7 Legal Tips For Starting An Online Business

7 Legal Tips For Starting An Online Business

If you have an exclusive brick-and-mortar store or want to be an entrepreneur, starting an online business is the way to go if you want to stay relevant and competitive in the modern digital world. This is because most people have shifted from the traditional way of shopping to online stores.

The dawn of the internet has even made it easier for consumers to shop online. It now takes one simple click of a button for customers to make orders online and have the goods delivered to their doorsteps. And as a business owner, you need to get in on all that action.

Furthermore, this article has all that you need to know about starting an online business. You’re going to learn what an online business is, the benefits of operating your business online, and legal tips for starting an online business. Read on to learn more.

What Is An Online Business?

An online business is a practice of conducting business over the internet. It’s where a firm sells or provides services to an online audience. In other words, an online business involves a firm interacting with its customers over the internet in order to generate revenue.

Many people have now explored the advantages of an online business because it often has lower overhead costs than traditional brick-and-mortar businesses. It can also reach a global customer base through the internet.

While you have some legwork to do, starting an online business is very simple. You only need to have a computer or any other smart gadget, a product or service to sell, and an internet connection.

How Do You starting an online business Legally?

There’s no doubt that millions of people are joining the online market every day. However, to operate an online business, there are several requirements you must meet. With that said, this section discusses some key legal considerations when starting an online business.

1. Choose The Best Business Structure

Before you start your online business, it’d be a good idea first to understand different business structures. There are four major forms of business structures: sole proprietorships, partnerships, limited liabilities, and corporations.

A sole proprietorship, also known as a sole trader, is a form of a business owned and managed by an individual person. It’s the simplest form of business you can establish online because it has no legal formalities. However, owners of single proprietorships are liable for all lawsuits filed against their companies. If you need to register as a sole trader, consult a lawyer or accountant to help you navigate the process.

A partnership is where two or more people starting an online business together with the aim of generating and sharing profits. The generated profits are shared according to the agreed percentages, usually based on the partners’ capital contributions. Amazon FBA, one of the most popular online businesses, is often done with forming a partnership. You can also automate this process with the help of automation empire by Ron Earley.

In a limited liability company, as the name suggests, owners aren’t personally liable for the company’s lawsuits, debts, and liabilities. However, if the company is to be liquidated, owners are personally liable to the extent of their shareholdings. 

Lastly, a corporation is a legal entity that’s separate from its owners. In other words, a corporation has a legal personality before the law. Consequently, it can enter into contracts, hire employees, pay taxes, or borrow money in its own name.

To help find the best business structure, you can have a dialogue with legal professionals like Attorney Blake Harris and other lawyers from reputable firms. Through this, they could enlighten you on which permits you to acquire and what you need to do next so you keep your online business on the right side of the law.

2. Search A For A Business Name

Before you starting an online business—or any business, for that matter—it’s a legal requirement to have a name for your business. Thus, you need to search for a unique name and present it to your local authorities.

It’s best to check the name you’ve chosen with the relevant government agency. This is to see if the name you’ve chosen is already in use or taken. You can also use a search engine to check for any existing businesses with the same or a similar-sounding name.

Though it’s not illegal for businesses to share a name with other companies in some states, having a unique name helps you stand out from other firms. With a unique name, your business can’t be mistaken for another firm.

3. Put Your Business And Personal Funds In Different Accounts

In most states and nations, the law requires business owners to open different bank accounts, one for business and one for personal funds. Having separate accounts helps protect both the business and personal finances. 

Keeping business and personal funds separate makes it easier to track expenses and income for your business, which will make preparing your taxes and financial statements much simpler. Having separate accounts for your business and personal funds can also help you manage your finances more effectively by providing a clear picture of your business’s financial health. Lastly, it can help protect your personal assets if your business is sued or faces financial difficulties.

If you fail to keep different accounts, you can end up facing huge penalties and fines. Also, if you want to receive the greatest number of business deductions, it’d be a good idea to have different bank accounts.

4. Obtain A Business License

Obtaining a business license is another legal requirement for online businesses. While most people tend to think that they don’t need to have a license to operate their businesses online, that’s not true.

Just like a physical shop, online businesses need to seek permission to provide their goods or services. Therefore, before you open your business, ensure you have all the legal licenses and permits from the local government. Business licenses are usually valid for a specific period and must be renewed accordingly. Make sure to check the expiry date and renew it on time.

5. Obtain A Permit To Collect Sales Tax

Tax is one of the major sources of income for the government. The government collects these taxes through businesses and other government agencies. However, for businesses to collect taxes through sales of goods or services, they must seek legal permission from the local authorities within their jurisdictions. So to ensure you’re on the right side of the law when collecting taxes, be sure to have a tax collection legal permit.

6. Avoid Defamatory Statements On Your Business Website

Sometimes, business owners get it wrong when promoting their products. Though telling your customers that your business is better than your competitors is allowed, be careful not to provide false information.

By putting up defamatory statements on your website, you can be legally liable for damages incurred by your competitor. For instance, if your competitor loses sales due to false information on your business website, they can file a defamation lawsuit against you.

7.Protect Your Business With Insurance

Last but not least is to protect your business against future calamitous events (such as acts of God) and other liabilities. That’s where insurance comes in. An insurance policy can help protect both your personal and business assets. There are several insurances policies you can consider for your business. Some of them are required by the law, while others are voluntary.

A good example of insurance required by the law is unemployment and disability coverage.  Another insurance policy you should acquire is general liability coverage that can protect your business against lawsuits, injuries, property damage, and much more. 

What Are The Benefits Of Starting An Online Business?

Though you might still be thinking of sticking to the more familiar brick-and-mortar business, starting an online business provides several benefits. Some benefits to starting an online business or transitioning online include the following:

1. Low Start-Up Cost

As mentioned earlier, you only need a computer and an internet connection to starting an online business. That makes starting an online business one of the simplest ways anyone could do to start building an empire with little or no capital investment at all. Also, by operating your business online, you can eliminate other hassles like the need to pay for dedicated office equipment or signing long-term lease commitments.

2. Offers Flexibility

Depending on what you sell, an online business can provide a much flexible schedule than a traditional offline store. For instance, with an online business, you can decide which days of the week you want to work and how many hours in a day.

However, this doesn’t mean that you can relax all the time. That means you need to research and find out which days or times your business is more productive and devote yourself during that time. Having a more flexible schedule allows you to focus on critical issues, both inside and outside your business.

Apart from flexibility of time, an online shop can allow you to work from anywhere, including from your bed, sitting room, coffee shop, when traveling, or even when at the garage.

3. Allows You To Make Money 24/7

Making money is one reason why many people starting an online business. However, to ensure you maximize your revenue, your business needs to remain open for many hours. With physical shops, keeping your operations 24/7 might be a little challenging. This is because, at some point, you or your staff will get tired, thus forcing you to hire a night shift crew. 

Also, most offline customers have their own shopping schedules. So if a customer is used to shopping in the evening when leaving for home from work, that’s their preferred shopping schedule and you can’t force them to change. In addition, most customers of physical shops don’t do their shopping during off-hours. This limits your business to certain hours of the day.

On the other hand, with an online business, you can interact with your customers, day and night, which helps you generate more revenue. Also, online shopping allows you to reach more customers globally, which also increases your chances of generating more sales.

4. Provides Ease Of Transactions

An online business allows you to set up secure and different payment options on your website page. This enables you to accommodate various customers according to their preferred payment options. It also helps eliminate the need to handle cash or send out paper bills. So with online transactions, you can receive your payments more quickly and securely.


There are several benefits of starting an online business. For example, you can increase your chances of reaching a global market, which allows you to generate more sales. This can allow your business to grow, thus staying ahead of the competition. However, before you starting an online business, it’d be a good idea to address any legal requirements you need for your business.

Did You like the post? Share it now: