5 Online Business Requirements Every Startup Must Have

So, you’re thinking about dipping your toes into the exciting world of online business? Well, read on to know more about important online business requirements you can’t do without!

First things first: what exactly is an online business? Simply put, it’s any business transaction that’s primarily done in the digital space. Think e-commerce stores, digital marketing agencies, or even online courses. The beauty of businesses operating online is that your office can be anywhere, as long as you’ve got an internet connection.

As liberating as starting an online business can be, it can also be a serious head-scratcher. As a newbie, you may feel like you’re trying to assemble IKEA furniture without the manual. But then, once you get the hang of it, running an online business can be incredibly rewarding. You now have the freedom to work from anywhere. There’s no more limit to how far you can cast your net in search of new customers. There’s also the satisfaction of building a small business from the ground up!

But there’s just one thing you must NEVER ignore in this journey: the legal requirements for online businesses. Not only do they serve as a compass so you don’t veer off into troubled waters, but they also serve as shields from potential future challenges.

That’s why I’ve put together this roundup of essential requirements for starting an online business! 

5 Online Business Requirements Every Startup Must Have

It wasn’t too long ago that you’d need a physical store or rely on word-of-mouth to get any business done. Even worse, your customer base is often restricted to the people within your locality. Well, e-commerce is here now, and it has completely changed the game!

Nowadays, you’ve got a great number of options for setting up a shop. And I’m not talking about the traditional physical stores. I’m talking about online marketplaces like Etsy, Shopify, eBay, and lots more. What you sell doesn’t even have to be your handmade bags or whatever items you’re trying to declutter. You can equally sell your skills, be it graphics designing, coding, or digital marketing. You can decide to offer consulting services or be a virtual assistant. The options are simply limitless!

But here’s the thing we’re no longer in the Wild West. We now have rules and regulations guiding nearly every aspect of society, and they apply to everyone. So, sitting behind your laptop to conduct your online business doesn’t exempt you from these rules.

Following these rules isn’t just about being a law-abiding businessperson. It’s about protecting yourself, your business, and your customers. Think of them as the seatbelt of the business world it might feel a bit restrictive at times, but you’ll be glad it’s there if things go sideways. Plus, you’ll have peace of mind. Nothing beats that in my books.

What Are Online Business Laws Exactly?

Online laws are like the rulebook for our digital marketplace. They’re there to ensure everyone plays fair and has a good time. Below are some of the key laws you need to know about when running an online business:

Federal Trade Commission (FTC) Act

The FTC Act is one of the biggest online business laws. It’s been fighting the good fight against deceptive and unfair business practices since 1914! This law ensures that businesses are honest in their advertising and marketing. It doesn’t condone making false promises or bogus claims just so buyers bring out their credit cards. To meet the requirements of this Act, be truthful in all your marketing materials. That includes your customer reviews, too. They better be genuine! Also, resist the urge to make claims about your products or services that you can’t back up.

CAN-SPAM Act

CAN-SPAM stands for “Controlling the Assault of Non-Solicited Pornography and Marketing.” This law puts the brakes on people who are fond of bombarding their email list with unwanted emails. We know email marketing is crucial in the online business space. So endeavor to follow the rules. Better still, include an unsubscribe option in every email campaign. Also, avoid using deceptive subject lines.

Digital Millennium Copyright Act (DMCA)

This law is there to protect intellectual property. It outlines the punishments for using any copyrighted work without getting the owner’s blessing or permission. So, as a copyright owner, you can request that content be taken down if it’s used without authorization. As an online service provider, understanding this law helps to avoid users’ copyright infringement. The best way to avoid intellectual property troubles is to either use original content or get proper permissions.

General Data Protection Regulation (GDPR)

GDPR refers to the European Union’s data protection law. However, don’t think you’re off the hook if you’re not in Europe! The moment one of your customers resides in the EU, this law automatically applies to you as well. The GDPR was created to protect customer privacy by demanding that businesses be transparent about how they collect and use their customer data.

So, be clear about what data you’re collecting and why. And most importantly, get explicit consent before collecting personal information. Secretly harvesting your customers’ private data attracts heavy punishment. You must also have a plan for how you’ll prevent data breaches or handle them.

Children’s Online Privacy Protection Act (COPPA)

COPPA is all about protecting the privacy of children under 13 anywhere online or the social media. According to this Act, business websites must get parental consent before collecting personal information from children under 13.

So, if kids are your target audience, you’ll need to be cautious going forward. This includes having a comprehensive privacy policy. Getting verifiable parental consent is another. Many parents also appreciate being able to review and delete their child’s information.

What Are The Legal Requirements for Online Businesses?

Now, let’s explore what you need to make your online business legit and ready to thrive in the digital marketplace:

Business License

Every brick-and-mortar store has its own set of keys. Without these keys, you can’t open your doors or get any business transaction done. Well, getting your business license is like getting the keys to your digital storefront. The only difference is that this particular key comes from the government, not from the market or a merchant.

Without this official permission slip, you can’t operate your business. And if you do operate without a license, hefty fines or even irreversible closure won’t be far off. So, get one for your business by applying through your local city or county government. Some businesses may also need state or federal licenses.

Employer Identification Number (EIN)

Every individual is expected to have that unique identifier known as the social security number. So also must every business have a unique identifier the EIN. Its purpose goes beyond just identification. You also need EIN for tax id number purposes, to separate your personal assets from business finances, especially if you’re not running a limited liability company. You also need EIN to hire employees.

You can apply for an EIN online through the IRS website. It’s free, and you get your number immediately after applying.

Sales Tax Permit

Sure, there are lots of services you could render online. However, if one of those services includes selling products online, the government will collect sales tax. You’ll likely need a sales tax permit to check this box. Trust me, you wouldn’t want to be on the wrong side of Uncle Sam.

How can you get this permit? Simply apply through your state’s Department of Revenue or Taxation. However, note that different states require different documents. So, you may want to check out the requirements for your state via their website.

Privacy Policy

A privacy policy is a statement that discloses how you gather, use, disclose, and manage your customer’s data. Putting such a statement on your business website is not optional or just good practice; it’s often legally required. To avoid errors or leaving out important points, you should probably use a good legal template like the Ultimate Bundle®. It’s a great resource, containing every legal template you’ll ever need to legally protect your online business. 

Terms of Service (TOS)

This is another requirement you must include in an easily accessible portion of your business website. Having a TOS is like entering into a pre-agreed contract with your users or customers. This contract essentially outlines the dos and don’ts of using your website or service. It helps protect your business well in advance.

Just like with the privacy policy, I’ll recommend you also use a good template like the one I mentioned earlier. This way, you can be sure all important points will be mentioned. I’m talking about key points like user rights and restrictions, your return policy, disclaimer of warranties, and limitation of liability.

With each online legal requirements box you check, you’re building a strong, resilient foundation for your business.

Before you go! → There are 5 things your online business MUST have in place. Want me to lay them out for you in plain English? Click here to grab my free download.