Online businesses have become a huge part of the business market.
In fact, this continues to get more popular day by day.
With millions of people starting online businesses, you might be wondering whether online businesses are legal or not.
Having a legal business ensures you have security and gives you more credibility.
If you’re looking to know the answer to your how to make my online business legal question, we’ll tell you how to do so below.
How To Make My Online Business Legal
Online businesses are relatively a new brand of retail.
You must comply with the general corporate laws and local and international laws that apply to your business.
You also have to comply with digital-specific provisions around data privacy, electronic payment processing, and web accessibility that could apply to your business.
Below are the important considerations you need to keep in mind to make your online business legal.
Taxes
Every state and separate locations come with their own sales tax.
Washington D.C. and 45 states impose a state-wide sales tax.
That said, different counties, cities, and special taxing districts can also add their own local sales tax in addition to the state tax.
If you fail to calculate and collect the right sales tax amount correctly, it could create a loss in your profit margin.
Additionally, this will add more stress to you during tax season.
If you import products from foreign country suppliers valued at more than a certain threshold, your imported goods can get subjected to customs duties.
In addition, there may be other taxes and tariffs that may be applied if your shipping in goods in larger quantities regularly.
Next, if you’re selling your products overseas, the customers from those countries may have to shell out for import taxes and duties.
You have the option of settling these via pre-paid shipments on their behalf.
You can also bundle them at an international price.
Several states also introduced taxation on items and activities that harm the environment to promote sustainability.
For instance, you have to pay an additional $0.05 recycling fee for plastic containers weighing under 24 ounces in California.
For over 24 ounces, you have to pay $0.10 under the California Redemption Value Act.
For more clarity, it is highly recommended that you speak to your local tax authorities or a tax professional.
They are experts who will help you understand the specific circumstances that could affect your products.
They will also give you insights into how much you have to charge for taxes as per your location.
Company or LLP
You must have an LLP or private company for your online business.
This will help deal with tax-related elements or VAT and is your identity in the marketplace.
Also, there’s a slim to no chance of generating any profit from your online business without good performance and reputation.
If all your paperwork is in order, it is easier for you to get attention to your business.
When you are starting your company, there are a few important things you need to remember.
Your company needs to have an appropriate name with a registered office address, a minimum number of capitals, directors in every department, and more.
When you have filled out all these requirements, your company will function as a registered company.
Marketplaces prefer dealing with registered companies, so this is the most valued legal requirement.
Payment Gateways
These are essentially the lifeline to process your customer’s payments securely.
The major emphasis here is on “security”.
That’s because there can be a regulatory fine if there is a payment data breach.
You’ll also have losses to your own business not just monetarily but also damage to your brand image.
Unfortunately, security breaches are quite common.
Last year, for instance, a payment processor admitted that more than a million debit and credit card accounts got exposed.
That is due to cyber attacks in North America.
As such, you must stay vigilant when you are choosing a payment processor.
Prioritize solutions with GDPR compliance (for selling in Europe), DCI-PSS compliance, Integrated security and anti-fraud protection, and HTTPS connection (SSL certificate) for all payment operations.
Trademarks, Patents, and Copyrights
These three are considered as business intellectual property and are all protected by their respective laws.
Below is how the United States Patent and Trademark Office categorizes each of them.
- Trademark: A phrase, word, design, and/or symbol that distinguishes and identifies the source of the products of one party from others.
- Patent: This is a limited duration property right relating to an invention that the United States Patent and Trademark Office has granted in exchange for public disclosure of that particular invention.
- Copyright: This is meant to protect the works of authorship like music, writings, and artworks that have been tangibly expressed.
In simple terms, this means that as long as you take all the necessary and appropriate steps concerning your intellectual property, you may get legal protection.
It’s a kind of protection that will prohibit other companies from using your intellectual property without your permission.
Similarly, you cannot use someone else’s intellectual property to make a profit without their written consent.
For example, if you want to produce and sell t-shirts and merchandise with characters from Marvel, you need to get all the appropriate permissions to avoid any legal issues.
Additionally, you need to consider copyright protection for your online business website.
Some of the laws that apply to your website you need to keep in mind include:
- Copyrights and patents can protect any unique aspect of a customized online business platform.
- Your online business’s website design elements like visual content, logos, and custom illustrations can also get protected by copyright laws like DMCA (Digital Millennium Copyright Act).
Shipping Restrictions
Shipping your online business products can be mind-boggling.
That is because logistic companies have different restrictions, rules, and rates for shipping various kinds of products.
Most of these logistic companies will have a list of restricted items, and these include:
- Aerosols
- Air Bags
- Alcoholic Beverages
- Ammunition
- Cigarettes
- Dry Ice
- Explosives
- Fresh Fruits and Vegetables
- Gasoline
- Nail Polish
- Perfumes (containing alcohol)
- Poison
Some companies will allow you to ship these restricted items, but with additional fees and paperwork.
You have to take this into account when you are evaluating shipping providers and integrations.
You also need to consider the fact that some states and countries have different shipping policies.
Inventory
If you are holding a substantial amount of inventory, you need to check with your real estate deed, lease, or zoning codes.
Doing so will help you know if there are any restrictions on running an online business from your home.
Even if you are running a small online business, certain property laws may apply to you.
The local homeowners’ association might not be too keen on letting your online home-based business in the neighborhood if it doesn’t comply with the homeowners’ association rules and regulations or zoning laws.
Age Restrictions
When launching a website for your online business, it must comply with the COPPA (Children’s Online Privacy Protection Act).
There are several regulations that this act includes.
One that’s most likely applicable to your website is the inability to collect any personal information from children under the age of 13.
If your online business particularly targets a younger audience, you will need to abide by COPPA regulations.
Else, you can be fined more than $40,000.
Business Insurance
You will also need to apply for business insurance to protect your online business.
There are several options available that you need to choose from and these include professional liability, general liability, commercial liability, product liability, and home-based insurance.
You must be doing ample research on each of them to find out which suits your needs perfectly.
Making Your Online Business Legal
We hope we were able to answer your question how to make my online business legal.
To summarize, in order to sell your products online legally, you have to apply for a sales tax ID (number).
After that, you have to make sure that you collect and report all sales taxes applicable at the state and local levels.
Additionally, your online business must be in compliance with digital customer protection acts such as COPPA, GDPR (for European sales), and CCPA (for sales in California).
You must also do ample research to find out whether you need any special license and/or permits to operate your type of online business.
Lastly, you must determine if any kind of other laws is applicable.