One Social Media Mistake Could Cost Your Business Thousands—How to Stay Safe Online
- Krystle Oshon
- Mar 28
- 4 min read
Updated: Apr 25
Lisa built her jewelry business from the ground up, using Instagram and TikTok to reach customers, collaborate with influencers, and showcase her creativity. Everything was going well—until one video changed everything.
She posted a short promotional clip featuring a trending song. It went viral. Due to the use of the song, the song’s copyright owner acted. Weeks later, Lisa received a takedown notice and a $5,000 demand for using the music without proper licensing.
This scenario isn’t unusual. Social media can be a powerful asset for small businesses and entrepreneurs, but it carries legal risks that many don’t fully understand. A casual use of a song can lead to lawsuits, fines, and lasting reputational harm.
Today’s entrepreneurs must do more than market their businesses—they must protect them. This post outlines five of the most common legal mishaps on social media and steps to avoid them.
The Legal Risks Behind Every Post
Social platforms such as Instagram, TikTok, LinkedIn, and X (formerly known as Twitter) are essential tools for brand visibility. However, entrepreneurs must navigate the web of intellectual property laws, advertising standards, and contractual obligations. Understanding these areas can mean distinguishing between a successful post and a costly legal issue.
1. Misleading or Exaggerated Advertising
Promoting your product or service online requires more than creativity—it also demands accuracy. The Financial Industry Regulatory Authority (FINRA) fined M1 Finance $850,000 after influencers made unsubstantiated claims while promoting the company. Because M1 failed to supervise this content, it was held responsible.
How to protect your business
Ensure that every promotional claim is truthful, substantiated, and presented. Review the Federal Trade Commission (FTC) guidelines on advertising and marketing. If you collaborate with influencers, confirm that their messaging aligns with your brand’s legal responsibilities.
2. Unauthorized Use of Copyrighted Content
Copyright laws protect music, photos, videos, and even memes. Using them without permission—especially in a commercial context—can result in infringement claims. For example, Universal Music Group filed a suit against Chili’s after the restaurant used licensed music in its social media ads without proper permission.
How to protect your business
Use royalty-free or adequately licensed media. Reliable resources include platforms like Unsplash and Creative Commons. Always read licensing terms, especially when creating content to promote a product or service.
3. Defamation and Harm to Reputation
While social media allows entrepreneurs to express opinions, it also carries legal responsibilities. Sharing false or damaging statements about competitors, clients, or former employees can lead to defamation claims. Nine Line Apparel, for instance, filed a lawsuit against an influencer whose negative posts allegedly caused over $2 million in lost revenue.
How to protect your business
Maintain professionalism in all public communications. Avoid personal attacks, inflammatory language, or public disputes. If you must address concerns or respond to criticism, rely on facts and maintain a tone consistent with your brand’s values.
4. Inadequate Disclosure of Paid Partnerships
Influencer partnerships are a popular marketing strategy, but failure to disclose paid relationships can lead to FTC violations. Both businesses and influencers may face legal consequences for misleading consumers about the nature of a promotion.
How to protect your business
Disclose all partnerships clearly and visibly. Use tags such as #Ad or #Sponsored at the beginning of captions, not hidden among other hashtags. Ensure influencers understand the requirements before they promote your products.
5. Sharing Confidential or Regulated Information
Some posts may unintentionally breach confidentiality agreements or legal disclosure rules. DraftKings experienced this when the U.S. Securities and Exchange Commission (SEC) fined the company $200,000 for posting earnings results on social media before officially filing them with investors.
How to protect your business
Before sharing information about performance, partnerships, or operations, review any applicable contracts or non-disclosure agreements (NDAs). If unsure whether something can be shared, seek legal guidance before posting.
A Legal Checklist for Social Media
Before publishing any post, consider these essential questions:
Do I have the legal right to use every element in this post, including media and text?
Is every statement accurate and supported by evidence?
Have I disclosed any material partnerships or sponsored content clearly and prominently?
Could this be interpreted as defamatory, misleading, or confidential?
Does this post comply with platform-specific rules and community guidelines?
If you can confidently answer “yes” to all the above, you’re in a much stronger position to post responsibly.
Additional Best Practices
Train your team.
Anyone managing your social media accounts—in-house or contracted—should be familiar with your business’s legal standards.
Monitor your brand’s presence.
Use tools like Google Alerts or Brand24 to stay informed about how your brand is being represented online and be ready to respond to potential issues quickly and professionally.
Understand platform-specific policies.
Each platform has its terms of service. Violating these rules can lead to content removal, account suspension, or worse. Staying informed will help you post within those boundaries.
Final Thought
Social media offers entrepreneurs unprecedented opportunities to connect with customers and grow their brands. However, it also comes with legal responsibilities that should not be taken lightly. A single misstep can have serious consequences.
Entrepreneurs can protect their businesses by understanding the risks, adopting proactive safeguards, and building engaging, authentic online communities.
Take a moment to pause, review, and think critically before you post. Your business, reputation, and future success depend on it.
Sources
• Federal Trade Commission (FTC) – www.ftc.gov
• U.S. Securities and Exchange Commission (SEC) – www.sec.gov
• Financial Industry Regulatory Authority (FINRA) – www.finra.org
• Universal Music Group v. Chili’s – Press Release
• DraftKings SEC settlement – Press Release
• Nine Line Apparel v. Sergio – Case documents
• M1 Finance – Press Release
I really enjoyed reading your blog post, as I think you do a fantastic job starting with a cautionary tale of how small business owners need to be careful when marketing their business. You do an excellent job of discussing the various legal risks that are associated with marketing across social media, which has become a dominate marketing platform. I think the alternation between legal risk and potential way to protect against that risk serves as an excellent strategy for helping small business owners navigate legal risks that may be of greater importance to them. I also really enjoyed the legal risk checklist that you included as it could provide invaluable advice to a small business owner preparing to make…
Hi Krystle! I very much enjoyed reading your blog. My second blog post was also centered around social media, except in the hiring space. Legal concerns related to social media job advertising came up in my research process. It was interesting to see you tackle the advertising issue in the context of companies’ products and services. You did a great job of explaining that issue and highlighting how businesses can avoid liability. I particularly liked how you organized your blog. Explaining each legal risk and providing clear recommendations for businesses immediately after that explanation made your post digestible and engaging. Your “Legal Checklist” was also a great way to summarize your thoughts and get the audience thinking about what they…
Krystle, I appreciated that you started your blog with an example of a business owner and her mistake to help set the scene for the rest of your blog. Your example was practical, as I know a lot of brands that solely promote and build their brand on social media platforms like TikTok. I remember when TikTok was going to “shut down,” and so many business owners rightfully panicked and shared their fears, as that app was where their main source of income derived from.
You are so right when you said promoting a business online “demands accuracy,” since a company’s digital footprint could permanently damage its reputation. As you touched upon, I have seen brands send products free of…