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Starting an Online Business

In the past, to start a business you had to find a location, rent space, and open your doors to the public. Today, many entrepreneurs can do it all online by advertising, communicating with customers, and managing transactions using the web. Many entrepreneurs are interested in starting a new business with a strong online presence. There are several steps that one must take to start a business, plus additional considerations to comply with online business laws. Are you ready to create an online business? Are you unsure which laws you need to be aware of for your e-commerce website?  If so, then you need to know the process to start a business and the additional issues that apply to e-commerce.

How Do I Start An Online Business?

The Small Business Administration recommends a ten-step process to start a new business.  First, write a business plan.  This is your general outline as to the identity of your new company and the structure you are going to build to execute your plan.  Second, get the proper assistance and training. No one knows everything and connecting with mentors and experts can help you get off on the right foot.  Third, choose your location. If your company is 100% online, you still need to determine the types of customers you plan on attracting and to what areas you plan on making deliveries.  Fourth, finance your business. Whether you choose traditional financing from a commercial bank or more creative methods (e.g., crowdfunding), make sure to do your research and figure out what works for your company.  Fifth, determine the legal structure of your business. There are many types of entities you can create (e.g., LLC or Corporation). Each entity creates different levels of liability and tax obligations.  Sixth, register your business name with the proper state agency (e.g., Secretary of State).  Seventh, get a tax identification number (a/k/a EIN) by registering with the Internal Revenue Service.  Eighth, register with state and local tax agencies (e.g., Franchise Tax Board, a/k/a FTB). In general, each state has its own tax laws, so make sure you know the obligations within your state.  Ninth, obtain business licenses and permits.  You should keep in mind that state and federal agencies may require different licenses and permits. Finally, you may need to hire employees or independent contractors.

What Are Other Concerns For An Online Business?

Doing business online may relieve you of the worries of a physical location, but there are additional considerations. The privacy of your customers should be a major concern. The Electronic Communications Privacy Act (“ECPA”) and the Stored Communications Act (“SCA”) protect privacy of electronic communications and electronically stored information.  For example, your website may access a customer’s computer to complete a transaction, but there could be criminal and/or civil penalties under the ECPA or SCA if your company accesses protected information.  In addition, some information (e.g., personally identifiable information) you receive from your customers must be protected and securely stored on the network.  In fact, new businesses should focus on cybersecurity.  Furthermore, no security system is full proof. Therefore, cybersecurity insurance is another protective measure businesses may want to consider in order to minimize liability.  If you need assistance in starting your new business and complying with applicable state or federal laws, you may contact us to speak with an attorney.