Top 7 Reasons to Contact an Attorney Before Launching Your E-Commerce Site
The internet has changed since the early days when an entrepreneur with a computer and a catchy business name could start a business from their bedroom. Today, e-commerce is regulated as tightly as any brick-and-mortar business. Starting an e-commerce business now means navigating federal and state laws like any small business.
Some of the legal problems facing small business owners when they start an e-commerce business may surprise you. The danger is not hackers or data breaches but failure to follow federal laws and tax codes. Discussing the changing regulations with a small business lawyer before making your business plans can save you time and headaches later.
Below you'll find the top seven reasons talking to an attorney might be a good idea for your online business. Before you open a new business or expand your existing business into e-commerce, you should talk to a business lawyer with experience in technology and intellectual property law.
1. Data Privacy Laws
The rapidly changing data privacy laws are the top reason to review your e-commerce startup with an attorney. In 2023, a raft of new data privacy laws were enacted, with implications for anyone doing business online. All these laws follow the European Union's General Data Protection Regulation (GDPR).
The GDPR affects businesses based in the EU and any business entity doing business with European Union citizens. The GDPR and related laws require businesses to guarantee:
- Transparency in data processing
- Purpose limitation, meaning data use is limited to the purpose for which it was collected and not sold or used for other reasons
- Data minimization
- Storage limitation
- Accountability by the collecting company
- Customer right to access and delete data
- Data portability across platforms
Related acts in the United States include:
- California Consumer Privacy Act, which also requires an opt-out for the sale of data
- Colorado Privacy Act
- Virginia Consumer Data Protection Act
- Utah Consumer Privacy Act
- New York's Stop Hacks and Improve Electronic Data Security (SHIELD) Act, which has a data breach notification requirement
- The Gramm-Leach-Bliley Act, a federal law aimed at financial institutions
These acts affect businesses that operate within the states. They also impact businesses that gather data from customers residing in the states. For instance, an e-commerce company operating in Nevada that sells to customers in Virginia must abide by Virginia's CDPA.
Violating these laws can result in fines and possible legal action by customers.
2. Data Privacy Policies
Related to Reason One, concerns over data privacy are the main reasons for these laws. You will need a cybersecurity expert for the actual software. Before that, an attorney can explain your business needs.
3. FTC Compliance
The Federal Trade Commission (FTC) regulates advertising in the U.S. They define deceptive and unfair advertising. Some types of businesses have specific regulations. Jewelry, business opportunities, and financial companies have their own FTC regulations.
Other FTC issues to consider:
- Disclaimers: The FTC requires any disclaimers to be clear and conspicuous. Having a disclaimer may not protect you from false or deceptive advertising claims.
- The Children's Online Privacy Protection Act (COPPA) restricts collecting data from children under 13. Businesses must have parental permission to collect that information.
- Claims of environmental benefits are deceptive without extensive scientific support.
- Warranties and guarantees must include any terms of the offer and a clear explanation of how the customer can receive them.
Failure to follow FTC regulations in advertising can result in fines, injunctions, and awards of damages in civil lawsuits. Getting legal advice before setting up your website is cheaper than dealing with a cease-and-desist order.
Whether you're a sole proprietorship, a limited liability company, or a corporation, you started your business to make money. Making money is easy enough, but you must also protect the transfer from your customer to your business account on the Internet. Online transfers must be PCI compliant. This is a standard developed by the major credit card companies, the PCI Security Standards Council.
Your business operations can be PCI DSS compliant with access control measures and a robust data management system. Many companies resolve the issue by outsourcing their payment system to a third party who manage securing credit card and other financial data. You should discuss this with your attorney for the best option for your business.
Online taxes are an unusual beast. If you've ever purchased anything online from a site other than Amazon, you may have noticed sometimes you pay sales tax, and sometimes you don't. This is because online retailers cannot collect sales tax unless they have a physical location in the state where the sale occurs.
If your startup business is in California, you'll need a notification and sales tax calculator on your site advising customers located in California they'll have to pay the current sales tax. If your business expands into other states, you'll also need to add taxes in those states.
6. Intellectual Property
No matter what you're doing on the Internet, chances are someone else is already doing it. There is nothing new under the sun, and that's especially true in the global marketplace. To avoid trademark or copyright infringement claims, an intellectual property attorney can review filings and ensure your copyright, trademark, or product concept is as unique as you think.
Your attorney can help protect your product from patent trolls if you already have a patent or license. A patent troll combs patent files for old or almost expired patents, and then sues other companies for infringing on the original patent. Usually, all they want is a licensing fee from new businesses without the means to fight them in court.
7. All the Other Stuff
Whether you're a new e-commerce business or an established startup, you'll need a small business attorney to help with the nuts and bolts of business formation. Your attorney can help with the time-consuming details of:
- Obtaining a business license
- Drafting articles of incorporation or a partnership agreement
- Contacting the IRS for your Employer Identification Number (EIN)
- Helping draft your bylaws or operating agreement
- Creating contracts for employees or independent contractors
Whether starting an e-commerce business from the beginning or expanding an existing business into the Internet sphere, you need legal services to be sure you're doing things right.
See the Internet and E-Commerce section for additional resources.
Find an Attorney Before You Launch Your E-Commerce Site
Now you know the reasons for hiring a business attorney before launching your e-commerce website. If you need legal help, be sure you find the right one. Check FindLaw's directory of business and commercial law attorneys to locate one near you.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.