Legal Checklist for New eCommerce Businesses
Starting a new business, especially an online shop or an eCommerce business, can sometimes feel like heading out for an exotic vacation. You’re excited to get where you’re going and you have a ton of cool ideas of how things are going to go once you get there but you arrive at the airport pretty much convinced that you’ve forgotten to pack something critically important. You just have that anxious feeling that no matter how well prepared you thought you were that you’ve somehow left something behind. And the anxiety over this can sometimes be enough to ruin the whole trip!
Well, consider this your packing checklist for setting off on the right foot for your eCommerce journey! As someone who’s started multiple small businesses myself, I definitely wish I had come across something like this that was complete and <b>trustworthy</b>. I even thought about putting together a list myself but {newsflash} I’m no lawyer. So I was super excited when an email from Paige Hulse of Paige Hulse Law and the Creative Law Shop recently came across my inbox on this exact topic!
In her post, Paige details all the steps on how to legally start an online shop. You should definitely click through to her post to get out all the legal specifics but I’m going to summarize most of them here, along with a few additions and notes that I think will help specifically ensure that you’re set up for eCommerce success!
Run a Name Search - This seems obvious but there’s a reason why it’s repeated over and over - and why it’s number one on the list! Paige rightfully mentions that most people check whether the domain they want or the social media handles that match are available and often do little else but that’s not the only error some new business owners make when it comes to naming. What I’ve experienced is that too many people fall into the trap of thinking too small when it comes to their name. They either don’t make their search wide enough when looking for any potential conflicts or they settle for a super limited local name just because the domain is available. For more domain name tips, check out this post (hint: #4 is all about domains).
Get Any Required Licenses & Permits - The exact list is going to vary widely depending on what you’re selling and where you’re located but it’s worth seeking out someone who is familiar with 1) your industry, 2) your area and 3) eCommerce for guidance. That last one is super important because even though selling online is still a little bit like the wild, wild West there are changes and new laws cropping up all the time. Also, just because you work from home does not mean you are somehow exempt from licensing. The last thing you want is to get shut down or see some major fines in the future because you didn’t have the right credentials in place or pay the proper fees.
Legal Contracts Are Your Friend - Don’t sleep on this step! Not only is it super important to set up the required privacy policies and terms of service for your eCommerce website, but it’s also really become more affordable than ever to make sure you’re protected. Check out this post that includes two of my favorite options. This is really a non-negotiable and not something you can opt-out of and just “take care of later.” If you plan on selling online, you need these legal policies and clauses in place. (If you’d like to learn even more about GDPR compliance, check out this post from Style Factory!)
File Your LLC - Obviously, you may want to check with your own lawyer and maybe even loop in your tax dude on this decision but the point really is that you need to make sure that your business assets and your personal assets are not one and the same. A DBA does not cut it. An LLC is the most popular route to take to make sure that you're protected. In the words of the late, great Notorious B.I.G.: keep your family and business completely separated.
Get Your EIN Number - Surprisingly, this is one of the fastest tasks on the list! Who knew that a solution featuring irs.gov would ever be so easy?!
Open a Business Bank Account - Remember: no mixing things up. Personal money 👉 personal account. Business money 👉 business account. Simple.
Get Insured - This is another situation where it pays to seek out someone familiar with your business/industry and eCommerce in general. Even if it’s just a general liability policy, you want to be protected.
Website Stuff - I do think that you can do a little more in this step beyond just making sure that your legal policies and copyright are linked in your website footer, although both of those are super important! One of the more intricate things that comes up with each and every client I work with is sales tax. And it’s no surprise to me that everyone is confused - it can be super complicated! Everything from the exact rates to how sales tax should be displayed and collected on your site can vary based on what you’re selling, where you’re located, where your customers are located and everything in between! You definitely want to confirm the specifics for your own case with your accountant or tax professional but the thing that I would recommend to everyone is planning on utilizing the automatic tax rates feature on Squarespace to ensure that sales tax is calculated correctly for each and every online transaction.
Register Your Copyright or Trademark - This is super important if your business is anything other than your name but check out Paige’s post for all the details! I think this is especially important if you’re selling your own custom products such as t-shirts with your own designs or prints of your own photography work, etc. We’ve all read those horror stories about independent creators having their ideas stolen by big brands without credit. Again, don’t think small here; you’ll be thankful that you took care of these things early on!
Bottom Line
Getting started with your first online shop doesn’t have to be an overwhelming experience! Use guides like these to help you feel confident in setting off on your eCommerce journey without worrying that you’ve left something behind or forgot to turn off the stove! 🔥 Once you’ve taken care of the things on your legal list, you can confidently turn your attention to the fun stuff, like web design. For those next steps, check out: A Step-by-Step Guide on How to Set Up Your First Online Shop.
