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What Legal Issues Should I Consider Before Starting a Social Network?

I'm interested in creating a social network. Are there any legal issues I should consider before I start or along the way? For example, could the data I'd like to collect from users (and how I use that data) have legal issues that need to be addressed? What about how members will interact with each other or the types of content members can create and share? With so many social networks already out there, are there ways I can minimize risk when it comes to getting sued by others who may see my site as competition?

Like any other business endeavor, a social network brings up a variety of legal issues. Here are just a few that you'll need to consider:

  • Social networks can take a great deal of capital to get off the ground. Will you be looking for investors? Hitting up family or friends for loans? Documenting these financial contributions, and determining whether people are entitled to "a piece of the action," involves securities and valuation issues.
  • You'll want to choose a legal entity that will own the social network. Which form of business should you be? That depends on your financial plans and exit strategy.
  • How will you collect and then use data from users? This brings up a host of privacy issues--both in terms of sharing email addresses, as well as data security issues if you take credit cards, store Social Security numbers or collect other private information on your site.
  • If your social network is a playground, what kind of referee will you be? Users want to know there are "rules of the road" and what kind of treatment they can expect in your playground. If yours will be a social network for “haters” and I’m a pacifist, I’ll want to know that before I join. That's where your site’s terms and conditions come in handy.
  • And then there's the competition. First of all (and this is not strictly a legal issue), how will you distinguish your social network from the many others that are out there? If you don't have a clear and differentiated value proposition, you're unlikely to win people over versus the more known and popular sites already available. Second, if you’re a copycat network, you do run the risk of being sued, especially if your logos and design are similar to those that already exist and have achieved some prominence.

Those are some initial thoughts. If you're serious about getting this started, and it's not just a pipe dream, you'll want to flesh out your plans to take full account of the competition, and consult with a business attorney who is familiar with doing business and creating networks online. Investors in particular will want to see that you have weighed all of the risk factors carefully before they pony up their cash.

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