Six Legal Tips for Starting Your Online Business

Hello, I'm Attorney Elizabeth Potts Weinstein. Today, I'm sharing six essential legal tips for starting your online business.

1. Choose the Right Legal Structure

One of your first legal decisions is determining the legal and tax structure for your business. Options include a sole proprietorship, partnership, LLC, or corporation. Additionally, you'll need to decide on your tax classification, such as sole proprietorship, partnership, S Corp, or C Corp. My advice is to keep it simple initially. For most single-owner businesses, a sole proprietorship works well. If you have multiple owners, I recommend forming an LLC over a partnership due to liability concerns.

2. Protect Your Trademark and Branding

Trademarks are crucial for your brand's identity. Conduct thorough searches on the United States Patent and Trademark Office (USPTO) database and Google before finalizing your brand name. Remember, owning a domain name doesn't grant trademark rights. If someone else holds a trademark for your brand, you could face legal issues, including lawsuits.

3. Implement a Privacy Policy

A privacy policy is mandatory for any website that collects personal data. This policy informs users how their data is used and stored. For an affordable and automatically updating solution, consider using Termageddon. This service helps you create a customized privacy policy and keeps it updated with legal changes.

4. Obtain Necessary Business Licenses and Permits

Research the required licenses and permits for your business. Start with your local city or town's website, which usually has information on business taxes, licenses, and permits. If the local website isn't clear, contact them directly or visit in person. Additionally, check your state's requirements using their business portal to ensure compliance at all levels.

5. Understand Sales Tax Obligations

If you're selling products, you need to understand sales tax obligations. Some states also tax services. When starting, consider selling through a marketplace facilitator like Amazon, Etsy, or eBay. These platforms handle sales tax collection for you. If you sell directly through your own website, you must obtain a sales tax permit and manage tax collection yourself using tools like TaxJar or Shopify’s tax system.

6. Set Clear Terms of Service

Clearly defined terms of service are essential for any transaction. These terms outline what you’re providing, payment details, refund policies, and what happens if something goes wrong. Ensure customers agree to these terms by checking a box or signing during checkout. Like privacy policies, terms of service can be generated and updated using services like Termageddon.