Updated June 24, 2020:

Do I need to register my online business? For entrepreneurs who want to start a business without spending on an office space, an online business is their go-to alternative. With an online business, a grand opening simply means registering an online domain and posting on a website. While this type of business doesn't require a formal license, there are some rules that apply to online entrepreneurs:

  • You can operate an online business through sole proprietorship, which means that there's no legal separation between the business and you as an individual.
  • With sole proprietorship, you can get a legal business name for your online enterprise through “Doing Business As” (DBA) in the U.S. and “Trading As” in the U.K.
    • Keep in mind that this will not create a legal entity for your online business, it will only give you an official business name. You can use the assumed business name to create a checking bank account to do business with.

Setting up an Online Business

The main advantage of online businesses is that they are easy to set up. On the downside, the entrepreneur has full liability for the online business. This means that personal assets can be used to settle business debts.

It is recommended to register your online business as soon as possible. Keep in mind that your intellectual property's protection (including copyrights, patent, and trademarks) will be done separately from the business registration. Copyrights are fairly quick and straightforward to process. On the other hand, patents and trademarks take longer to register. Ensure you get these registrations ASAP before competitors start ripping it off.

Business License for an Online Business

Almost all types of businesses should register with a formal agency at either local, state, or federal level. Depending on the nature of the business, some enterprises have to register with several formal agencies. Businesses regulated by the federal government must be registered with a federal agency. Consequently, professionals with regulated occupations and entrepreneurs transacting in particular counties must be registered with their respective states.

Moreover, businesses that have significant parking requirements and foot traffic must comply with the local business laws. These laws apply to online enterprises too. All online companies must comply with the set e-commerce regulations imposed by the Federal Trade Commission.

Since most online businesses acquire and maintain their customer base through emails, the CAN-SPAM law regulates how these businesses contact people for business purposes. As a general rule of the CAN-SPAM act, an individual should be given the option to decline or opt out from any sales solicitations.

Online Business Regulations

Additionally, online businesses should conform to federal regulations concerning small print and advertising. For example, many low-cost computers will require buyers to comply with hidden complex rebate processes or long-term internet contracts. Such practices are clear violations of the FTC laws, which require full disclosure of terms and conditions.

With an online business, you can conduct business both nationally and internationally. It should, therefore, comply with the federal and international export and import laws. Also, it should be aware of the potential tax liabilities of specific states.

In Quill vs. North Dakota, the Supreme Court ruled that by just conducting business with people who live in a specific state, a business wasn't liable to collect tax on behalf of the state. Conversely, in another case of the U.S. Supreme Court – Wisconsin Department of Revenue vs. William Wrigley Jr. - it was ruled that by maintaining a “non-trivial” presence in a particular state, an online company was supposed to collect tax on behalf of the state, even if it operates outside the state.

Online businesses also have to deal with privacy rights, more so when it comes to kids. The Children's Online Privacy Protection Act (COPPA) oversees activities of online businesses that collect information from kids below the age of 13.

COPPA ensures that these businesses post notices that inform parents or guardians of their intent to collect data from their children. The act also prohibits collection of certain personal information from children without the explicit consent of their parents.

Additionally, online enterprises should inform its visitors of its privacy policy on the site, especially how it is going to use the data collected from its customers. It should also give recipients an option to opt out.

If you need help with registering your online business, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.