Why Should You Have a Limitation of Liability Disclaimer on Your Website?

James Chiodo, Certified Information Privacy Professional CIPP/US

Limited Liability is a legal protection limiting your personal financial risk in relation to your eCommerce business.

There are two aspects in establishing Limitation of Liability: (1) Forming your eCommerce business as a Limited Liability Company (LLC.) and (2) The Limitation of Liability Term of Use is a legal disclaimer.

There Are Two Aspects in Establishing Limitation of Liability:

  1. Forming your eCommerce business as a Limited Liability Company (LLC.) Your financial risk exposure is only limited to the financial investment amount you “put in” to your eCommerce business.By law, your liability is limited to the amount invested in your business. It may also legally protect any investor, partner, or member who invested in your eCommerce business; their risk is also limited to the amount they invested into the business.
    Important to note: Forming a LLC company is in accordance to state law; verify the limited liability law for your state prior to forming an LLC.
  2. The Limitation of Liability Term of Use is a legal disclaimer for eCommerce businesses. It gives public notice that your eCommerce business shall not be liable for any legal damages arising from actions beyond your control, actions your business is not directly involved in, and actions arising from the use of your eCommerce business (Website,) including actions arising from software accessed through your Website. The Limited Liability Term of Use is similar to the liability protection a LLC offers. However, it limits the damages to the amount the customer has paid for the Website services.
    Important to Note: Verify if your state law permits limitation of liability terms of use.

How Does a Limited Liability Protect Your Website?

Limited Liability is a legally permissible way to help protect your personal finances in legal actions that may arise in relation to your eCommerce business.

Forming your business as an LLC (if permissible in your state) or posting a Limited Liability Term of Use disclaimer on your eCommerce Website (again, if permissible in your state,) is a preventive form of protection. It can be viewed as “insurance” in protecting your personal assets.  It gives legal notice that liability and financial damages arising from legal actions against your eCommerce business are limited to the eCommerce business, and/or are limited to the amount a customer pays for your eCommerce business services (as used in above sample Limited Liability disclaimer.)

Not All Businesses May Be Afforded Limited Liability

Not all businesses may be afforded Limited Liability. Professionals such as lawyers, doctors, accountants, chiropractors, engineers, or architects are prevented by law and ethics from limiting their liability. Also, a LLC business formation or the use of a Limited Liability disclaimer is not a 100% guarantee shielding you from all liability.

A court of law will have the final say in any liability action brought before them, however, they may look to your eCommerce business formation and/or liability disclaimer in discerning if liability is applicable.

Having a Limited Liability disclaimer, or forming your business as a LLC (if permissible in your state,) is the most advantageous preventive action you can take in protecting your personal assets if a liability claim and/or lawsuit arises in relation to your business.

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