Legal Basics of Starting an Online Business

February 19th, 2019
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If you’ve thought about creating an online business, the legal process can feel a little overwhelming. From your first tiny idea to your first big sale, understanding the accompanying legal issues is a key factor for setting up a successful online business. But where do you even start? Fortunately, there are a lot of resources available to help you streamline the process.

Here are some tips to get you headed in the right direction:  

  • Select Your Structure: First, you need to decide on the structure of your company. There are essentially three basic types of businesses: Sole Proprietor, LLC, and Corporation. 
    • Sole Proprietors are the most common type of business startup. There is almost no paperwork, but the owner is liable for any debts that the company might incur.
    • Owners of LLCs are not personally liable for any obligations or debts from the business. It is a little more flexible and has less paperwork than a corporation. 
    • Corporations are better for you if you are planning on having a large business that crosses state lines. A corporation also allows you to have outside investors.
  • Choose a Name: You might have thought up the catchiest and cleverest name in history for your company, but it won’t do you any good if someone else has already claimed it. You can check your state’s businesses by searching the Secretary of State site online for free, but don’t stop there. Check all 50 states and then search local and state databases for registered trademarks. Someone might not have officially formed a business but if they have registered a trademark that is the same as your business name, they could sue you for trademark infringement down the line. 
  • Set Up Your Finances: Make sure to file for a tax ID number as soon as you decide on a company name. This number gives your business an identity for tax purposes and you won’t have to provide your personal social security number for business transactions. Once that’s set up, head to your preferred bank and create a business bank account. This allows you to start building a line of credit for when you have business expenses later on. 
  • Other legal aspects
    • Trademark protection is not necessarily required by law, but you may want to take this extra step to help you keep your name, business reputation, and assets under your control. 
    • Permits and licenses are sometimes tedious to obtain, but they are vital in keeping your business within the law. Business permits, building permits, health permits, and sales tax licenses are just some of the different permits and licenses that you need to look into before opening your virtual doors.
    • Employee laws can be complex to understand, so you might want to seek out legal counsel to make sure that you are meeting all of the requirements.
    • Setting up a DBA (Doing Business As) might be required in your state if your business is named anything other than your personal name. Often, banks won’t let you set up a business account until you have a DBA.  

These steps are all important to consider when you are setting up your online business. You may be chomping at the bit to get started but the key to success is to do your homework and research before jumping in head first.

For more information about the legal ramifications of a new business, attend an Amazon sellers event with workshops from experts in the field who can help educate you about the ins and outs of business regulations.

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