The Legal Steps to Starting an Online Business

Here’s a step-by-step about the legal steps guide to starting an online business today. The benefits of starting an online business compared to a brick-and-mortar business include low startup costs and complete flexibility.

Working an online business is a great way to have financial freedom. Not only can you work from anywhere, but you also get to set your own hours and live on your own terms.

While it’s easier than ever to start your own online business, that doesn’t mean there aren’t still legal hoops to jump through. Depending on how large your company will be, you might need to register with state and federal institutions.

Step 1: Business Structure

While many new businesses operate under a sole proprietorship, this might not be the best choice depending on your situation. A sole proprietorship means you’re individually responsible for your company, and there is no formal paperwork. If you find yourself facing a legal situation, you’ll be held personally responsible.

Because of the liability concerns, many new online businesses are created under an LLC, also known as a limited liability company or a corporation. With both of these business structures, your personal assets are protected from company troubles. However, there are startup costs and legal forms. Review these guides to starting a new business to learn what type of formation is right for your situation.

Once you decide which structure is right for you, you’ll need to file the paperwork with your state. It’s best to submit these documents in the state you personally are located. Talk to a lawyer about the best structure for your business to avoid any complications.

Step 2: Name Your Online Business

You’ll need a name when you register your business with the state, and you want this to be something unique are memorable. Before deciding on a name, make sure you do these steps to cover all your bases:

  • Is your name easy to spell?
  • Are there any businesses with similar names already?
  • Does your name fall under state law requirements?
  • Are social media usernames and domain names with your business name available?

You should do research online to ensure there are no similarly named businesses already. Most state offices require your name to be unlike anything else registered in your state, so take this step seriously. Run your chosen name through trusted friends, family, and advisors to make sure it doesn’t have any unexpected connotations.

Step 3: Purchase Your Domain and Web Hosting

Now that the legal formalities are out of the way, it’s time to purchase your online real estate. You’ll need both a domain name and a hosting package. Depending on your business needs, you might need more or less hosting. For basic packages, Bluehost and GoDaddy are the most popular and affordable options.

If you suspect you’ll need more hands-on hosting, WP Engine is known to offer the best support and dedicated packages. If you’re new to the world of online businesses altogether, you should let a web designer help you with setting up your newly hosted website.

Domain Purchasing

Step 4: Sales Tax and Licensing

Depending on your business strategy, you might be selling products online. If that’s the case, you’ll most likely be responsible for collecting and paying sales tax for every transaction. These taxes will be based on the state where your business is physically located, but the rules are different from place to place.

You can check with your city to see if you need a business license to pay sales tax. In addition, it’s always a good idea to speak to an accountant and tax attorney prior to accepting tax payments online. That last thing your new business needs is a sales tax audit.

Step 5: Launch Your Website

Now that your website is up and running and all your financial ducks are in a row, you’re ready to launch! Working with a designer is the best way to ensure your website looks great and functions properly. Consider hiring people to test your website before your big launch day to ensure all final kinks have been worked out.

Next, it’s time to work on things like SEO, marketing, and creating content that will attract more users to your website. Creating a website is hard enough, now you’ll need to ensure it actually converts visitors into long-term readers or buyers.

Online Business Success

While the hype is true: it is easy to start an online business, don’t rush into a new business venture. Like any type of business, online businesses take time, preparation, and proper planning in order to become a success. Always consult experts before making financial or legal decisions about your company, and do your research so you can make informed decisions. As long as you do things the right way and put in the work, success will come.

It’s a good practice to involve experienced mentors to advise you on relevant industry legislation and the pros and cons of each decision, starting with early software product planning and development. It is especially important for the launch of a software product for highly regulated industries like healthcare and banking. Your advisors can be other companies in the field, individual industry players or professional startup consultancies with domain knowledge and experience of your chosen industry.

This is an article provided by our partners’ network. It might not necessarily reflect the views or opinions of our editorial team and management.

Contributed content

Leave a Reply