4 Legal Issues E-Commerce Businesses Have to Deal With

It should be noted that I am not a lawyer and the information in this article is general and should not be considered legal advice. 

You should consult a legal professional to determine if there are any other legal concerns, what applies to your particular situation, and whether there are any applicable laws or regulations in your state of residence

That said, there are some legal concerns that you should consider yourself before embarking on your e-commerce journey or paying legal counsel.

1. Copyright and Intellectual Property

It should go without saying that you must follow all copyright laws when selling products in an e-commerce system through Shopify. However, there is often confusion about what is allowed and what falls under the concept of “fair use” Let us clear it up.

If you do not own the copyright to a product, trademark, image, or other material, you may not use it for profit without the express permission of the copyright holder or the appropriate licenses. This is especially true in many areas of design.

An obvious example is using the intellectual property of another company or person. Take Nintendo’s ever-popular character Mario. Despite the vast amount of products online that use his likeness, the vast majority of them technically infringe copyright by infringing Nintendo’s trademark

Without the proper licenses, it is technically illegal to use his image on a t-shirt, mug, poster, notebook, or any other product.

This is true even if you drew the character yourself. Although this type of infringement is often overlooked, it is entirely possible for Nintendo to sue you for stealing from the company. The same goes for other video game characters, cartoons, movies, etc.

In the case of e-books, videos, and other digital content, it is obvious copyright infringement to download and resell these items without first obtaining permission. Not only is this illegal, but customers also tend to despise sellers who do not do the work themselves.

Although it’s very popular to simply find images on Google Images and use them for your design projects, it’s important that any images you use are either in the public domain or that you have paid for a license to use them

This also applies to things like fonts, clipart, design elements, etc. It is a big misconception that just because a font is free to download, it is free to use for commercial products. If you are not using a font that comes with your computer, you should take the time to find out if you need to purchase a license to use the font. As a rule of thumb, if you are unsure whether you are infringing copyright, simply avoid using the item, image, etc. in question.

2. Business Licenses

Not all e-commerce sellers need a business license, but that depends on many factors

First, check your state’s laws regarding e-commerce and business licenses

Second, if you plan to hire employees or staff, you will need a business license and an employer identification number for tax purposes. It’s worth noting that you can hire independent contractors without an employer identification number. 

Those of us who do not require a business license are considered “sole proprietors,” which means that we are generally the only “employee” in our business

This also means that our personal and business finances are intermingled, and so are our taxes. For this reason, it may be beneficial to obtain a business license even if you do not plan to work with employees

Should you use credit to build your business and then default or file for bankruptcy, it is a personal bankruptcy and not a business bankruptcy, which will harm your financial health for years to come.

3. Taxes

A general advice: you have to pay your taxes. However, for online sales, the general rule is that if you have made more than 200 transactions and have net sales of $20,000 or more, you must pay full tax on your earnings

Unless you are a young seller who has a full-time job on the side, you can expect to claim your earnings regardless of these criteria.

As mentioned earlier, if you have employees working under you, you must have an employee identification number and report the income of your employees. You are responsible for issuing W-2s to your employees

For independent contractors, you must issue Forms 1099- MISC if you paid them more than $600 during the year. It is advisable to consult with a tax professional to guide you through all the details of taxes as a business or as a sole proprietor

Doing your own taxes may save you a few dollars, but the likelihood of a tax audit increases dramatically for self-employed individuals who do not handle the process properly. Some states require you to charge sales tax even for buyers within the same state.

4. Privacy and Spam

Did you know that it is actually illegal to spam? For comparison, it is illegal to advertise products in an unsavory manner. That does not mean you should refrain from emailing customers. In fact, email lists are a great way to increase sales and market your new products

When you close a sale or when someone signs up for an email list, it’s okay to send them an email. You just need to take some steps to avoid falling into the “spam” category.

First, all your messages should be clearly marked as advertisements. Second, the text in the subject line and body of an email should definitely not be misleading

Finally, you must provide your customers with a way to opt out of receiving messages from you. Ideally, you should also include a legal mailing address in all your messages, even if it’s just a PO mailbox.

As an online merchant, you are sometimes privy to a whole range of information about your customers, including contact information, mailing address, full name, and more

While it may be tempting to sell or otherwise exploit this information, it’s highly illegal, and the fines and possible jail time are far more damaging than the meager earnings a few scams provide. Just do not do it.

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