8 Online Business Laws You Need to Be Aware Of
Starting a business online is becoming very popular. People like the relative freedom to locate their business in a convenient place while reaching a worldwide audience. There are also opportunities for reducing your overhead by not having a physical customer-facing storefront.
However, if you are considering starting an online business, you need to be careful not to cut too many corners, as this could get you into trouble. In particular, running afoul of online business laws can be expensive, so it’s still worthwhile to work with a small business attorney for your online business. Here are some of the laws that your online business needs to be aware of.
Sales Taxes
If your business is selling merchandise (and, in some cases, services), you will need to collect sales tax. How much sales tax? That depends on the local laws of where your customers are. Most US states require that online businesses collect sales tax for sales; however, the specific thresholds that trigger the requirement differ. For most states, you must accumulate $100,000 in total sales before you are required to collect sales tax, but often the requirements are different if you are selling to customers in the same state.
If you don’t know what the sales taxes are for your online business, you might end up with a hefty, unexpected tax bill and could face criminal charges.
Secure Payments
Online businesses are required to make sure that their transactions are sufficiently secure to protect customers’ payment information. The industry standard for this is using a payment gateway to provide for secure payment. These are included in most e-commerce platforms, and you don’t need to know too much detail unless you are trying to build your own e-commerce payment gateway.
Data breaches can be very costly for your business, leading to a major fine. In addition, you may be held liable in civil lawsuits if it turns out your negligence contributed to the data breach.
Privacy Protection
It’s not just payment information that you need to protect. Customers have a reasonable expectation that you are going to protect any and all information that they give to your website, either intentionally or unknowingly as you collect data about their visit.
You need to provide customers with information about the data you collect from them and how you use that data. You will also need to provide options for opting out of some types of data collection. Exactly what form the disclosures and opt-out forms take can depend on where you’re doing business, where your customers are, the information you’re collecting, and the type of business you have. Anything that might be considered a medical business, for example, must meet very strict privacy requirements.
Age Restrictions
In addition to privacy protection for all customers, you must be aware of limitations on collecting information from children. In the US, online businesses are banned from collecting personal information from children aged 13 and under.
If you are going to collect personal information from customers, you need to have an age field that either prevents children from filling out personal information forms or ensures that the data from those forms will not be collected. Otherwise, your business might face stiff penalties.
Home Business Restrictions
We mentioned that many online businesses reduce overhead by not having a physical customer-facing location. Often, people will run these businesses out of their homes. However, it’s important to be aware of laws restricting businesses in residential areas. There may be limitations about how much of the house can be given over to the business, how many people or delivery trucks you can have coming and going from the house, and other possible restrictions.
Failure to comply with these regulations may lead to fines and criminal penalties, with the potential of getting your home business shut down.
Marketing Restrictions
Many people think that the way to market their product is to make amazing claims about what it is and what it can do. While doing this may help you move more product, it can also get you into trouble.
Making false claims about your product can lead to heavy fines from numerous government agencies and potentially expose you to civil lawsuits as well. This is especially true if your product falls under the jurisdiction of the Food and Drug Administration (FDA).
Terms and Conditions
Many online businesses will want to have strict legal contracts that define their relationship to their customers. This is true whenever you are engaging in a relationship for any sort of subscription service, long-term commitment, or expensive service or merchandise.
However, every business should have a sort of informal contract with customers, which they describe in their terms and conditions. This describes what responsibility you take (or don’t take) for customers who visit your website or purchase your merchandise. It also stipulates things like your return policies and what warranties you offer for services and merchandise (if any).
If you fail to make these conditions clear, customers and website visitors may allege that you are failing to meet implied warranties or common law duties of care, leading to potentially expensive lawsuits. You might also be liable for fines and penalties, depending on local laws.
Business Formation Documents
Just because your business doesn’t have a physical location, that doesn’t mean it shouldn’t have business formation documents. In particular, if you want to protect your personal property with a structure like a limited liability company (LLC) or some type of corporation, you need documents drawn up to that effect. These will need to be filed with local authorities. Sometimes, these documents might need to be filed in any state where you are doing business, or, at least, enough business to qualify for sales tax.
Get Help with Online Business Laws
Although starting an online business can be simpler and easier than starting a physical store location or other in-person business, there are still many legal tangles and requirements that you have to be aware of if you want to avoid expensive legal problems. The best way to make sure your business is compliant with local, state, and federal business laws is to consult with a small business attorney.
Let Elizabeth Lewis handle the legal complexities of your online business. Since 2010, she has helped many businesses in Denver to understand the complex legal dimensions of their business. Elizabeth is dedicated to relationships. She wants to develop a long-lasting relationship with your business so that if any legal issues arise, you will know who to contact. She is focused on the needs of small businesses, which are very different from those of larger businesses. With her results-oriented approach, she has helped many small businesses get through their difficult early stages, and she is ready to help your business, too.
To learn how Elizabeth can help your business, please contact the Law Office of E.C. Lewis today for a consultation. We serve clients in Denver and throughout Colorado.