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March 25, 2011

Some Legal Aspects Of Operating An Online Store

When starting any kind of business, there are always various legal issues which must be addressed. Although e-commerce might seem like a paper and tax-free business to you, nothing could be further from the truth. In fact, your online store is no different from any other kind of “physical” store or business. Here are some things to keep in mind and research well before opening an e-store:

Store Business License

The regulations for a store license vary by country and within countries, by region or state. License requirements differ depending upon the type of products you are selling.

In most cases, obtaining a license is a relatively easy process; however, licensing to sell alcohol, firearms, pharmaceuticals, etc., are often more complicated. A current business license is usually required for a business (rather than personal) bank account.


You will definitely need to report your taxable items revenues and pay income tax according to the laws where you reside. This means you must record all revenues and expenses, and retain documentation of same. Entrepreneurs in the USA should be aware that beginning in 2011, banks which process your credit card sales and PayPal are required to report your gross proceeds to the Internal Revenue Service if you process $20,000 or 200 transactions in one year. A tax return must be filed showing that income, and it is imperative that you keep track of all costs and expenses in order to deduct them against the gross proceeds in your tax return. If not, you will be assessed tax on the gross amount.

VAT and local sales taxes must also be collected by online merchants. Your shopping cart software should make this job easier; however, you must research and apply the applicable laws for your operation.

Advertisements on Your Website

Be careful that your marketing text is true, and do not make claims that cannot be substantiated. If you have other advertisers on your site, it is your responsibility to ensure that pay-per-click ads placed on your site are not fraudulent.

Product Liability

If you are selling merchandise which can be dangerous in any way, consider a limited liability legal structure for the business and be sure to carry liability insurance.

Important Documents

Keep the following up to date: license, vendor and buyer agreements, terms and conditions of sales, terms of services, etc. You will also have to prepare contracts for third-party services and affiliate programs if you plan to offer these.

In general, always be sure information placed on your site and sent out in e-mails to customers is accurate and authentic, and use current technology to protect your site from spam and hackers.

We have tried to summarize the broadest and most important issues in this article, but every new online merchant will have unique needs and requirements. Careful research and planning will prevent unpleasant and unprofitable surprises after you begin operations. You can obtain more detailed information on legal aspects of e-commerce business online from many legal websites.

This article was written by Mr. Vladimir N.Tuporshin, founder of WebAsyst and several other software development companies during a successful career spanning more than 20 years. His company offers free and inexpensive applications at to help you manage your business effectively, including the Shop-Script (TM) shopping cart which is invaluable for online merchants.