What You Should Know: Online Business Laws and Regulations
Even businesses that conduct all of their transactions online aren’t exempt from various laws and regulations. It’s important to spend time researching specific regulations in your field as it could cost you a lot of time and money in the future. Knowing about various online business laws and regulations ahead of time is the key to working through them. It means launch dates can be kept and market plans can remain effective.
It’s essential for online entrepreneurs to understand the three key factors that determine the legalities surrounding their e-commerce business. Firstly, focus on which type of e-commerce sector the business will be apart of. Next, get the necessary business licenses before you start selling. Finally, there are business laws and regulations you’ll need to be aware of when starting your e-commerce site. Not knowing these regulations could lead you into some legal trouble down the line.
Electronic Commerce- What is it and Where do you Fit into the Market?
E-Commerce, also known as electronic commerce, is the practice of buying and selling goods, products, or services over the web. E-Commerce law encompasses all the legalities associated with the e-commerce industry. Each type of e-commerce company is required to abide by certain laws and regulations so it’s important to be aware of each type. There are 6 basic types of e-commerce:
1. Business-to-Business (B2B)
2. Business-to-Consumer (B2C)
3. Consumer-to-Consumer (C2C)
4. Consumer-to-Business (C2B).
5. Business-to-Administration (B2A)
6. Consumer-to-Administration (C2A)
Each type of e-commerce has different sets of rules and regulations. For example, Consumer Contracts Regulations only apply to the B2C marketplace, It’s vital to understand what type of business you have and which regulations may be associated within that marketplace.
Business-to-Consumer (B2C) is perhaps the most common form of e-commerce. This is when a company will sell its goods and/or services directly to the consumer. The consumer can browse their websites and look at products, pictures, read reviews. A popular example of this is Amazon. B2C requires a general business license and possibly more, depending on your location and product.
Business Licenses for an Online Store
Setting up an online business may be becoming easier by the day. Many websites like Shopify can help you set up a website and even advise you on the best payment options. You could build your own website to sell from in a week, or have your business requirements on eBay set up in just three days. But without the appropriate licenses, you’re putting yourself in a lot of danger.
General Business License
Operating an online business does not exclude you from certain legal formalities and a business license is one of them. Every city and state also has different requirements and laws for obtaining a business license. For many jurisdictions, business licenses have more to do with registering for taxation purposes. General business licenses are also helpful for getting a resale number if your business will be buying wholesale goods.
Home Occupation Permit
A home occupation permit is a type of zoning permit that helps distinguish residential neighborhoods from commercial areas. You may not think this is necessary with an online business, but if your address is associated with your business on your license then a home occupation permit may be required.
A seller's permit authorizes a business to sell the agreed products and services that are within the license. You may also see a seller's permit called a "sales tax permit" or "sales tax license”.
Failure to secure a seller’s permit could lead you with fines, penalties and back taxes on previous sales. Look to your state’s regulations to determine whether your business needs one.
Again these licenses vary on the county or state in which you’re located and the product you wish to sell, so contact your local licensing department for specific requirements for your online business.
Now you know which type of e-commerce you’re positioned in, and you’re aware of some of the licenses that are associated with an online business. It’s time to look at some laws and regulations that could save your e-commerce business some lawsuits in the long run.
Online Business Laws and Regulations in 2019
Technically, It is not required by law to register your trademark. But if you run into some legal cases, it could save you a lot of time and money. Having a registered trademark entitles you to certain privileges, rights, and protection when selling online. Registering your trademark with the USPTO gives you several advantages. Some of them include:
- Ability to Sue in Federal Court and Register with Customs
- Legal presumption of ownership nationwide
- Exclusive right to use the mark on or in connection with the goods/services listed in the registration
Once you’ve decided whether you’ll register your trademark, you’ll then have to decide on a state or Federal Trademark. Before you decide which is best for you, it’s important to understand the differences. State trademark registration is relatively quick and inexpensive, and federal trademark registration is more complex and costs more. However, federal registration offers far more protection. The bottom line is it all depends on the scale and size of your business so research and forecast your business’ growth before making your decision.
Patents & Copyright
The United States Patent and Trademark Office defines a patent as a right under limited duration relating to an invention. It’s granted by the United States Patent and Trademark Office in exchange for public disclosure of the invention. Its solely focusing on ownership of the product and the inventor. Once the duration of the patent is up, the product can be distributed by other retailers.
Copyright focuses on the protection of authorship, such as writings, music, and works of art. There are various advantages of copyrighting your work but perhaps the most valuable benefit of registering copyrights is the ability to file a lawsuit for copyright infringement.
Depending on what product you plan to sell, you may or may not want to apply for one of these. It’s wise to check and make sure you’re not infringing on other patents or trademarks with your products or business.
Product and Shipping Restrictions
There are numerous products and services online that are age-sensitive or contain substances that are harmful to children. If your product falls under this category then be aware, you’ll need to comply with the Children's Online Privacy Protection Act (COPPA). Sites selling items like wine or alcohol need to have age verification tools before checkout in order to be legally sold.
When it comes to shipping your products, remember that there’s a number of items that will require some extra paperwork and fees. These should be taken into account when you’re choosing your products for your online store. Generally, restrictions are placed on items such as:
- Dry ice
- Nail polish
Remember, when it comes to the product and the shipment, a lot of research should be done before settling on anything specific. If you’re still not sure about something in regards to product or shipping restrictions then seek professional guidance.
Income Tax and Self-Employment Tax
By law, all businesses and taxpayers must file an income tax return annually to determine their tax obligations. This tax is used to fund public services, pay government obligations, and provide goods for citizens. There are imposed fines and penalties on taxpayers and businesses who don't pay their income tax.
Self Employment Tax is primarily for people who work for themselves. Your payments of SE taxes contribute to your coverage under the social security system. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance.
The e-commerce legal world is still relatively new and online laws and regulations are constantly changing. Having an e-commerce lawyer can help you protect your company against all the obstacles in this article- and more. An e-commerce lawyer can also create a clear outline of your company’s terms and conditions, privacy policies, and delivery terms. By hiring an e-commerce lawyer, it will give your company time to focus on some of the finer details in running a successful site, like website design or, having an effective multi-channel selling strategy. Make sure you’ve got a well rounded, and legal business to avoid any fees in the future.