Despite the devastating world events of 2020, the formation of online businesses has soared. As more and more people turn to the internet as a source of income, legal requirements have become more important. However, starting an online business is more complicated than creating a website and selling products.
This guide will explain five crucial legal steps that you must take when forming your online business. This will ensure you and your new business are protected.
1. Decide on a Business Structure
The easiest option is to operate your business under a sole proprietorship. However, this isn’t always the best option. Being a sole proprietor means you are individually responsible for your company. It also means you don’t need to do any formal paperwork.
To protect yourself from liability, consider forming your business as an LLC or a corporation. These structures will protect your personal assets and insulate you from personal liability. Once you decide what is best for your situation, you’ll need to file the necessary paperwork in the state where you are personally located.
Your attorney will assist in preparing your new business’s documents, such as articles of incorporation or formation agreement. They can also offer registered agent services.
2. Register A Name
You’ll need to choose and register a name for your online business. It needs to be something memorable and relatable to your business. It also can’t be something that someone else has already registered. Check your state’s laws for any requirements that you must meet. Your attorney can perform a name search to see if your desired name is available. They can also help you prepare the required paperwork to secure your chosen name for your business. Finally, don’t forget to check if the name is available as a domain or social media account.
3. Licensing and Sales Tax
If your future business involves the sale of products, then you’ll probably be responsible for sales tax. These are based on the state that you are physically located in. Beginning July 1, 2020, Florida will require certain online sellers to collect a 6% sales tax from residents.
Speaking with an accountant or attorney can help you understand the changing laws. This is crucial to ensure you fulfill your state’s tax requirements.
Depending on the industry you plan to operate in, you may also need permits, licensing, or certifications. An attorney can help you file the required paperwork to ensure your business is registered with appropriate government authorities.
4. Sign Supplier Contracts
Read every contract in full before you sign. It’s also smart to have an attorney review the agreement. As an online business, you will sign agreements when you purchase your domain, arrange for server services, have your website built, and establish business social media accounts. If you’re selling a product, you’ll also sign agreements with suppliers and logistics services. It’s important to know what you can expect from these services and what you are liable for.
5. HR Documents
If you plan to hire employees to help you with your online business, then you’ll need to have employment paperwork prepared. Working with an employment attorney will ensure you have the proper paperwork and policies in place. Each state has requirements that must be fulfilled depending on the size of your business and the number of employees you employ.
Form Your Online Business Today
Forming an online business is a smart way to generate additional income. It’s also an opportunity to become independent in your career. As with any new venture, you need to protect both the business and yourself legally. Speaking with an attorney early on will ensure that you address any possible sources of liability. Starting with these five
Schedule a consultation today, and let’s get started on the formation of your business.
