8 Ways to Legally Protect Your Online Business

Starting an online business is an exciting prospect, an opportunity to deliver goods or services to those who are looking for the solution you offer.

10:06 09 January 2023

Starting an online business is an exciting prospect, an opportunity to deliver goods or services to those who are looking for the solution you offer.

There’s a lot of time, energy and resources that go into creating your online business. That’s why it’s so important to make sure that it’s protected. There are several steps you can take to protect your online business and ensure that your assets, intellectual property and commitment are safe.

Not taking these steps can be harmful, both financially and legally. You can have your intellectual property stolen and used by competitors. You may be restricted from operating if you do not have the right documents and licenses in place, too.

Tip #1: Form Your Business Officially

When you start a business, there are several processes to complete to ensure that it’s protected. The first is to establish it as a legal business entity.

There are multiple options for your business. You can become a sole proprietor, meaning you are the sole owner. This is the simplest business entity and profits and liabilities pass through to your individual tax return.

A partnership involves two or more people who operate the business. Usually, all partners have an equal role in the business and are also responsible equally for decisions, liabilities and owners’ actions.

A limited liability corporation (LLC) is the most common business structure. In it, the business is a separate legal entity and owners are not responsible personally for the liabilities. You can also determine the tax status you want (sole proprietor, partnership or corporation) that best fits your financial needs.

You will need to register your business in your state. The registering guidelines vary greatly from state to state. Be sure that you file your legal and operating (“doing business as”) name, if required to do so.

Tip #2: Register Your Domain Name

Do you have a great idea for a website name for your business? It’s best to check to make sure that the domain is not already in use by another entity or is owned but not being used.

With the proliferation of websites, the supply of good website names and domains is shrinking fast. Picking a domain name that aligns with your company name is important and can lend credibility to your site.

Using one of the popular commercial domain registration sites is simple to do. Many commercial web design companies also provide this service. Integrating your domain name registration with website design also allows you to use domain-specific email addresses (instead of, for example, a Gmail or yahoo address), lets you create subdomains and makes it more difficult for anyone else to co-opt that branding.

Tip #3: Create and Show Online Policy Documents

When building a website, you want to be sure you protect it, and your company, from liability claims. To do so, spell out key rules and guidelines and post them. While there are some sites that offer templates for these guidance and policy documents, it’s always a wise idea to run these by an attorney.

Privacy Policy

Website visitors have a right to understand how your company will use its data. In recent years, there have been new laws passed by the European Union (General Data Protection Regulation), California (California Consumer Privacy Act) and other jurisdictions that give customers extensive rights to know how that information will be used.

Many jurisdictions require online sellers to have a privacy policy that’s easy to understand on their website. Doing so shows your visitors not only that you’re adhering to legal mandates, but that you take their privacy rights seriously. The policy should outline the following:

• What data you collect
• What categories of third parties you share data with
• What tracking techniques are used
• How data are retained
• How visitors can request a change or deletion of data
• How visitors are told about changes to policy
• How private information is protected
• How to contact your company regarding data

Terms and Conditions

How will your business operate online? Your terms and conditions statement lays out business details that, if omitted, could open you up to liability claims. Among the key points to cover in your terms and conditions are:

• Your policies on returns, refunds and exchanges for products and services you offer
• Your intellectual property rights and copyright infringement guidance
• How you will settle legal disputes
• How your website can be used
• How your liability is limited

Disclaimers

A disclaimer is a broad legal net that details the scope of your work and obligations. Having a disclaimer also satisfied a Federal Trade Commission regulation. The information in your disclaimer may include:

• What the limits of your liability are
• What you are responsible and not responsible for
• Discloses relationships you may have with third parties, such as affiliates
• Disclaims liability for information in third-party links on your site

Tip #4: Trademark Your Property

A trademark is a legally binding indication that you own various types of intellectual property, such as a design, logo, word, symbol, phrase or a combination of these items.

Having your intellectual property trademarked is an important step to protecting things that are a part of your brand. Knowing how to trademark a logo or other creative element of your brand gives you priority use of it, lets you take legal action against anyone who tries to use it, and when registered in the United States, lets you also register it in foreign countries.

There are different levels of trademark protection, including at the local, state and federal levels. A trademark differs from a copyright, which protects other types of property, such as writing, computer programs and artistic works.

Tip #5: Get Business Insurance

Business insurance is an affordable, practical step to protecting your online company. There are a wide array of policies available. In general, business insurance protects you against financial risks, such as the loss of a partner, injury to an employee, lawsuits or natural disasters.

Business insurance protects the underlying assets you’ve worked so hard to build. While it can’t protect you from a client or customer filing a lawsuit, it can reduce the impact of those claims. The same goes for employee injuries.

Business insurance provides peace of mind, allowing you to continue with your business while reducing the overall risks of operating.

Tip #6: Draft and Review Contracts

A handshake and verbal agreement may be all well and good, but leaves you on tenuous ground legally. Consult with a lawyer to draft contracts that cover the scope of any work agreements with vendors, partners or clients. You’ll need contracts for various types of work including:

• Client agreements that cover the scope of work, deliverables, payments and payment/deliverable schedules
• Terms of use when using applications on your website, downloading materials or accessing proprietary information
• Independent contractor agreements
• Vendor contracts

A good legal counsel can help guide you as to the types of contracts you should have, review any existing agreements and look at any contracts created by other parties in the course of your business dealings

Tip #7: Conduct a Financial Audit

You want to be sure that your finances are audited on an annual basis by an external auditor. That’s a good way to accomplish several key goals.

First, an audit ensures you have a clear, unbiased understanding of your financial status. Second, it’s a way to identify business procedures and processes that may be problematic for your online business. Your auditor can detail these items and make suggestions to ensure that your company is sound and adherent to key business practices.

Tip #8: Invest in Cybersecurity

Another crucial aspect is to improve your website security as much as possible. Knowing how to protect a site from hackers can not only keep your business from operating, but it can also do irreparable harm to your online reputation. Keep the systems, website and data away from cybercriminals by ensuring your site has the right protection. Tools that scour your website, monitor traffic, and identify and contain threats before they can do any major damage are invaluable. They’ll also ensure that your customers trust your site and want to continue to do business there, without concerns for their data or identifying information being compromised.

Conclusion

When you’ve launched an online business, there’s a lot to consider. By factoring in some simple steps such as adding business terms, protecting trademarks, establishing your business and ensuring contracts are well constructed, your business will be primed for success.