5 Important Things to Know About E-Commerce Law

You’re serious about opening your online store and you’re hashing out the details.

After having determined that your business idea is good and having made a plan for product sourcing, it’s important to look at how e-commerce law might affect your venture.

E-commerce law can have restrictions and regulations that directly relate to your business, and not being aware of them could cause it to fail.

Furthermore, understanding the law before launching your company will help you be better prepared and save a lot of time and money.

We’ll review below 5 important things to know about e-commerce law. Read on!

  1. Payment

There are many ways to get paid when you have an online business. One thing to keep in mind if you want to make the step into modernity is to watch out for cryptocurrency scams. Cryptocurrency law is still in its infancy.

Payment gateways will often have restrictions on certain products or services, so when finding payment solutions for your business, make sure to inquire about any limitations around the products you sell.

Additionally, there are some other important things to consider, including whether they are hosted or not, they protect against fraud, and what fees they incur.

Some of the most common payment options are PayPal, Stripe, Square, First Data, 2Checkout, and SecureNet.

  1. Taxes

The first thing to know when it comes to taxes is that every state and country enforces different standards.

In other words, you’ll have to do some research to see how tax laws apply to your situation and inform yourself about the local regulations of your target market.

For example, American customers are used to seeing prices exclusive of tax, whereas the European demographic is accustomed to seeing all-inclusive prices. Naturally, you’ll want to adapt accordingly when displaying your prices.

Furthermore, you should be aware of laws that apply to where you are selling from and what you are selling. For instance, California applies an extra $0.11 recycling fee on items you sell in plastic bottles.

To ensure that you don’t miss anything, the most practical solution is to consult with the local tax authorities or hire a tax professional.

Working with tax professionals is practically essential to running a healthy business because regulations are constantly changing.

They will help you understand how the law applies to your specific circumstances. How does it affect your business? How do you need to charge tax?

They will also help you submit applications for necessities such as a tax ID and understand if you qualify for sales tax exemption.

  1. Business Insurance

Several types of insurance exist for small businesses. These include professional liability, commercial liability, general liability, product liability, and home-based insurance.

Your local insurance provider will let you know what type is the best fit for your business.

One thing you want to consider when looking for insurance is product liability insurance. It applies to businesses that manufacture, distribute, and retail a product, and are liable for its safety.

If you are selling products that present any sort of risk, it is especially important.

Additionally, you’ll want to look into professional liability insurance. It’ll protect you against lawsuits for injuries due to negligence, malpractice, and error.

  1. Inventory

Since you’re just starting out your online business, you’re probably thinking of storing the product you’re selling in a spare closet or in storage boxes in your garage.

However, you should ensure that your business isn’t too big to legally run from your home.

If the inventory you’ll be holding is large, you should verify that your lease, zoning codes, or deed doesn’t prohibit from running a business such as yours out of your home.

In the early stages of your business, you might benefit more from holding your inventory in a warehouse.

But even if you’re not allowed to run your business out of your home and don’t really feel like opening a physical location to attract customers, you still have options.

You may decide to go a different route when it comes to product sourcing. Get in touch with a shipping and fulfillment company to see if you can dropship your product.

Dropshipping and 3PL service allow you to reduce shipping zones. In other words, your packages will travel less distance which will reduce the time in transit as well as the shipping cost.

Clearly defining an inventory management strategy before starting your online business will make creating a sustainable business plan much easier.

  1. Copyrights, Trademarks, and Patents

The general public tends to have some misconceptions about these terms. There are nuances with each of these concepts, with laws and regulations that are important to know.

Having a clear understanding of each will help you stay out of unwanted legal complications.

The United States Patent and Trademark Office states:

  • A copyright is meant to protect works of authorship including music, writings and works of art that have been ostensively expressed.
  • A trademark is a phrase, word, design, and/or symbol that distinguishes the source of the goods of one party from those of others.
  • A patent is a finite duration property right pertaining to an invention, authorized by the United States Patent and Trademark Office in return for public disclosure of the invention.

Depending on the nature of your business, you may or may not need to apply for one or more of these.

While doing so isn’t absolutely necessary, it is nonetheless important to ensure that you’re not infringing on other trademarks or patents with your business.

For example, you don’t want to sell clothing displaying Lord of the Rings characters unless you’re looking for trouble.

Get in touch with the relevant trademark or patent organization to make sure there’s nothing preventing you from starting your business properly.

Get Familiar With E-Commerce Law

Knowing e-commerce law is essential when starting an online business. In addition to helping you plan ahead and stay out of trouble, it’ll grant you peace of mind knowing that you’re doing things properly.

Make sure to check out our Start-Up section for more tips on how to launch a successful business.

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