Legal considerations for starting your online business

Online business is booming. Most consumers now favour online shopping given that it is quick, convenient and usually cheaper than in a retail shop.

Consider the legal considerations and responsibilities of running business online, preferably before you start trading.

THE FORMALITIES & NECESSARY REGISTRATIONS

The first thing that needs to be remembered is that even though you do not have a shopfront, you are still operating a business. As such, there are certain legal requirements that you will need to abide by. In particular, you need to think about:

  • The structure of your business – consider asset protection, taxation issues, income splitting;
  • Registration of your business name and (the all too often overlooked trademarks, social media and URL registration);
  • Obtaining a tax file number, ABN and, if required, registering for GST;
  • Putting in place Terms of Trade, Privacy Policies and the like.
  • Government regulations and any advertising restrictions regarding the products or services that you wish to sell.

Although these considerations may seem daunting at first, it is important that they are given due consideration. Take for instance the choice of business name. Many would consider this the most important decision in the establishment of an online business. When choosing a name, you need to make sure that it does not infringe upon or not too similar to an existing business name or another person’s trademark. Preferably you would do this before spending money on websites, logos and the like!

CONSUMER LAWS

Before embarking into the world of e-commerce, it is important to remember that there have been major legislative changes to the laws regulating business transactions. In particular, you should take note of the Australian Consumer Law which regulates consumer affairs and transactions. Provisions which may be relevant to an online business usually concern the issue of misleading and deceptive conduct, misrepresentation and misdescription of products.

Consider the descriptions that you will be putting up about the products you will be selling and the impact that these may have in the mind of the consumer. If you think that they may create a false assumption, then it is best to re-word them and make it clear exactly what the product or service does.

If you are planning on selling products internationally, then you may also need to take regard of legal requirements of the countries that you are proposing to deliver to.

TERMS OF TRADE

Most online businesses do not sufficiently state the terms of their proposed sale to consumers. The description of the goods is usually there, as is the price and a method of delivery… but that’s about it! What if something goes wrong – what other terms would be useful?

Consider these:

  • Where is the law of the contract?
  • At whose risk are the goods while in transit?Are they insured?
  • What warranties or indemnities (if any) are required?
  • Can the performance of the contract be delegated to a third party?
  • Have you secured supply of key components of your product?
  • Can liability be limited in the contract?
  • What happens if circumstances beyond my control prevent you from fulfilling my contractual obligations?
  • Do you need to protect the intellectual property in any goods sold?
  • How will any disputes be resolved?

Many, if not all, of these matters can be addressed by having appropriately drafted terms of trade. If you haven’t brought all of your terms to the customer’s attention before the contract is entered into, they do not form part of the contract at all.

SECURITY & PRIVACY CONCERNS

On-line systems are at risk of fraud 24/7 and from anywhere in the world. When dealing with sensitive information such as personal contact details and credit card information, it is important that you have appropriate security measures in place. You should aim to:

  • Ensure that all personal details and credit card information is securely stored (and encrypted or not stored at all);
  • Take steps to seek to prevent fraud by using appropriate firewalls and software (as well as third party payment systems);
  • Provide a safe and secure online space.

Remember that by doing these actions, you are not only protecting consumers, but also protecting your and your business.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to estate planning, business succession or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.