Written by: Attorney Sam Vander Wielen, https://www.samvanderwielen.com
Watch Sam’s free workshop ‘5 Steps to Legally Protect & Grow Your Online Business’ here: https://www.samvanderwielen.com/legal-workshop/
Are you starting an online biz? Sure, being your own boss, pursuing your passions, and reaching new audiences are all very exciting dreams. Still, it’s easy to get caught up in the thrill and overlook the important legal stuff. Today I’m going to cover how to be compliant with important online business legal requirements from day one and avoid headaches down the road!
Starting your own online business is such an exciting journey. As an entrepreneur, you’ll have the flexibility to shape your own path and create the lifestyle you envision. Before officially launching though, it’s important to ensure you have the legal aspects covered!
Believe me, I totally get the temptation to dive headfirst into your online business like in the early days of eCommerce…what I like to call the Wild West. Back then, the thrill of breaking into uncharted territory made many want to cash in fast without worrying about the rules–consequences be damned!
But soon enough, rules kicked in to protect everyone in online transactions. And for good reason—e-commerce was booming. While the legal side may seem boring, compliance sets both online and home-based businesses up for success!
In this post, I’ll walk you through the top online business legal requirements you need to be aware of so that you can launch your business legally and smoothly!
Payment of Taxes
Well, friends, you know what they say–the only certainties in life are death and taxes. And when it comes to running an online business, taxes can get quite confusing.
Sales tax has become a major headache for business owners. It used to be collected only in states where your business has a physical location. But now, some states require you to pay sales tax no matter what–even if you don’t have a single storefront there. And each state gets to make up its own rules about what to tax and when. Ugh, right?
To avoid nasty surprises and since they vary by state, you have to look carefully at sales tax. One state requirement might give you a pass unless you hit a certain level of sales. Another might collect sales tax for even just one small sale. And depending on where you’re located, there may be income taxes, import duties, and environmental taxes too.
It’s a lot to wrap your head around! But I can help! In the Ultimate Bundle® resides countless helpful tools that will put your legal worries to rest. You can also check out my blog on The Online Business Owners Guided to Taxes!
Electronic Commerce Regulations
While we’re on the subject–don’t forget about those e-commerce regulations that I laid out in these steps to start an online business! You’ll need to share certain personal information and business details on your website. It’s no big deal; it’s just to give your website visitors an idea of who you are and what your business is all about. This could be your business name, address, registration number, email address, and official bodies you may belong to. This information usually lives in your website footer.
Marketing Infringement
I get how tempting it can be to get a little loosey-goosey with your online marketing. When you’re hustling to grow your biz, sometimes you convince yourself to stretch the truth just a teeny-tiny bit, right? I’ve seen this time and time again!
But, you have to remember that even upcoming businesses like yours are subject to federal and state rules on how you sell products or services on the internet. For instance, you can’t make false claims about your products or fail to disclose any paid endorsements. This is also established by the Federal Trade Commission policies.
Email marketing is super popular for reaching customers, new and old. But with great power comes great responsibility, Spiderman style. Your email campaigns need to follow the CAN-SPAM Act that was passed back in ’09. If the FTC decides you violated any part of it, they can slap you with fines of up to $50k PER EMAIL. Yeah…per email.
Some of the CAN-SPAM no-nos include deceptive subject lines, fake headers, and leaning too hard on the caps lock key. There’s a bunch more, but you get the idea.
PCI Compliance
Now, let’s talk about playing by the rules when collecting customer payment info. I know all these compliance things can feel like annoying hoops to jump through, but protecting your customers’ data is so important for building trust!
You’ve probably heard of PCI compliance standards before. In a nutshell, it’s the guidelines for safely handling credit cards and payment details you get from our customers. You may not be a huge corporation with millions of customers yet. But, even small businesses like yours need to make security and privacy a top priority. When customers give you their sensitive info and credit card numbers, it’s your job to keep that data away from cyber criminals!
Federal and state government regulations stress that all online businesses need solid information security and ways to avoid legal trouble. Following the rules saves you tons of money and helps you build a great reputation. Win-win!
Refund and Return Policy
Speaking of customer care–having a solid refund and returns policy is key! Let’s be real; sometimes, a customer will request a refund because an item arrived damaged or just isn’t what they expected. And that’s okay! A good refund policy shows you are not only fixated on how to sell products online but also care about making things right.
When writing your policies, you must remember that customers have rights, like getting full refunds within 30 days for faulty items. Keeping their rights in mind as you craft your policies helps manage expectations and prevent issues down the road.
Business Operation License
Virtually every eCommerce biz needs a Business Operation License from their city, county, or state to legally conduct business there. However, the specific regulations and how to apply can vary a lot depending on your location. I know–they just had to make it complicated.
Here’s what I recommend: contact your local City Hall or check your state’s Secretary of State website to find and apply for the correct licenses for your situation. The process is usually pretty straightforward, with just a small fee. Annoying but doable!
One super important thing is to make sure your license doesn’t expire. Operating with an expired permit can lead to fines or penalties. So, set yourself a reminder to renew that baby on time!
Intellectual Properties
You must be super careful not to use anyone’s creative work without permission. Copyright protects authors and creators, so if you want to use something like images, writings, or videos, you need to make sure we have the rights or give credit and compensation when needed. The last thing you want is a copyright lawsuit!
Trademarks are important, too. Trademarks are those unique words or logos that companies use to identify themselves. You can’t incorporate just any trademark without permission either. Every business needs its own distinct branding, so you have to respect others’ trademarks just like you want yours respected!
Shipping Restrictions
I don’t need to tell you how important fast, reliable shipping is for customers buying online. But when shipping internationally, things can get tricky very fast if you don’t follow the rules.
Many shipping companies restrict certain items like aerosols, alcohol, or anything perishable or explosive. Extra fees and paperwork are usually involved if you want to ship restricted items. So, it’s smart to research and find shipping partners who can smoothly handle your specific products. The last thing you want is held-up shipments or disappointed customers!
Age Restrictions
In the US, there’s this law called COPPA that applies to any website collecting personal data from kids under 13. Even if you’re a small business, COPPA requires you to get verified parental consent and take steps to protect minors’ privacy and safety online.
Legally, kids under 13 can share personal information with parents. But many sites, especially social media, just ban under 13s altogether to avoid the hassle of complying. Now, I’m not saying you need to completely restrict minors from your sites. But, COPPA does mean you need air-tight privacy policies and age gates if you want to legally engage with the under-13 crowd!
And it’s not just COPPA–every country has its own rules about age restrictions and selling products online. Things get really complicated really fast! To keep your businesses on the straight and narrow, you’ve got to put in the time to research and stay current on legislation everywhere you operate.
Business Insurance
Now, you may have set up your online business as an LLC or other registered entity, which can shield your personal assets. Nevertheless, consult an expert to confirm you’re truly protected and also complying with your state’s requirement or that of your country. Online business laws vary a lot based on location!
Even so, there are still some really beneficial insurance options for eCommerce businesses:
- Product liability in case a product or service injures someone
- Professional liability to protect against errors and negligence
- General liability to cover claims of injury or property damage
- Commercial policies to cover equipment and inventory
I know insurance feels “extra”, but it could save your business one day. An ounce of protection now is worth it for peace of mind as you grow!
Inventory Policy
This one is especially important for those of you selling physical products. Scaling up is so exciting, but you need to remember the legal logistics too! When your business is still small, stashing products at home is no biggie. But once your business expands, larger storage or a warehouse may be needed!
Here’s the thing though–some localities prohibit stockpiling certain product types. Make sure to check your lease, deed, and local zoning to see if any inventory limitations apply to you!
Customer Privacy Policy
The urge to want to collect every bit of customer data you can to make your businesses as smart as possible can be overwhelming. But you’ve got to be really careful about respecting the Online Privacy Protection Act when handling that data!
I get it–analytics on customer details seems like a goldmine. But things like full names, addresses, social security numbers, employer identification number (ein), and credit card info? That’s called PII, or personally identifiable information. And privacy laws actually prohibit you from using PII for analytics without direct consent. Oops!
Some states even require you to explicitly ask shoppers before collecting, storing, or processing their data at all. So, those sneaky tricks to gather info without them noticing? Yeah, huge no-no!
I know, I know–data makes the business world go round these days, but customer privacy needs to come first. Being ethical means only analyzing the bare minimum data needed to serve them better. Consent and transparency are everything!
Starting an online business is such a smart move – so much potential for versatility and growth!
But just like businesses with physical locations, there are definitely legal factors we need to consider to avoid issues down the road. I know, I know…legal mumbo jumbo, yuck! But I want you to know you’ve GOT this, and I’m here to help!
Believe me, I get how confusing and annoying all these rules can be. I’ve been in the online coaching business for years, so I was in your shoes once too! With an experienced guide holding your hand and breaking it down step-by-step, you have nothing to worry about!
Here’s what I can do: help you figure out the exact contracts and website policies YOU need based on your unique business model. Contracts are the written proof you’ll need to legally defend and protect yourself and your business. I also offer fill-in-the-blank legal templates tailored to meet your online business requirements. This makes getting compliant SO MUCH easier!
And the bonus–once your legal ducks are in a row, you can market with total confidence, knowing you and your business are protected. Amazing what a little legal reassurance can do for your peace of mind!
Building a legal shield may feel tedious at first, but you’ve totally got this. And I’ll be by your side the whole way to cheer you on. I’m always available to provide a helping hand, so don’t ever hesitate to reach out to me at any time. My blog and podcast are also there for more vital information like this.
Sam Vander Wielen is an attorney-turned-entrepreneur and legal educator who helps coaches & service providers legally protect and grow their online brands through her legal templates, her podcast “On Your Terms”, and her signature program, the Ultimate Bundle™️. Sam lives in Long Island, NY with her husband Ryan, bernedoodle Hudson, lots of plants and her ever-growing stack of favorite books. If you’ve always associated attorneys with words like “shark,” “intense,” and “cutthroat,” you’re in for a down-to-earth breath of legal fresh air from Sam.
New to AB? Are you a holistic healer, or wellness or beauty practitioner? Check out https://www.alternativebalance.com for business insurance, business resources and collaboration of 15K like-minded professionals!
