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If you have a membership site or are creating one as a primary part of your business, you’ll need to set up some items for legal purposes. Let's dive in and review the agreements you need.
How To Legally Protect Your Membership Site
If you have a membership site or are creating one as a primary part of your business, you’ll need to set up some items for legal purposes.
We’ll begin by looking at the legal basics for creating an online business and then move into the specifics you need for your membership.
- Trademark search: Run a trademark search to make sure that you’re not using a name for your site and materials that is already registered to someone else who has the exclusive right to use it.
- Copyright infringement check: When creating material for your site, you have to ensure that there are no copyright issues related to images, music, videos, screenshots, and other related materials that you’re using.
- Transfer of intellectual property (IP): If you have a contractor who’s making content for you, have them sign an IP transfer agreement that gives you the IP rights of all the material they made for you.
These basic requirements are similar for online businesses like course sites. However, there’s an additional must-have for a membership site: the Membership Agreement.
The Value of Getting Your Agreements in Writing
You need to get agreements in writing because it gives you legal protection. And you want to be covered, especially if it involves payment, regardless of whether you’re the one giving the money or someone is giving you money.
Written agreements are one of the most important concepts I want to get across to people. As a business owner, written agreements are one thing you have the most control over. It’s also one of the most important things you can do for your business.
Now, for membership sites, it’s especially important to have a membership terms agreement because you’re going to be charging people and you’re going to be continuing to charge them month in and month out. You want a written document that clearly says what’s going to happen so that they can understand and agree to it.
Differences Between a Membership Agreement and a Course Agreement
Membership Agreements and Course Agreements are similar. One of the things that is slightly different is that with membership agreements, your terms are likely to change over time.
What this means is that if your site offers monthly memberships, you could change month to month the amount you’re going to charge as well as what you’re going to offer as part of the membership plan.
That’s different from a Course Agreement where someone buys a course from you, and you complete the transaction. You can’t decide later that you’re going to take some of that away from your customer or you’re going to charge them more. You can charge future buyers more or you can charge future buyers less, but your agreement is static once it’s signed.
In contrast, a membership agreement can be changed. You’ll simply give people notice of the difference in terms and let them decide whether they want to stay or go. If they decide to stay, they’re agreeing to those new terms.
There’s a little bit more flexibility in a membership agreement. It should give you a little bit of comfort, as a business owner, that you can change your membership agreement down the line if needed.
7 Things You Need to Include In Your Membership Agreement
Now let’s look more closely at the details you need in your membership agreement.
What are your members going to pay? You have to decide on some membership and payment options: monthly only, a monthly option and an annual option, or annual only. You must choose which one you’re going to do and clearly lay out how it works for your members. Annual and monthly options have pros and cons, so it’s up to you to consider what’s best for your business.
An important consideration to think about is that if you only offer an annual membership, you’re potentially locking yourself into whatever you say you will provide as services for the price you set for a whole year.
Now, maybe that’s not a problem for you, but if you’re just starting with a membership, you might need a little more flexibility to tweak your offerings to make your service better. You may even decide to take out certain offerings if you realize they don’t work.
But whatever membership payment options you provide, your membership agreement must say how much must be paid and that the first payment is due immediately. Then you’ll have to say that all future payments are going to be made on the same day of the month going forward, and it’s going to continue until you cancel.
For memberships with multiple payment plans, there should be a bit more description of what the different options are.
Payment Plan Authorization
This is a clause in your membership agreement that states that the customer is giving you permission to continue charging their credit or debit card automatically.
The default is that the membership continues to automatically renew until canceled. But first, under the law, you must tell people how they can cancel. You must give them an email address that they can write to if they want to cancel, and you need to tell them what to do.
There are a few different cancelation policy models.
- Cancel anytime with no refund. Particularly for a one-year membership, a member can cancel from Day 1 up to Day 364, but no matter when they cancel, they won’t get a refund. However, they’ll still have access until the end of that year.
- Cancel anytime with a prorated refund. The member can cancel at any time and get a prorated refund, but they lose access at the time they cancel.
- Cancel and lose access immediately with no refund. When the member cancels, they lose access immediately and don’t get a refund. (I’ve personally never liked this practice. But if it’s what you choose, I don’t get to tell you how to run your business.)
The important thing about a cancelation policy is that besides telling people how to cancel, you need to tell them what’s going to happen if they do. You need to tell people because if you don’t, people are going to be angry. You’re going to have some really bad PR and some customer ill-will, and you don’t want that.
If you have a refund policy, you need to tell them what it is. If you don’t have one, just say so, too. Just set out whatever the conditions for refund are, just like in the cancelation policy.
What Members Get
Describe the minimum that the members are going to get as a product or service. You can always overdeliver, but you should lay out what you’re granting them in exchange for their payment. Are they going to get training? Will you do Q&As? You need to give them a sense of what to expect.
Your membership agreement must have a section that says that you, as the membership site owner, continue to own the intellectual property to the material and by accepting the member’s payment, you’re not transferring any IP rights to them.
You must have something in there as well which states that everyone agrees to protect the privacy and the confidentiality of the other members. In other words, what happens in the membership, stays in the membership.
There must be a clause on how you, as the business owner, and the member are going to resolve disputes. As in the context of the Course Agreement, you’re either going to choose arbitration or going to court as the mechanism for dispute resolution. Arbitration is what I tend to prefer. That’s not legal advice, that is just my personal business preference.
Whether you go with arbitration or the courts, your membership agreement must say that dispute resolution is going to happen where your business is located. It’s more advantageous for you that way.
Always Think About Legal Stuff First
Make sure you’re thinking about the legal stuff in your business and that you’re treating your business like a business and not like a hobby or a side hustle. If you want to make online business your profession and the way you make money, you need to know your legal basics.
With that, I encourage you to join my free program, BADA$$ Online Marketing University (BOMU) and check out our full course, Online Legal Foundations. It’s a free resource that dives deeper into the legal stuff that’s going to affect your online business.