality or characteristics of the product. When using social media, you do not have to hold back on how awesome your product is so feel free to tweet or post about how amazing it really is. Just remember, when using social media portals, using statements that are vague or highly subjective will keep you in the clear.

Try Not to Promise What you Can’t Deliver

Direct promises and guarantees can be tricky business online. Stating claims about your product on the web can open the flood gates to some major issues if you aren’t careful. However, there is no reason you cannot mention the amazing things your product can do. When talking about your product, the most important thing to keep in mind is to claim only what the product is actually capable of doing. Imagine you were looking for a can of chicken broth to make some soup and you needed one without any bones. You come across a can that states it is boneless so you purchase it. However, when you go to use it, there are tons of bones in it. The fact that your purchase relied on the false promise of boneless broth the producer of the product will be held liable, even if all of their other cans had no bones. For the same reason, it is important to promise only what your product can deliver. Stating claims that sound good but are hard to guarantee is a risky move, especially online where information travels fast. This risky behavior could not only make your product look bad, but people may have legal claims against your company. That’s why it is so important to stand by your product in the best way you can, rather than stretch the truth to catch a couple of extra dollars. The small bump up in money won’t make the huge headache worth it.

Write out Your Rules

Another popular social media campaign aspect is setting up giveaways and guarantee campaigns. These campaigns can vary from “the first hundred people who retweet a post will win a free product” to saying “this product will keep you from getting a cold for two weeks or we will give you a hundred dollars.” When setting up an advertising campaign that involves an event, sweepstakes or challenge, it is important that you lay out your ground rules. The reason for this is to set up a situation where you control the outcome of your marketing goal. An online place, such as your website, where any participant can find the guidelines is all you really need. Just make sure you outline the requirements and the steps for how participants can receive their refund or prize. You want to make sure to have the information readily available for anyone who wants to participate and create clean steps that people must take to win the prize. You can place limitations on who wins, like one grand prize winner, or limit things like all the paperwork that must be filed with the company to show the participant has completed the entire process to be eligible. By stating these rules, you can create a campaign that provides great social media marketing while also protecting your assets.

By making sure your marketing team and you follow these simple rules, you can avoid unpleasant issues that may arise, which can lead to a bad reputation for your company. Just remember, you can stand by your product and see the growth of your brand as long as you use social media wisely.

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

As CEO of MyCorporation Business Services, Inc. (MyCorporation.com), Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With her experience in the fields of corporate and intellectual property law, Deborah has evolved from lawyer to business owner. She has extensive experience in the start-up and entrepreneurial industry as she has been involved in the formation of hundreds of thousands of businesses for MyCorporation.com’s customers.

Ms. Sweeney received her JD & MBA degrees from Pepperdine University. She is active in the community and loves working with students and aspiring entrepreneurs. She serves on the Board of Regents at California Lutheran University and is a founding member of Partners of Pepperdine. Deborah has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in the areas of corporate and intellectual property law. Ms. Sweeney is also well-recognized for her written work online as a contributing writer with top business and entrepreneurial blogging sites. She is a regular contributor on Forbes, American Express, Social Media Today, and BlogHer among many others.

In her ‘free’ time, Deborah enjoys spending time with her husband and two sons, Benjamin (8) and Christopher (6). Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Follow her on Twitter @deborahsweeney and @mycorporation.

Deborah Sweeney

www.mycorporation.com

The Basics of Establishing a Web Presence by @DeborahSweeney

May 27, 2016 by Deborah Sweeney Leave a Comment

by Deborah Sweeney | Featured Contributor

A 2014 study by Google found that a little over half of small businesses have a website, though it’s likely that number has gone up since the survey was done. Still, the fact that a little under half of small businesses don’t even have a website it appalling – without one you are losing customers every day. Over 50% of people surveyed said they look up a business online before making a purchase, and that same study found local searches are twice as likely to lead to a purchase. Creating a solid web presence, though, is more than just parking a site under ‘yourbusiness.com’ – you’re going to have to put in a bit more effort to see any real returns.

Domains and Websites

This is step one – buy your company’s related domain name and publish a site. The site doesn’t have to be fantastic, and there are plenty of services online that’ll help someone with little to no web experience publish a decent looking website. When designing it, though, remember that over 60% of all web traffic is now mobile, so at this stage use eye-catching graphics and write short, easy to read content. Your business’s name, address, phone number, and services offered should all be front and center. As a side-note, don’t ignore other top-level domain variants like ‘yourbusiness.net’ or ‘yourbusiness.biz.’ They aren’t as important as a .com, but it’s never a bad idea to buy as many reasonable tld variants as you can.

Social Media

Social marketing is more than Facebook, though having an active profile there is important. You’ll want to register your business on every major site – Twitter, LinkedIn, and even Instagram or Pinterest if you think you can market your product visually. Google+ needs to be on your list as well. Recently the site has been making moves to separate + from the more important ‘Local Listings,’ but that hasn’t happened yet. So grab a ‘Google My Business’ page while you can, and make sure your listing is up to date and looks nice. Then when Google inevitably separates their local/business section from Plus, you’ll be in a good spot to adapt to whatever changes Google implements.

Blogging/Cross-Blogging

Content marketing is how you turn your web presence from good to great. 70% of consumers now say they prefer to get to know a company through articles over ads, so producing good, well-written content is a must, especially if you’re based online or do business with people you do not personally see. The idea behind blogging is to foster trust in, and recognition of, your brand, so don’t just throw 800-word ads up every week and think that’ll do. Rather, you need to identify good topics about which you can write knowledgeably. When you’re first starting out, try focusing on common questions or sources of customer frustration. Then, as you get some experience, you can venture into advising on industry-specific issues. And, once you’re seen as something as a thought-leader, you can try cross-blogging with other companies and outlets. The more links into your site you have, the better your search engine ranking.

Creating a web presence requires much more than a website, though it’s a good place to start. The majority of your target market browse the internet, and a strong web presence makes it much more likely they’ll recognize, trust, and eventually patronize your company. Different business will have different needs, but at the very least make sure your business has a presence with its own site and on the major social networks. Then, as you grow, you can work on expanding that presence through content marketing. Before you know it your own small business will be popping up all over the internet!

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

Deborah Sweeney

www.mycorporation.com

Five Tips for Expanding Your Business by @DeborahSweeney

March 29, 2016 by Deborah Sweeney 1 Comment

by Deborah Sweeney | Featured Contributor

Expanding your business is, quite honestly, a lot like starting it. The steps, paperwork, and investments are all similar. Despite that, there are a few key differences that trip up small business owners. Expansion takes place over a much longer period of time, and you have to be careful not to hurt or ignore your original business while expanding into new markets. MyCorporation was actually suffering from over-expansion when I took it over, and there is nothing worse than having to forcibly shrink a company. So, to help other business owners avoid that unfortunate process, I usually give a few tips to those looking to expand.

Plan, plan, plan

The problem with our expansion under the previous owners was it was not an organic process. The company was structured in a way that put a strict time frame on the very lofty goals those in charge required of middle-management. Planning, if it was ever done, focused on the short-term. Before I decided to try expanding the company myself, I knew I had to specifically plan every move I made. That means setting milestones, sticking to budgets, and even having a way out if my ideas were not working. What do you want to do? Tap a new market? Enter a new city? Offer a new product? Track the steps towards that goal so you have a way to gauge how your expansion is going. There were a couple of times where I felt we spent too much and achieved too few milestones, so I backed off, re-wrote the plan of attack, and tried again.

Beg for Criticism

Once you have your plan written, beg anyone and everyone to take a look and talk through it with you. Parents, spouses, colleagues, old professors; really use your professional and personal network. It doesn’t matter how well trained you are, or how much experience you have, there will be something you missed. Expansion is a serious commitment of time, capital, and energy so, while it can be hard hearing criticism, the more holes poked in your plan, the better off you will be after you fill them.

Scale everything

One of the biggest misconceptions about expanding your business is that it happens all at once. You just decide to open a new store, or target a new demographic, and then you follow through. That simply is not the case. Expansion is best done through scaling. That was actually our biggest problem before I took over – management hired tons of salespeople, without investing in anything else. So while we got more orders, our infrastructure, equipment, and sale process never grew to match. This quickly became a logistical nightmare. Orders were dropped, people were upset, and we risked losing customers. After I scaled back, I invested in streamlining our order processing and filing before I started to salespeople back on so, when we did get more customers, we could handle them. It doesn’t matter if you’re looking at another location, or hoping to bring on different customers, or trying to sell something new. You need scale your business proportionately so it can support your goal.

Keep Customers Informed

When you finally start expanding your business, it is a good idea to let your customers know. You don’t have to share every, little detail, but a broad overview of what you’re doing shows your regulars you care about their business and want to explain why everything may feel a little hectic. People like to support their favorite businesses, and they will appreciate that small gesture. Generating a little buzz can only help your expansion efforts, so don’t shy away from this marketing opportunity.

New Licenses, Permits, and Registrations

Finally, don’t overlook any new legal paperwork you need. Heading into a new city means permits, licensing, and registering with the local tax board. Bringing on staff could affect your benefits package and tax brackets. A new product or service might require extra insurance or compliance with new regulations and laws. Make sure you fully research what you are getting into so that your expansion is not hindered by a misfiled or forgotten form.

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

Deborah Sweeney

www.mycorporation.com

Take These Three Steps to Grow Your Brand Right Now by @deborahsweeney

March 17, 2016 by Deborah Sweeney Leave a Comment

by Deborah Sweeney | Featured Contributor

Whether you and your business are new to the game, or you’ve been in business for a while and feel as though you’ve hit a lull, every business can stand to learn a new trick or two. If you’ve been wanting to take your business to the next level, but you’re at a loss for what comes next, try implementing these three easy tips for growing your business right now!

Amp up your cross-blogging.

Whether your company has a blog or not, writing guest posts for other blogs in your industry can be very beneficial to your business. You get to completely double your exposure by showcasing an article you wrote (that ideally links back to your website somewhere) to a new group of potential customers who haven’t previously heard about you, and might not have heard about you were you not being featured on a new outlet.

If you do have a blog, try and create cross-blogging relationships with other blogs in your industry. Most cross-blogging typically occurs once a month for each outlet, but if you find an outlet that really grooves with your company and vice versa, feel free to establish a more frequent cross-blogging rate. Conversely, if writing a lot of blogs isn’t something your team has the time to do, you can also arrange something that occurs once every couple months. Establishing a cross-blogging relationship with a company in your (or in a similar) industry can often times lead to a partnership down the road that goes beyond simply swapping blogs.

Stay on top of your marketing.

A large part of marketing these days is simply being a master of all things social media. The only way to know your way around social sites is to actively partake in them on a daily basis. Never leave your audience hanging during the work week- you should at least be posting once a day to let your followers know you are a serious business with a serious online presence. As social sites continue to change in a non-stop way, the best way to adapt is to keep up and be an active user every day. If you take a break from your social sites, not only will your customers be wondering where you went, but something major could change that you may not be accustomed to upon your return, setting your business behind its competitors.

Update your company culture.

Typically, behind every strong brand is a strong team of employees. The most successful businesses have a group of employees who not only get along, but who work together for the betterment of the company. Achieve this ideal company culture by paying special attention to who you hire. On top of skill sets, really think about how these potential employees will mesh with the rest of your team.

Don’t be afraid to liven things up by keeping the office a fun, warm place to be. Celebrate birthdays, watch major sports games together in the break room, take office field trips to the nearest frozen yogurt establishment on the hotter days this summer- don’t be afraid to get creative!

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com

Deborah Sweeney

www.mycorporation.com

What is a Business License and why do I need one? by @DeborahSweeney

January 7, 2016 by Deborah Sweeney Leave a Comment

by Deborah Sweeney | Featured Contributor

When you’re first starting a business, lots of things can seem unclear or confusing. Picking an entity, getting employee contracts figured out, and researching which sorts of licenses and permits pertain to your business personally can all prove to be daunting tasks. Luckily, there are plenty of online resources available to entrepreneurs to help guide them through the thick of it all. The Small Business Administration being one of the many helpful sites out there.

But today, we will make one of the hazier parts of starting a business clear: business licenses!

Firstly, what is a business license?

A business license is any government issued permit or registration that a business owner is required to obtain at the federal, state, or local level in order to legally conduct business. Basically, you need these licenses in order to officially open up shop. So it’s important to get this all squared away as a business owner before you want to start inviting customers into your store front!

Does my business definitely need a business license?

Almost every single local government requires every business inside the city or county to apply for at least the basic business license and pay the basic business license fee. So, in short, yes, your business definitely needs a business license. This license acts as a minimum tax levied against the business in a concentrated area. Do to this, some areas call the license a tax registration certificate instead of a business license altogether.

Now how do I get one for my business?

Any city website is a good place to start to look for how you can get your hands on the necessary business licenses your new company needs. If you’re in the neighborhood, stop by your local city building. They’re sure to have all the business licenses and permits your business could ever need. If you live in a smaller town, however, you may have to go on up to the county level to see if you can find the info you need on the county website, that is, if the small town you live in doesn’t have a licensing bureau. If after that you still can’t find anything, check out the state government. Most of the states have licensing guidance applications, and if they don’t have that, they will have a guideline with licensing requirements for you to easily follow.

Once you’ve filed the initial licenses, do you ever have to renew your licensing and permits?

Yes you do! Once you apply for and receive your license or permit, you will eventually need to renew it. Rules vary, but most likely, your city, county and state are going to need you to pay an annual fee along with renewing your licenses. Since it’s just a renewal, the fee isn’t too large, but don’t forget to renew because if you fail to do so and continue to conduct business, you could have to fork over hundreds if not thousands of dollars! So stay on top of your renewal fees!

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

Deborah Sweeney

www.mycorporation.com

What’s the difference between an S-Corporation and a C-Corporation? by @DeborahSweeney

December 15, 2015 by Deborah Sweeney Leave a Comment

by Deborah Sweeney | Featured Contributor

For all the new small business owners out there deciding which entity to file their business as, and the already-formed corporations thinking about tacking on a different election, this is the post for you. Choosing the right entity for your business is a huge enough deal, weighing the pros and cons of all the different elections is another entirely different ball game. Basically, there’s a lot to research when you start a business.

First of all, how exactly does one define a regular Corporation?

A corporation is an independent legal and tax entity, that’s legally separate from the people who own, control and manage it. Because of this separation, the owners of a corporation don’t use their personal tax returns to pay tax on corporate profits—the corporation itself pays these taxes.

Owners pay personal income tax only on money they draw from the corporation in the form of salaries, bonuses, and the like.

The C-Corporation

A C-Corporation is the most general type of corporation you can have. The owners of a C-Corporation are mostly protected from personal liability for business debts, although, if the corporation doesn’t follow the formalities of a corporation, there can be problems with personal liability. As a result, the formalities such as filing annual reports, maintaining separate bank accounts, keeping track of meeting minutes, and holding shareholders meetings are very important.

A huge benefit of owning a C-Corporation is that the owners can share corporate profits with the corporation, lowering the overall tax rate. A C-Corporation can also have an unlimited number of shareholders. Plus, if you wish to take your company public (selling shares over a public trade), you will definitely need to be in a C-Corporation, so starting out as one saves you some time and trouble down the road.

The S-Corporation

An S-Corporation is a C-Corporation that has elected to be treated as an S-Corporation. It has the same personal liability protection and potential issues as a C-Corp, but it also comes along with some very precise formalities. An S-Corporation can only have a certain amount of shareholders and the shareholders must meet specific requirements. An S-Corporation also allows for corporate profit sharing, but the allocations must be done in accordance with the shares each owner owns. A benefit to this is that owners can use any losses of the corporation on their personal income tax returns, reducing personal tax liability in many instances.

In an S-Corporation, all business profits “pass through” to the owners, who report them on their personal tax returns. The S-Corporation itself does not pay any income tax.

Therefore, an S-Corporation elects not to be taxed as a corporation. After the corporation has been formed, it may elect “S-Corporation Status” by submitting IRS form 2553 to the Internal Revenue Service (in some cases a state filing is required as well).

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

Deborah Sweeney

www.mycorporation.com

So You Want to Dissolve a Business… by @deborahsweeney

November 12, 2015 by Deborah Sweeney Leave a Comment

by Deborah Sweeney | Featured Contributor

Whether things didn’t work out with your last venture, or you’re just moving on to something new, sometimes businesses close. Unfortunately, a lot of small business owners don’t know that there’s a process beyond simply closing your doors and putting a sign on the door. If you fail to officially dissolve your business with the state when the time come, you could end up paying unnecessary taxes, annual state fees, late fees, and additional charges. To avoid all that, follow these four steps:

File Articles of Dissolution

When a business terminates, it needs to file articles of dissolution (also known as a certificate of dissolution or a certificate of cancellation) to make the close official. If you do not file your articles of dissolution, your business will go on being an active entity in the Secretary of State’s eyes. That means that, legally, your business will need to continue filing its annual reports, paying state fees, and paying taxes, even if you are technically closed. You have the option of doing the paperwork yourself, but many small business owners opt for the use of a filing service to help ensure all the paperwork gets done correctly. If you do choose to file the articles yourself, just be sure to do your research- one incorrect paper could add up to some hefty charges.

Don’t Forget About the Annual Tax Return

Though filing your articles of dissolution will stop you from having to pay any future taxes, you still need to file an annual tax return for your last year of doing business. Even if you didn’t do business for almost the entire duration of the year, you still have to pay for the time you were in business. When filing your final tax return, check the ‘final tax return’ box to notify the state that this is your last one. This goes for your employment tax return as well.

Tell the Necessary People That You’ve Closed

Is your business registered with the state? Contact the state and let them know you’ve dissolved your business. All of the insurance providers associated with your business? Let them know the same. Anyone who has previously worked for or with your business needs to know that you will no longer be there. More than just the people who provided your business a service, like the state and your insurance broker, your partners need to be notified as well. Just a small note or an email letting them know that you’ve enjoyed working with them, but you will no longer be conducting business, is the courteous thing to do.

Try and Make Some Money

Lastly, regain some of the money you may be losing by selling what you can of your business. Everything from office necessities like the break room refrigerator to supplies and company machinery. Just be sure to report all your business assets. Take stock of what you have, and make the most of it.

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

Deborah Sweeney

www.mycorporation.com

Everything You Need to Know about Registered Agents by @deborahsweeney

September 3, 2015 by Deborah Sweeney 1 Comment

by Deborah Sweeney | Featured Contributor

Starting a business involves making a lot of choices, and with those choices comes the opportunity to do plenty of research. You have to choose the right entity to file your business as, you need to become an expert on small business taxes, and you need to weigh your options when it comes to hiring a registered agent service or being your own registered agent. Consider this your registered agent (or RA) research.

First of all, what is a Registered Agent?

A registered agent is an “agent” of your corporation or LLC. You’re supposed to officially designate this agent at the time of your incorporation or LLC registration in accordance with state requirements. The main role of a registered agent is to act as the representative for accepting Service of Process, and to forward any and all official legal and tax correspondence from the state to you, the business owner. They receive business and legal documents from county, state, and U.S. agencies. These documents include such things as notice of litigation (as mentioned above) franchise tax forms and annual report forms. Basically, a registered agent is an individual or entity who receives documents relating to the corporation. In most cases, having a registered agent, whether you act as your own or hire a service, is mandatory.

Why exactly do you need one?

Once a business is formed on the state level, most jurisdictions require corporations or Limited Liability Companies to designate a registered agent to receive documentation on behalf of the company. You also need one to remain in compliance with state law. If you don’t register and designate an agent your company: can’t legally enter into contracts and gain access to the state court system, is subject to monetary, civil, and possible criminal sanctions, and/or cause your jurisdiction to revoke a business’s corporate or LLC legal status.

Registered Agent Conditions

Your RA must have a physical street address in the state your company is formed. This means no P.O. Boxes. Additionally, the RA must be available during regular business hours to receive service of process. Their name and address needs to be listed on the formation documents of the business and that information is kept on record as the official contact for the company. In fact, registered agent information is considered a matter of public record.

Your Options

A small business owner can definitely act as their own registered agent, just be sure to understand all that that entails, like needing to stay open during standard business hours. You get to save some money and not deal with a third party service, but make sure you’re keeping everything compliant or you stand the risk of falling out of good standing.

You can also hire an outside service to act as your registered agent. Many business owners like this option because it gives them a sense of privacy. Were they to ever be served, the mail wouldn’t be delivered directly to them; it would be delivered to their registered agent. This way, if a document must be served to your company, it will be served to the independent third party, as opposed to serving you with legal and/or personal business documents in the presence of customers, clients, vendors, employees, and neighbors.

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

Deborah Sweeney

www.mycorporation.com

Can You Sue a Customer For Leaving a Bad Review? by @deborahsweeney

August 26, 2015 by Deborah Sweeney 1 Comment

by Deborah Sweeney | Featured Contributor

Do people love you on Yelp? Hopefully they do, since 90% of consumers who read online reviews say they influence buying decisions. A recent study from Cornell also found that people who read online reviews normally perceive them as an objective factor in their decision-making; despite the fact the individual reviews are highly subjective. Enough bad reviews, especially when a company first starts up, could sink the business.

Understandably, a lot of business owners don’t like how online review sites work. People tend to be more willing to leave a review after a negative experience, so companies with good overall customer service could still suffer. That feeling of powerlessness led some to take legal action against customers who leave bad reviews online, and I’ve talked to plenty of small business owners wanting to know if that was really an option. But the reality of the situation is much more complex than just sending a cease & desist letter to a disgruntled customer.

Is the statement defamatory?

Opinions are protected by the first amendment, be they good or bad. You cannot just sue somebody for saying something mean, even if you felt it hurt your business. The statement has to qualify as defamatory before legal action is even considered. Defamation is a completely false statement of fact that is injurious, and unprivileged. It is up to you to prove that a review is libelous, which you means you have to show it is not an opinion and that it is completely false. So the first question you need to ask yourself is whether or not the review is the customer’s actual experience with, and subsequent opinion of, your company. You and the reviewer may have totally different stories as to what lead to the bad review, but you can’t prove the customer didn’t have a bad experience. But if they write that a cashier punched them in the face and stole their wallet after they walked through the door, and there is surveillance of that day that shows the reviewer never even stepped foot in the business, there may be a case.

Do you have a non-disparagement clause?

Non-disparagement clauses can, in most states, be added to a contract that you require customers and clients to sign before doing business. But they are morally questionable, and in some states illegal – California passed a law at the end of 2014 that barred businesses from drafting contracts that include clauses limiting a customer’s right to make statements about the business online. But a business owner living in a state where non-disparagement clauses are allowed could, theoretically, use those to prevent customers from posting negative reviews, usually by threatening a fine if the clause is broken. But it seems nearly every time a business tries this, they get destroyed in the court of public opinion – just look at what happened to the Union Street Guest House. Further, clauses like that could be painted as unconscionable if the case did wind up in court. Essentially unconscionability means the terms of a contract are unenforceable if they are so one-sided that a reasonable person would never knowingly agree to them. So not only are non-disparagement clauses bad for business, but they inhabit a very grey legal area.

What do you want to gain from this action?

Users who leave reviews that can actually be considered defamation usually cannot be reasoned with. There is no point to responding because any response would essentially be ‘that didn’t happen, and we can prove it.’ Legal action is an option for those reviews, provided the review is injurious to the business. But if you just want to censor everyone who writes negatively about your business, you need to re-examine how you respond to complaints. Sending a cease & desist or taking other legal action, more often than not, slams a company with negative PR. One bad opinion turns into thousands. Rather than intimidate a disgruntled customer into removing their review, reach out and try to solve the problem. Most review sites let business owners respond, and responding to complaints with calm, reasoned answers looks way better than having a lawyer send angry letters.

So can you sue a customer for leaving negative reviews? Yes, in some cases, but most of the time it’s better to just reach out, talk to reviewer, and try solving their problem.

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Deborah Sweeney – Legal Expert, CEO, MyCorporation.com – Calabasas, CA

Deborah Sweeney