The internet has revolutionized business operations and gave led to the growth of e-commerce. If you run an e-commerce business, understanding the legal aspects of your business is crucial. Doing so helps you avoid lawsuits that may jeopardize the success and growth of your business. Here are few legal issues you must know as an e-commerce business owner.
1. Product Liabilities
Product liability is the legal liability that you incur for making or selling defective products. It is also applicable when your products cause harm or injures the users. While it is easy to blame the manufacturers when products your sell turns out to be faulty, you can also incur product liabilities if you are a reseller. If your e-commerce website is simply a platform for third-party sellers, you may also be liable for distributing faulty products.
As an e-commerce business owner, you have the responsibility to do due diligence on your products. To protect your company, always provide warnings on the potential hazards of what you are selling. Also, implement stringent quality control measures and take up liability insurance for your business in case of litigation. The insurance will help you pay for the resulting expenses, including representation fees and even medical compensation.
2. Data Breach and Privacy Issues
Data breaches are one of the biggest threats to online businesses. E-commerce businesses get access to client’s financial and contact details, and you must safeguard them and keep it confidential. Leaking the information you collect from your clients not only ruins your reputation but also leads to lawsuits and loss of customers. Since e-commerce may transcend national borders, you should know the different data and privacy laws in your target markets.
3. Incorporation Problems
Most people who create online businesses in a hurry may forget to register them on time, which leads to a host of problems later on. Operating an online e-commerce business without registration makes your activities illegal and strips you of legal protection. Therefore, claiming your rights in case of corruption or fraud becomes difficult. It also limits your company’s growth in terms of gaining investments.
Incorporating your online business gives it a professional look and also protects you from personal liability. You won’t have to settle your business debts and liabilities using your personal assets in case of outstanding debt or bankruptcy. However, incorporation does not protect your business if it is involved in criminal activities.
E-commerce businesses are not exempt from paying taxes based on not having a physical store. Failing to pay taxes exposes you to penalties and legal problems. When starting an e-commerce business, familiarize yourself and comply with your state’s taxation laws and practices. If, for example, you sell goods to a demographic in the USA, your prices shouldn’t include tax. However, a business in Australia should show tax-inclusive prices.
Note that the level of tax you pay will depend on your type of business. The best way to go about taxation is by contacting your government’s tax agency and asking about the taxes and charges applicable to your online business. A tax professional can also help you understand what circumstances affect your business, advise you on tax charges depending on your location and even let you know if you qualify for tax exemption.
5. Intellectual Property Rights
Using content belonging to other companies for your e-commerce business can lead to legal problems due to infringement of intellectual property rights. It doesn’t matter whether your actions are intentional or not. Violating intellectual property rights can cost your business millions in damages, and you may even lose it. To avoid getting into legal problems, consider using websites that offer free images and content, such as Pixabay, or work with content creation agencies to produce content for your e-commerce business.
Always assume all content is copyrighted unless stated otherwise and avoid making any material differences to the product if you are a reseller. On the same note, ensure that you trademark your product name and logo to protect your brand against companies that may want to steal or copy it. Doing so protects your brand name and gives you legal rights to sue in case of infringement.
As an e-commerce business owner, you should understand all your legal obligations depending on your area of operations. Since your business may be subject to numerous laws, it is advisable to consult an attorney to ensure compliance and safeguard your business success.