Running a business requires owners to follow a set of rigorous guidelines. Individuals setting up an online small business are not exempt from these regulations. In fact, online small businesses often face complicated regulations that they must follow.
You will need to adhere to strict legal guidelines when:
Opening an Online Business
In order to open your online business, you will first need to register with a number of official organizations and obtain specific permits. Opening your business will require you to:
Register the Name of Your Business.
The exact processes for registering the name of your business vary by state. Instructions can usually be found on the website for your state’s secretary of state. For example, let’s say you wish to open an online jewelry store called the 24K Connection. In New York, you would have to file a Business Certificate in that name with the County Clerk of your county.
Register for an Employer Identification Number
The Internal Revenue Service (IRS) uses Employer Identification Numbers (EINs) to identify your specific business. You can get an EIN from the IRS over the internet. Note that you may use your social security number (SSN) instead of an EIN if you are operating a sole proprietorship without employees.
Obtain a Sales Tax Permit
Most online businesses are required to obtain a sales tax permit – sometimes referred to as a seller’s permit – if they sell:
Note that if your state does not have sales tax, you may not need a sales tax permit. Additionally, some online businesses are exempt from this requirement if they do not have a “physical presence.” However, most business have a physical presence of some kind, even if it is just to store inventory.
Get Any Required Permits and Licenses
Many individuals are required to get a license or a permit in order to perform certain jobs. Most online businesses will not require you to have a license, but you should always go over the legal codes in your state to make sure you are not violating any regulations.
Focus on Labor Agencies
Every state has unemployment and workers’ compensation departments. You will need to register with these departments if you employ anyone. Certain states will require you to register even if you don’t employ anyone besides yourself.
Operating Your Online Business
Every aspect of your online business must comply with business laws and regulations. This means that you will need to accurately report your income, expenses, and payroll, just as any other business would. You will also have to follow regulations surrounding:
Online Information Collection
Online businesses will likely end up collecting credit card numbers and personal contact information from clients. You will have to obey any state and federal laws related to consumer privacy if you acquire this information.
It is especially important that you comply with the Payment Card Industry Data Security Standard (PCI DSS) when making sales that use credit card data. These standards ensure consumer information is protected.
You should also be aware that it is against the law to collect information on anyone under the age of 13. Your business may need to set up an age verification tool to make sure you do not violate the Children’s Online Privacy Protection Act (COPPA).
Accurate Product Information
All businesses must truthfully describe their products, including online businesses. This means that, if you open an online business that will allow consumers to buy diamonds online, you must truthfully describe the gemstones you are selling to your clients.
Sales to Other Countries
Online businesses are uniquely able to make sales to people around the world. This can increase sales, but it requires business owners to ensure they are familiar with the regulations for the countries where their products or services are bought. You should make sure you are familiar with:
- All Tax Codes
- Customs Laws
- Any Duties
Avoid Using Spam
Companies are no longer permitted to send out unsolicited commercial e-mail messages due to the CAN-SPAM ACT. While all companies are impacted by this law, if can be especially important for online companies to keep this regulation in mind.
Understand What You Can Ship
Online companies can sell almost anything. However, not all products can be shipped by every provider. Many items cannot be legally shipped through the U.S. Mail. This includes alcohol, ammunition, bullion, and more.
Note that you may be able to ship your products through different providers. You may need to pay a fee and fill out extra forms and permits to ship certain products.
Ensuring You Comply with All Online Business Laws and Regulations
Running an online business requires business owners to adhere to a number of important business laws and regulations. The exact regulations your business must adhere to can vary by your state, so it is important that you research the laws in your area before your business begins operation.