Online stores are becoming increasingly popular with shoppers year after year. People love the online shopping experience because they can order almost anything and have it sent right to their door. It’s easy and convenient, and shoppers can often purchase items for less money when they buy them online, too.
If you want to start up an online store in the US, you have to make sure you’re following the law to avoid fines and other problems, like having your store shut down. Even if you may not have as many requirements as a brick-and-mortar store, you’ll still be operating a business that has to abide by local and federal regulations.
While some states may have specific requirements, there are some basic steps and legal aspects to consider when starting up a US online ecommerce store. Just make sure that you look into information for your state of residence, too, so you don’t miss an important step that might be specific to where you live.
Choose a Name, Domain Name, and Site Host
The first thing you want to do when you’re going to set up an online store is decide what you’re calling it. You don’t want to have the same name as a competitor, for example. You also don’t want a name that looks bad or inappropriate as a URL. Make sure you have the legal right to use the name in your state, and then register your domain.
Also decide where you’re hosting your business. Some people like to sell on eBay or other sites, but that’s not the same as having your own domain and dedicated shop. Take a look around at the companies that host domains, so you can choose the one that meets your needs.
Some of the things you want to consider are:
- Cost
- Hosting options and abilities
- Customer service rating
- What you can put on the site
- How easily you can make changes
Even if your store starts out small it has the potential to grow into something much larger. If that happens, you want to be sure you can scale up easily and meet customer needs. It’s generally better to choose a hosting package that’s a little larger than what’s needed in the beginning, or a host that lets you change plans and hosting package sizes easily.
Choose a Business Entity and Structure
Once you know what you’re calling your online store and where you’re going to host it, you need to decide what kind of business you’re going to create. A lot of people choose sole proprietorships or partnerships, but you might want to have the additional legal protections that an LLC can provide.
You can make this easier when you use a remote LLC formation service. That way you don’t need to worry about the paperwork to create your LLC and you can let a trusted company handle it for you. You’ll get the benefit of knowing that your company was created the right way.
If you’re not sure whether an LLC is the right choice for you, you can also talk to the service that’s assisting you and get answers to any important questions. That way you’ll have a quality online store and peace of mind, which is a great combination.
Apply for Any Licenses
Depending on the state where you’re located and its requirements for online businesses, you might need to be licensed. You could also need a license for your city or county, too. It’s important to check into those things before starting up your store, since you could get into legal trouble if you don’t have the right licenses for selling over the internet.
In a lot of places it’s very simple to fill out a short application and receive a license, and the fee is usually small. Often, it’s just to keep track of who’s doing business from where. However, you might also need to pay taxes to the city, county, or state you’re located in, based on the amount of money you make from sales.
Understanding what comes with applying for a license, whether it has to be renewed and how often, and if you need to pay taxes or other fees should all be done before you start selling from your online store. It’s easier and less stressful to have all the information from the beginning.
Consider Trademarks or Other Protections
Most online stores that start up in the US don’t seek any kind of trademark or other type of protection. The biggest reason for that is the stores are generally small and don’t go by a name that’s easy to trademark.
But if you’re calling your store something that’s truly unique and want to trademark the name, there’s no reason you can’t try. Just make sure you read all the rules about trademarking anything, so you’re not wasting your time or paying fees that won’t get you anywhere in the end. Getting a name trademarked isn’t as easy as many people think.
Depending on what type of goods you’re selling, you may want to work with a legal professional regarding any other protections you need or can get. Most online stores are up and running without special considerations, but yours could be unique for some reason. It’s better to ask questions and get information, instead of missing an important step or type of coverage.
Insure Your Business and Set Up Your Taxes
Not all online businesses need insurance, but it’s important to talk to a professional in that field to see what kind of protection you should have. You want to make sure customers can trust you, and that you’re protecting yourself and them properly.
There’s no reason to carry insurance for people coming to your location, for example, if your store is completely online. But you do want to make sure there’s some kind of coverage for purchase protection, and that you’re keeping customer information safe.
Your taxes also need to be set up at this time. You can get an EIN (employer identification number) from the IRS for free. This is like a social security number for a business, and provides you with what you need to file business taxes. This also helps establish you as a separate entity for things like getting a business bank account.
Set Up a Business Bank Account
You’ll want to have a business bank account for your new company and its online store. While it can be tempting to put all the money into your personal account, that’s generally not a good idea for taxes. It can quickly make things confusing, and end up costing you money in the long run.
If you’re trying to get some of the perks that can come with a business, such as special funding, a business credit card, or certain types of loans, you need a separate account for your business. It’s also easier for an accountant or bookkeeper to handle your financial statements if you’re keeping business money separate.
Most banks make it easy for you to set up an account for your business. You’ll need your EIN, and you might also be asked for proof of your LLC status or a business license, along with your personal identification. Getting your account set up is generally an in-person job, and then you can start using it right away.
Get the Word Out Through Advertising
Advertising matters, and you want to make sure people can find your online store. You want customers to know what you sell, what prices you have, and how they can get special perks or discounts you’re offering. While advertising isn’t necessarily a legal step in the setup of your business, there are still legalities you need to consider with it.
For example, you have to follow laws that protect against false advertising and other issues, to make sure you’re honest in what you’re providing. If you’re not sure about the legal wording for advertising your store’s products, consult with a professional in the industry to be safe and reduce any risk.
The Bottom Line on Online Stores
Online stores can be very lucrative in the US, and getting one set up and operational isn’t difficult. But unless you just want to sell a few things here and there through a site like Etsy or eBay, you need an established company.
Getting your company set up can be different depending on what state you’re in. Not all states have the same requirements for a business license, for example, and some states might not require you to have one at all. In other states, you might need a state and a city license to sell products online.
The most important thing you can do for a successful online store is make sure you’re setting everything up legally right from the beginning. Then you’ll have peace of mind, and can start selling your products without the need to worry about potential legal trouble in the future.