When starting an online business there are so many things to think about. Have you got a killer idea? How should you attract customers? What will your pricing be? How can you beat the competition? Etc.
So rather than add to this list of unknowns, we’re going to tell you 5 specific things you need to know about running an online business – from a legal perspective, of course – each with a critical ‘to do’ item. So here we go.
1. You should run your online business through a ‘Pty Ltd’ structure
Before starting a new business, your number one priority should be protecting what you already have if things go wrong.
If you haven’t incorporated and you run your business as a ‘sole trader’, your personal and business assets are at risk. If you are sued by a customer, as a sole trader it’s possible you could lose your house, car, life savings, etc. Depending on the amount of damages claimed, it could wipe you out!
However, if you run your business under a ‘Pty Ltd’ company structure and someone sues you, the assets at risk are only those of the company (subject to any fraud/gross negligence). The protection of running your business under a ‘Pty Ltd’ structure is substantially greater than as a sole trader.
In addition, having strong, clear Terms & Conditions on your website – including a limitation of liability clause in the event someone tries to sue you – will give you additional protection.
To Do Item: Add properly drafted Terms & Conditions to your website, customised for your business. This is the minimum first step (and least expensive). Then incorporate your business as a ‘Pty Ltd’ company, as soon as you can afford to.
2. You are responsible for everything on your business website
Little know fact: you are legally responsible for everything published on your website, whether you wrote it or not. That includes blog comments, forum postings, advice offered in articles, opinion pieces, etc.
You need to take this seriously and monitor everything that goes up on your website. And you are required to immediately remove anything that is:
- Infringing Copyright
- False or misleading, etc.
Otherwise, you’ll have to be prepared to manage any claim against you which may arise as a result of postings on your website.
To Do Item: Put in place a systematic way of checking everything that goes up on your website. For example, ensure all blog comments are moderated. And make sure contributors agree to Forum Rules that push some of the responsibility back on them.
3. If you have advertisers, you are responsible for their content too
The content on your site that you’re responsible for includes any advertisements. So if these advertisements are false and misleading or the advertisers do not deliver the product or service, you could be liable or, at the very least, end up in the middle of a nasty dispute.
This is particularly true if your website is a ‘Classifieds’ type site, where many advertisers post details of their products and services. You need to protect yourself from customer complaints involving products that are, among other things:
- Not received
- Not as advertised
- Cause injury or damage
As owner of the website, legally you are seen to be in control of what is sold, what is stated, how things are posted. The legislation is directed at making owners of the website businesses responsible for all consumer and other legal issues that may arise as a result.
To Do Item: Ensure your advertisers have agreed to specific Terms, which include that they will indemnify you and take over any claims which may result from their customers.
4. You must honour standard Australian warranty terms
If you sell imported goods, irrespective of the manufacturer’s warranty, you are required to offer your customers warranty terms which are the same or better than those required by Australian Consumer Law. And importantly, you cannot tell your customers to go back to the overseas manufacturer for any claim they have. You must do this on their behalf.
This means, as a local Australian business, you cannot shirk your responsibilities. You are the local point of contact and you are responsible for making sure your customers are fairly dealt with.
So if you’re setting up an online business with overseas suppliers, be very sure of who you are getting in bed with. Vet them diligently. Make sure they will do right by you and your customers – if not, you’ll be in for a difficult ride.
To Do Item: Check out any overseas suppliers you will be using. Make sure they will stand by their products and services. And agree how customer complaints and refunds will be handled.
5. You need to trademark your online brand or business name
You may not believe that you need to consider registration of your business name, brand or logo. This is a mistake we have seen too many business owners make. They believe that because they have registered a ‘Pty Ltd’ company or a business name with the Australian Securities and Investment Commission (ASIC) that their name belongs to them. Wrong.
Protection of your business name, brand and logo comes from trademark registration with IP Australia. Not ASIC. And the first person to register their trademark has priority using that name, brand or logo for that type of business.
If someone comes along and registers the same business name with IP Australia and starts selling the same goods or services you are selling – they could put you out of business. At the very least you’d have to change your business name, re-brand and re-launch. A costly and time consuming error. And we’ve see it all too often.
To Do Item: Check out the Legal123 guide to choosing an online business name. Then go check the IP Australia trademark register prior to choosing your business name and/or incorporating your company. Then trademark your business name and logo for the market categories that you’ll be working in.
There are a lot of things to work out with your online business. But start with the basics early, so you don’t end up wishing you had and find it’s too late.