Home > Run and Grow > Legal > 7 Legal Risks of Doing Business Online

7 Legal Risks of Doing Business Online

By: David Smith


Legal Risks of Doing Business Online

If you have an idea for a service or a product, you can start an online business.

With modern technology, starting a business has never been easier…

The web eliminates the immediate need for a storefront, you can easily promote—and for a reasonable price—on social media sites such as Facebook or Twitter, and you’ll be up and running in a day or less.

Starting a business does not take much business knowledge or any experience—with major search engines, like Google, right at your fingertips, you have direct access to all the resources you will need.

While most entrepreneurs have a sense of what they are doing—most have started a business before—some still have a tendency to ignore the legal risks of conducting business online…

Failure to adhere to the legal risks of conducting business online include:

  • Loss of your good standing.
  • Loss of well-known clientele.
  • Loss of your business license.

And trust me, “I didn’t know” will not hold up in court…

It is your responsibility to make yourself fully aware of the legal risks of doing business online.

Before jumping online, invest in a will kit to protect your business and its assets in the event of your sudden death.

Once you have the fundamentals of your business protected, it is time to worry about the legal ins and outs of doing business online…

But, before you send yourself into a stressed-out frenzy and begin checking out all the law books from the library, let me tell you about 7 legal risks of doing business online:

Copyright infringement.

Copyright infringement occurs when you reproduce the work of someone else that is already secured by a copyright.

While you can easily download pictures, music, or video from the internet, you cannot legally reproduce or use the content without permission.

Because of the large amount of content online, it can be easy for an inexperienced business owner to participate in copyright infringement.

Data security and privacy.

Consumers are always sharing personal information online…

Names, addresses, account numbers, and even social security numbers.

As a consumer, you trust that the site and business you are using already has a secure system in place. You also trust that they will either not share your information or inform you ahead of time who it will be shared with…

This is actually a right of all consumers—you must advise them of why, how and with whom their information will be shared. It is also your responsibility to advise the consumer if their information has been compromised.

Risks of social media.

Risk and liability does not disappear on social media…

Social media has become one of the best ways to connect and communicate with consumers, but don’t take the risks lightly…

You might be liable for the online actions of your employees and there are additional opportunities for trademark and copyright infringement.

Online marketing and advertising.

Similar to other mediums, the laws of online advertising and marketing pretty much boil down to not misleading your customers…

Don’t practice deceptive marketing.

Trademark infringement.

Similar to copyright infringement, trademark infringement is when you illegally use someone else’s brand name, domain name, or their logo.

Not only will this confuse your customers, but it will get you into a lot of trouble…

Help protect yourself by ensuring your chosen business name is not already being used prior to filing for your business name.

Most states have a business name directory available for new business owners to search through to ensure their name is unique before completing their forms.

Fair trade practices.

The fair trade laws discuss price discrimination, market pricing, monopolization, and boycotting suppliers or competitors.

Fair trade laws are in place to protect both the consumer and the business—it keeps the consumer from experiencing extremely high costs and the business from experiencing unfair competition practice.

Under fair trade practices, sellers are liable for any claims they make about their services or products.

As an online business, website designers and agencies might also be liable for services or products made available online.


The standards and expectations regarding taxes vary from state to state and country to country. Make sure you do your research and fully understand your target market.

Keep in mind, if there is not a store located in a certain state, that state will not be required to pay sales tax on their purchase.

However, taxes also apply to the opposite side of things—the business. Just like a storefront, you will still be required to keep an accurate record of business transactions and pay income taxes.

Taxes can become quite the headache; therefore, it is in your best interest to always have a tax professional on hand.

So, there you have it—an online business can save you a lump sum of your capital investment and can make your dream of working from home become a reality.

With a little research and attention to detail, you can help protect yourself and your business from the potential legal threats of owning an online business.

Published: August 1, 2017

Trending Articles

Stay up to date with
Avatar photo

David Smith

David Smith is a blogger and world traveler, with experience in China’s manufacturing industry, as well as content marketing manager in his hometown of Los Angeles, California. When not staring into a computer screen, David is an avid badminton player and photographer of natural landscapes. Follow him on LinkedIn.

Related Articles