Legal Considerations For E-Commerce Startups

By: Krystle Warren

The Internet connects people all over the world with goods and services and an Internet business can eliminate many geographical limitations of a brick-and-mortar business. By conducting your business electronically, you can cut down on business operating expenses and reach a wider client base. Studies now show that over half of all internet traffic is conducted through mobile devices.  Companies such as Facebook, Amazon, and Netflix have normalized on-demand and high growth internet-based businesses.  However, e-commerce businesses still face a variety of legal requirements and issues that must be addressed to ensure the success of your business. It is important that startups consider the new and ever-changing legal landscape developing online.  The following are only some legal considerations for e-commerce startups.

Best Business Selection and Formation

Like any other type of business, online startups must consider what type of formal business entity is best for them – if any. Do you want the liability protections of a limited liability company (LLC)? Do you want to incorporate to facilitate investors in your business? Do you simply want to run the startup as a sole proprietorship? It is important to weigh the benefits and drawbacks of each.  A startup should always select a business entity that will best meet its short and long-term goals.  Selecting the appropriate business entity depends upon a variety of factors, including the type of operation you are running, as well as your plans for growth.

Potential trademark violations – When you are selecting your domain name and posted content on your startup website, it is important to avoid infringing on any existing trademarks that may protect other content on the Internet. The Digital Millennium Copyright Act of 1998 (DMCA) provides protections against online copyright infringements, however, no such protections exist for trademarks. If you are accused of trademark violations, you can face significant legal liability from laws other than the DMCA.

Intellectual property protections – You do not want other companies infringing on your business name, brand, or original content that you post on your business website. Startups create and implement many novel business ideas that provide a new or innovative product or technology.  Consequently, it is essential to ensure you have all necessary trademarks and copyrights in place to give you stronger legal rights if another business or person tries to misappropriate your protected content.  A startup should work with an attorney to develop language and seek legal protections that will protect the startup’s ownership, naming, and intellectual property rights.

California Laws and Regulations

Startups are required to comply with state and federal regulations in order to operate internet-based operations.  E-commerce businesses require many different contracts and agreements, all of which should be carefully reviewed and negotiated. Relevant contracts can involve website design, privacy policies, disclaimers, service agreements, terms of sale contracts, and terms of website use.

These are only a few of many different contracts your e-commerce startup will encounter and you should ensure that every contract is enforceable, has favorable terms, and protects the legal rights of your business.

Discuss Your Startup’s Legal Needs with a San Jose Startup Attorney Today

Although the internet has made doing business easier, it has also increased the number of legal risks a startup should consider and address.  Every startup will have numerous legal considerations, whether you are doing business solely over the Internet, have a brick-and-mortar location, or a combination of the two. It can be difficult to recognize all of the laws implicated in your business and the risks of legal liability or financial losses. In order to ensure your startup gets off on the right foot, you should always discuss your business venture with an experienced startup attorney who thoroughly understands California business law. Working together, the startup and the lawyer can identify potential legal considerations that will need to be addressed and structure the startup in order to best minimize potential legal risk.  Call Startup Company Counsel for assistance today at (408) 441-7555.  Contact SCC to schedule a consultation with one of our experienced business attorneys.