7 Legal Issues to Consider Before Selling Your Product Online

7 Legal Issues to Consider Before Selling Your Product Online

If you are considering expanding your physical business or starting a home-based business, selling your products online is a great way to reach additional customers. Before you sell products online, there are several legal issues you should know to ensure that your business complies with the law and that your interests are protected.

Business Entity

If you are starting a new business to pursue online sales, consider the pros and cons of different business structures. A sole proprietorship is uncomplicated and inexpensive, as no separate business entity is formed. In a sole proprietorship, there is no distinction between your business and personal assets, so you are personally responsible for all the business’s debts and liabilities. A partnership is a similarly simple business structure used when two or more people co-own a business. Like a sole proprietorship, you will be personally liable for all the business’s obligations—including those incurred by your partner. A limited liability company (LLC) is a separate business entity that can be formed by a single business owner or multiple owners. It involves the payment of specific fees to the state and a few formalities, such as an annual meeting, and in some states, a yearly report. An LLC, however, provides limited liability, meaning, if someone is injured by one of your products, they can only sue the business, and your personal assets will be protected. Other business structures are available as well—these are just some of the most common structures used by small businesses. We can help you evaluate which business structure will best achieve your goals.


A trademark is a word, name, symbol, device, or a combination of them used or intended to be used to identify and distinguish the goods and services of a seller or provider, and to indicate the source of a good or service. A trademark is one of your business’s most valuable assets. If you engage in e-commerce transactions beyond your state’s borders, it is essential to register your trademark with the United States Patent and Trademark Office, which enforces your rights as a trademark holder across the entire country, not just the state in which your business is located.


Most states have a sales tax, and if your online business sells products in other states, you must collect and remit sales tax in each state in which your company has a “tax nexus,” or a sufficient connection to that state(e.g., a particular volume of sales). Some smaller online businesses may be exempt from collecting and remitting sales tax under the laws of many states, for example, if they have less than $100,000 in sales or fewer than 200 annual transactions.

Restrictions On Home Business

Many people run online businesses from their homes. If you plan to store a large inventory of your products in your home, make sure that you will be violating no restrictions in your lease, deed, homeowner’s association, or zoning ordinances.

Licenses And Permits

Many types of businesses do not require a special business license to sell products. However, for certain products, such as medical devices, foods, and animal products, a special local, state, or federal business license must be obtained before they can be sold. Home-based online businesses may also need to purchase a home occupation permit or conditional-use permit to operate legally.

Data Protection And Privacy

For online businesses, reasonable data security measures and a strong privacy policy are essential. Because online purchases require the transmission of personal customer information, customers will be unwilling to patronize your business if these protections are not in place. Also, you could be civilly liable under data privacy laws if third parties obtain your customers’ information because you failed to take the steps required by state law or steps reasonable under the circumstances to protect your customers’ personal information.

Business Insurance

Like all businesses, consider obtaining general liability, product liability, or commercial liability insurance policies to protect your online business in the event of lawsuits. Also, if your online business will be delivering goods to customers, consider purchasing delivery insurance.

We Can Help Set Up Your Online Business for Success

These are only some issues you need to consider before you form an online business. We can help guide you through every step in starting your business, from choosing your business structure to ensuring you comply with state and federal law. Call us today to set up a meeting so we can help your exciting new venture succeed.

NOTICE: The information on this website does not constitute legal advice. You should not rely on any information without seeking the advice of a competent attorney licensed to practice in your jurisdiction. This website is both a communication and/or solicitation as defined by California Rules of Professional Conduct, rule 1-400. For further information, please click here.