• Startups
  • January 24, 2022

Legal requirements for setting up an online business

Are you ready to make 2022 the year you launch your online business? If that is the case, you are far from alone. According to City AM, “the UK has registered a record high of new businesses following the Covid-induced ‘great resignation’”.

The Coronavirus pandemic has supercharged not only the growth in online shopping but also people’s confidence in opening their own ecommerce business. 

At LawBite, we are dedicated to providing those setting up an online business with the legal advice they need to succeed. In the spirit of our commitment, this article sets out the legal requirements you need to consider when opening an online business.

Create an extraordinary business plan

Launching a small business without a well-thought-out written plan is like stepping into a canoe without any oars – yes you will float for a while, but you have no way of moving forward. 

Your business plan should include:
  • executive summary
  • company description
  • market analysis
  • products and services
  • marketing plan
  • logistics and operations plan
  • financial plan

Not only will your business plan provide you with a strategy for starting and growing your online store, but investors and lenders will also carefully examine your plan when deciding whether or not to risk providing you with funds. 

Choose the right legal structure for your online business

One of the many legal steps you need to consider when launching your ecommerce business is the legal structure you want to adopt. The main options are:
  • sole trader
  • traditional partnership
  • limited liability partnership
  • limited liability company

>> To help you decide which business structure is best, please read our detailed article on Choosing A Legal Structure For Your Start-Up

Have the legal agreements in place for building and hosting your website

Your website is your store and therefore must be attractive and informative to visitors. 

It is important to hire the best online website developer for small businesses that you can find. 

You will need to enter into a website design and development agreement with the supplier you choose. 

The agreement should include:
  • the specifications of your website
  • timelines
  • how and when payment will be made
  • details of what tests will be conducted
  • IP and copyright ownership, including who owns all rights in the web design of the pages and the underlying software or any software relating to unique aspects of the website
  • details concerning the hosting of the website (if the developer is undertaking this function)
  • warranties and indemnities

You will also need to have an agreement with the company that hosts your website covering matters such as uptime requirements (the percentage of time the website must be live online), response times, and network and information security.

Register and protect your intellectual property

In the ecommerce world, your brand is everything. 

To stand out on social media you need to develop consumer recognition and trust. The starting point is to trademark your company name and/or logo. If you have invented a new app or product you need to apply for a patent to ensure others do not steal your idea.

Intellectual property law is highly specialist, therefore, it is best practice to work with an experienced IP Solicitor who can advise you on the best ways to protect your brand.

Understand how funding works

Unless you have a large amount of savings or have no plans to grow beyond being a freelancer (which is absolutely fine by the way) you will require outside investment to grow your business. 

There are several fundraising stages, each requiring detailed contracts that set out the rights and obligations of both you and the investor. 

Typically the first round of funding you will receive is pre-seed funding. Most of the money will come from you and the other founders and supportive family and friends. 

Next comes seed funding – like planting a tree, seed funding is the first funding used to grow an already existing operation.  

Seed funding is used to finance product development, market research, and hire employees. Seed funders can be friends and family or angel investors. 

Angel investors take risks on startups that they believe will scale up rapidly and produce a high return in the future.

The next stage of funding is Series A, B, and C funding, usually provided by venture capitalists who will demand a share of your business in return for their investment. Once you have targeted the investors you think would be the best fit for your business you will need to present them with a brilliant business plan and a persuasive pitch deck to convince them that investing in your company is a risk worth taking.

Wrapping up

There has never been a better time to launch your online shop or business venture. More people than ever are buying online and there is an enormous amount of support available to small business owners.

 If you require legal advice at any stage of your start-up journey, please do not hesitate to contact us. We look forward to celebrating your success.

Get legal assistance from LawBite

Starting an online business can be challenging. LawBite expert commercial lawyers are ready to help you make sure you are protecting your business from the start. 

LawBite makes it easy for you to get everything sorted out from the beginning, providing expert legal advice on key things you need to consider, such as what is the best structure to form the new business, how to protect the business intellectual property and funding the new business and issuing shares.

If you have any online business ideas and don’t know where to start, contact us for a free 15-minute phone consultation, or try LawBite for free.

Additional useful information

In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.

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