Software as a service, also known as SaaS is something we interact with pretty frequently. If you’ve watched a show on Netflix recently, typed something into Microsoft or used your email app, then you’ve been utilising SaaS. In simple terms, SaaS allows users to access software online instead of individually installing the software into each device.  

So, if you’ve got a software you want to share with the rest of the world then you’re probably looking into building a SaaS business. Joining the tech world as an entrepreneur is an exciting step! Although, tech stuff aside, it’s important to understand the business-legal aspect of it all. 

That way, you can give your SaaS business the best chance possible out there. 

What Is A SaaS Business? 

A SaaS business makes a profit by putting their software online for people to purchase and use. For the most part, we don’t go to a store and have someone manually install the apps we want into our phones. SaaS businesses allow users to access their software from the internet and utilise it through a subscription based model or a one off purchase. 

Users are usually free to discontinue the service when they want and people are easily able to access the software, as it’s readily available online. In fact, most of the apps on your phone are considered SaaS. 

How To Start A SaaS Business

If you want to start your own SaaS business, then aside from designing the right software you will need to legally register your business. In order to do this, the first step is to establish a legal structure for your SaaS business. 

The three common types of legal structures are: 

  • Sole trader
  • Company 
  • Partnership 

Each structure is different when it comes to registration, management and liabilities, so it’s important to think carefully so you can choose one that will be right for your business. 

Who’s Liable For The Business?

As a sole trader, you’ll be completely liable for your SaaS business. The business is legally ‘attached’ to you therefore, whatever happens with the business falls on you personally. Generally, people who want to run their business themselves and consider their business to be low risk choose to operate as sole traders. 

If your business is higher on the risk scale, then setting up a company might be the way to go. A company is a legal entity on its own. Therefore, the owners of the company have limited liability as the company can be responsible for legal matters, own property and have debts (however this does not mean company owners have zero liability or responsibility). If you’re in a partnership, then you’ll need legal documents like a Partnership Agreement to determine liability and responsibility of the company between partners.  

Legal Documents For My SaaS Business

When you combine intellectual property with sales, the line can get blurred and sometimes, things can be a bit tricky. However, this can be easily overcome with the right legal documents. 

A few legal agreements you may want to look into getting for your SaaS business include: 

SaaS Terms and Conditions: When you allow users to interact with your software, setting some ground rules can limit your liability, secure your revenue streams and overall, keep your SaaS business protected. 

Software Licence Agreement: Licencing allows you to safely let others utilise your creation, without compromising your ownership. Having a Software licence agreement can make sure there’s no blurring between lines and important legal information is clearly communicated.

Privacy Policy: When people interact with your SaaS business, it may require you to collect their personal information such as names, emails or phone numbers. When your business does this, then you’re legally required to have a privacy policy, which lets people know what’s being done with their data.  

Disclaimer: You may have noticed disclaimers on a lot of software purchases you’ve previously made. This is because, as a SaaS business, there’s only so much control you have over what happens with your product when it’s being used. A disclaimer can help keep your SaaS business’s liability in check.  

Strong, well drafted legal documents can protect your business, your software and your customers, so it’s worth getting done by an expert. 

Next Steps 

Building a SaaS business is an exciting venture however, it’s important to take care of all the legal considerations so you can protect your business and software. To summarise what we’ve discussed: 

  • SaaS (Software as a Service) allows online access to software instead of individual installations
  • SaaS businesses profit by offering software through subscriptions or one-time purchases
  • Legal structure options for SaaS businesses: Sole trader, company, partnership
  • Liability: Sole traders are personally liable, companies have limited liability, partnerships require a Partnership Agreement to sort out matters like liability 
  • Important legal documents for SaaS businesses: SaaS Terms and Conditions, Software License Agreement, Copyright License, Privacy Policy, Disclaimer 
  • Prioritise legal considerations to protect your SaaS business and software 

If you would like a consultation on your options moving forward, you can reach us at 08081347754 or [email protected] for a free, no-obligations chat.

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