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Running a SaaS business is no easy feat. There are issues of company privacy, website privacy, and terms of service. Knowing the legal basics, you might encounter from a SaaS business can help you to seek the specialists you need and become familiar with the issues you might face.

Continue to read on to learn more about the common legal issues for SaaS companies.

What is a SaaS Company?

SaaS, or “Software as a Service,” is a company that hosts an application and makes that application accessible to clients online without the need for installation on a computer. Instead, the software is used remotely while hosted on a server by a SaaS provider or a third-party server.

What is SaaS Law?

SaaS law deals with the legal aspects of a SaaS company and the SaaS business model. Different legislation impacts both service providers and SaaS users with differing intricacies. A SaaS lawyer is a dedicated professional to legal issues that SaaS businesses and users will face and can be a valuable resource for SaaS companies to comply with online regulations.

Here is an article about SaaS law.

Common SaaS Legal Issues

SaaS companies face several legal issues, which can be complex and expensive to resolve. Therefore, you need to prepare for these issues and have a plan to deal with them. Of course, consulting internet lawyers can help. Some of the common SaaS legal issues include:

  • Warranty. Warranties cover any defects in the quality or performance of a product within a certain period after the date of purchase. Clients may demand warrants for specific aspects of the SaaS service, such as software performance. This issue is significant in a SaaS agreement, wherein clients have more options to bring legal action for warranty breaches for damages, much more than typical contract violations.
  • Privacy Policy. A privacy policy is legally required if your SaaS service gathers personal data. For example, a user's email address is one piece of personal data that almost all SaaS services will eventually acquire. There are rules regulating this in numerous nations and locations.
  • Liabilities. Many SaaS agreements limit the provider’s liabilities when they lose customer data. A release of liability agreement may be utilized to help with this issue. This is a significant issue because the data loss might significantly and negatively affect the customer's business.
  • Data Security. Another concern for SaaS companies is the security of their customer’s data inputs. Clients may question where their data is stored. Questions about the fate of their data in the event of a security breach, termination of service use, or bankruptcy may also arise.
  • Intellectual Property. A SaaS company provides online access to applications to a customer. The SaaS provider has all the rights to the application offered. Still, users may retain intellectual property rights to all the content they make using the application. Therefore, it is best for you to stipulate clearly in the SaaS agreement the users' rights to their content clearly in the SaaS agreement.

Here is an article for a legal guide for SaaS companies regarding data protection policies in the European Union.

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Legal Documents Needed to Run a SaaS Business

There are several documents that SaaS business aspirants must file to comply with the legal aspects of the business. Since this is a legal guide for SaaS companies, we present some of the essential documents needed.

  • Nondisclosure Agreement. A nondisclosure agreement is a binding contract between you and other parties you deal with. The signatories agree that any sensitive information they may collect about your company during their business dealings will not be disclosed to any third parties. Read here to learn more about the NDA legal guide for SaaS companies.
  • Terms of Service. A terms of service is an agreement between your SaaS business and your clients about how they use your rightfully own software. This legal document includes rules on data security, customer access, termination of contract, and payment of charges. This article may be helpful if you want to know more about Software License Agreement legal guide for SaaS companies.
  • Proof of Concept (“POC”). A POC allows a potential customer limited access to the software to evaluate its versions, participate in the software’s development, and experience customized versions.
  • Independent Contractor Agreement (“ICA”). An ICA details the limitations of working with third-party (non-employer) services for tasks like software development. In this case, an ICA will address the issues of intellectual property and tax.
  • Master Services Agreement (“MSA”). A master services agreement allows your company to provide professional services to clients, which gives you the right to commercialize products made in said service.

Here is an article about the legal documents needed to run a SaaS business.

SaaS Legal Checklist

  1. Find a problem. Develop a Solution. You should know the value and solutions your SaaS can provide its consumers/customers and deliver better services than your competitors.
  2. Set up a business plan. Determine the process and organization of your business. Detail the financial, marketing, and technical needs of your business. Here is an article to learn more about this process.
  3. Conduct analysis and tests about your SaaS idea. One key step in validating the quality of your product or service is to do a survey and ask questions to your customers. Through this, you can find different problems that are present.
  4. Find the right price. You should find the right price adjustments that fit well with consumers' comfort. An excellent way to start is to know your competitors’ prices.
  5. Establish Your Identity and Brand. Make your company stand out among the competition. Establish your name, reputation, and credibility in the vast marketplace.
  6. Legalize Your Business. Completing the legal documents that can protect you, your customers, and other parties involved in the business.
  7. Funding. The assistance of angel investors or venture capitalists and even your savings can get your business running. Here is an article on different ways of funding.
  8. Develop Your Product. Hiring a software engineer or an IT developer is important, especially since there are levels of experience required depending on the software. But if you are already equipped with these skills, you can do it yourself and cut down on costs.
  9. Prepare a Market Strategy. Advertisements, partnerships, and social media marketing are the best ways to reach out to potential users and keep them engaged. This part determines the success of a business and how far the product can reach.
  10. Track the Success of Your Company. Building a business requires a good eye for keeping track of numbers, especially if it involves the growth of the market, user engagement, and profit. Monitoring these metrics gives you the advantage of knowing how to improve the product and the business.

How To Find a SaaS Lawyer

Hiring a lawyer familiar with software as a service can be important in ensuring that your business is established correctly. With the various forms of entity development, simple decisions such as choosing between the incorporation filing for an LLC versus a C Corp can be substantial.

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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