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Legal Issues to Consider Before Selling Your Products Online

By Howard C. Stross
December 05, 2019

If you are considering expanding your physical business or starting a home-based business, selling your products online is a great way to reach additional customers. Before you sell products online, there are several legal issues you should know to ensure that your business complies with the law and that your interests are protected.

Business entity. If you are starting a new business to pursue online sales, consider the pros and cons of different business structures. A sole proprietorship is uncomplicated. No separate business entity is formed. In a sole proprietorship, there is no distinction between your business and personal property, so you are personally responsible for all the business’s debts and liabilities. A partnership is a business structure used when two or more people co-own a business. Like a sole proprietorship, each partner is personally liable for all the business’s obligations—including those incurred by the other partner. A limited liability company (LLC) is a separate business entity that can be formed by a single business owner or multiple owners. It involves the payment of certain fees to the state and a few formalities, such as an annual report. An LLC, however, may provide limited liability. To discover more about the organization and operation of an LLC, click Other business structures are available, e.g. corporation. These are some of the common structures used by small businesses. We can help you evaluate which business structure will best achieve your goals.

Trademarks. A trademark is a word, name, symbol, device, or a combination of them used or intended to be used to identify and distinguish the goods and services of a seller or provider, and to indicate the source of a good or service. A trademark can be one of your business’ most valuable assets. If you engage in e-commerce transactions, register your trademark with the United States Patent and Trademark Office, so you may enforce your rights as a trademark holder across the entire country, not just the state in which your business is located.

Taxes. Most states have a sales tax, and if your online business sells products in other states, you must collect and remit sales tax in each state in which your business has a “tax nexus,” or a sufficient connection to that state (e.g., a certain volume of sales). Some smaller online businesses may be exempt from collecting and remitting sales tax under the laws of some states, for example, if they have less than a certain amount of sales or less than a specified amount of annual transactions.

Restrictions on home business. Many people run online businesses from their homes. If you plan to store a large inventory of your products in your home or regularly see clients or others in your home regarding business, make sure you will not be violating any restrictions in your lease, deed, homeowners’ association, condominium association, or local zoning ordinances.

Licenses and permits. Many types of businesses do not require a special business license to sell products. For certain products, such as medical devices, foods, and animal products, a special local, state, or federal business license must be obtained before they can be sold. Home-based online businesses may also need to obtain a home occupation permit or conditional-use permit to operate legally.

Data protection and privacy. For online businesses, reasonable data security measures and a strong privacy policy are essential. Because online purchases require the transmission of personal customer information, customers will be unwilling to patronize your business if these protections are not in place. In addition, you could be civilly liable under data privacy laws if third parties obtain your customers’ information because you failed to take the steps required by state law, or steps reasonable under the circumstances, to protect your customers’ personal information.

Business insurance. Like all businesses, you will want to obtain general liability, product liability, or commercial liability insurance policies to protect your online business if a lawsuit occurs. In addition, if your online business will be delivering goods to customers, consider purchasing delivery insurance.

We Can Help You to Establish Your Online Business for Success

These are some of the issues you may need to consider before you form an online business. We can help guide you through every step in starting your business, from choosing your business structure to ensuring you comply with state and federal law. Contact us today at 813-852-6500 to set up a meeting so we may help your new venture succeed.

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