You just want to start trading and generating income online. You’ve sorted your product, done your competitive research, set up your eCommerce platform, you’re ready to hit ‘launch’ and…
Sorry, but there’s another little formality you need to have sewn up first.
You really should be across all the legal obligations and restrictions that can have real and serious bearing on the running of your online business. Like any business, many of these issues are just standard obstacles to overcome but there may be a few that surprise you.
Of course, forewarned is forearmed so let’s have a look at a few…
You probably know that when setting up your online business website you need to register a domain name. This name should be recognisable by your customers and be relevant to your business.
But be aware that you can’t buy a domain name permanently. Domain name registration is done on a yearly basis. However, you can guarantee exclusivity if you pre-pay for up to 10 years.
After that the name becomes publicly accessible again. This can cause problems if you don’t renew your domain name in time, or someone else purchases it once it’s expired.
To help cover yourself, it’s wise to register a trademark for your business’s name, logo and any other assets. That means that if someone else registers a domain name that is substantially similar to your trademark, you can object to its use.
Also, once you have your website up and running, your intellectual property assets will be publicly available. It’s a good idea to show visitors that you take content misuse seriously by displaying a copyright notice on your website’s footer.
International markets can offer big opportunities for store owners. But you need to be aware that tax laws are different in every state and country in the world.
So, to understand your relevant market’s requirements you’ll need to do some digging of your own.
For instance, if your market is based in the USA, you’ll probably want to show your prices exclusive of tax. However, if your target market is Australia, shoppers are used to seeing the full prices, inclusive of the 10% Goods and Services Tax.
Different issues arise depending on what you are selling and where you are selling it from.
- In Britain, value-added tax (VAT) applies to most goods and services but most food and children’s clothes incur zero%
- In Canada the sales tax varies from 6% - 10% depending on the province
- In the USA, there are 28 states that tax digital products, 23 states that do not tax digital products and 4 states do not have a retail sales tax at all
The bottom line is, more than 160 countries charge VAT, including China, India, and most of Europe. If you’re selling into a foreign country, it’s essential to scout out the tax landscape there.
It pays to talk to a tax professional or your local tax authority who can help answer the specific questions that can affect your product or business, such as:
- How you need to charge tax for your business’s location?
- Do you need to apply for a tax ID?
- Do you qualify for sales tax exemption and resale certificates?
Best to establish a good relationship with these experts as this information — and the regulations around it — are constantly changing.
Trademarks, Patents and Copyrights
First of all, you need to know the difference in these words’ meaning, and the laws and regulations around each one.
The United States Patent and Trademark Office defines them as the following:
- Trademark: A word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others.
- Patent: A limited duration property right relating to an invention, granted by the United States Patent and Trademark Office in exchange for public disclosure of the invention.
- Copyright: Protects works of authorship, such as writings, music, and works of art that have been tangibly expressed.
Whether you apply for one of these depends on what you plan to sell. It may not be strictly necessary, but you should at least check to make sure you’re not infringing on other patents or trademarks with your products or business.
For example, if you start sell phone covers with Mickey Mouse on them without telling Disney, you’ll probably receive a terse email from Walt’s lawyers…
As always, a bit of research could keep you out of unwanted legal action.
Your Privacy Obligations
Ensuring privacy obligations are met is a critical part of how to start an online business.
In a time where online scams and data breaches are happening more frequently than ever before, customers now expect that businesses will take their privacy seriously.
Whether you launched your website to sell products or to accept client enquiries, you’ll probably be collecting information about your customers. This can range from names, addresses, and phone numbers to payment information.
Terms and Conditions for Users
A solid set of terms and conditions is essential to avoid any misunderstanding about what you are selling and the terms on which you are selling it on.
They establish a legally binding contract between you and your customers. Because no two businesses are the same it is important that your terms and conditions are written specifically for your business.
Your terms and conditions should cover commercial terms such as price, delivery and payment terms. While there's actually no legal requirement for them, they can limit your liability if a customer takes you to court and protect your intellectual property rights.
In general, a good Terms and Conditions for an ecommerce store should contain:
- Product information.
- Pricing and payment terms, including shipping, returns, exchanges and cancellations
- Limitations of liability
- Intellectual property/trademark protection
- Dispute resolution
Children’s Online Privacy
Children are often more cyber-savvy than their parents. But they also have a trusting and curious nature that may lead them to give out personal information without realising it.
If you’re planning on selling a product or service tailored specifically to a young audience, you’ll need to abide by COPPA regulations (the Children’s Online Privacy Protection Act).
The COPPA regulations apply to operators of commercial websites and online services that collect personal information from children under the age of 13.
For ecommerce stores selling age-restricted items, like vapes or alcohol, you should look into your country’s specific needs for age verification tools before checkout in order to be legally sold.
Every country is different in their demands on how to run a business, so it’s crucial to do your own research to stay on top of legislation around age restrictions on products.
Bricks-and-mortar businesses face risks like someone slipping on their wet shop floor and suing them for damages. Moving your business online exposes you to a whole new raft of risks, any one of which could damage or even destroy your business.
It could be inadvertently spreading viruses or malware to your customers in marketing emails or compromising customers’ privacy and personal details via an online security breach.
So, in addition to General Liability, Product Liability, Professional Liability and Commercial Liability you may need to look into Privacy Protection, Data Breach Cover, Hacker Damage Cover and even Cyber Extortion Cover.
To find what’s best for you, start by asking for recommendations, your best sources will be people who have been through a similar stage of business, and in a similar line of business.
Then interview potential brokers. You’ll want to find one who has worked with and understands the needs of ecommerce businesses.
Small businesses need many types of insurance and planning the best way to cover your growing enterprise is a key strategic activity.
The Payment Card Industry Data Security Standard (PCI SSC) refers to the technical and operational standards a business follows to secure and protect credit card data when processing transactions.
Designed to protect cardholder data, the 12 requirements of PCI DSS are:
1. Install and maintain a firewall configuration to protect cardholder data
2. Do not use vendor-supplied defaults for system passwords and other security parameters
3. Protect stored cardholder data
4. Encrypt transmission of cardholder data across open, public networks
5. Use and regularly update anti-virus software or programs
6. Develop and maintain secure systems and applications
7. Restrict access to cardholder data by business need to know
8. Assign a unique ID to each person with computer access
9. Restrict physical access to cardholder data
10. Track and monitor all access to network resources and cardholder data
11. Regularly test security systems and processes
12. Maintain a policy that addresses information security for all personnel
Although it is a standard and not a law, the benefits are definitely worth it and failure to comply can have significant consequences.
As the PCI DSS
say: “Keep your systems secure, and customers can trust you with their sensitive payment card information
Understanding these issues before you launch your online business will help you plan wisely and save you time, energy, and money.
New factors affecting your operations will, of course, keep popping up all the time – but if you’ve done your homework, take heart and set forth confidently – you can pick up the rest as you go and grow!
Please note: This post is for informational purposes only, and does not constitute legal or financial advice.