How to set up an online business
If you want to set up an online business, there are certain legal requirements for electronic commerce you have to comply with.
Starting an online business has both its advantages and drawbacks.
At first glance, the advantages are pretty obvious - cost savings. An online business or shop, can save you the added expenses associated with the maintenance of a physical store or office.
An online business is also associated with speed. By now you’re all probably familiar with the saying “in a couple of clicks…”, however, not to be a party pooper, we anticipate that you will need more than a couple of clicks to get it up and running.
Some of the basic elements you need to start an online business are the following:
- A product or service
- A web page -A form of secure payment
- A marketing plan to publicise your business
Once you have clearly established and defined these, there are a couple other things you should also consider before going in head first. You need to make sure these elements come together effectively, and you need to do consider the market, the time, and your competition.
Furthermore, you need to address your legal obligations - and we can assure you that this will, and should, take more than just a couple of clicks.
Legal requirements to setting up an online business
The first steps towards starting an online business are pretty much the same for all businesses. That is to say:
If you are a sole trader:
- You are allowed to keep all your business profits earned after you have paid VAT.
- You are fully responsible for all aspects of your business, and this includes any losses incurred in your business.
- You need to adhere to certain rules about operating and naming your business.
- You need to keep records of all your business expenses and sales.
However, there are a couple other important factors and legal implications that you need to consider when starting your online business: As a sole trader, you will also need to register with HRMC to make sure that you are paying the correct income tax and National Insurance. If you are working in construction however (either as a contractor, subcontractor, or something else in the construction industry), you may also need to register for Construction Industry Scheme (CIS).
If you have an annual turnover of more than £85,000, then it is compulsory for you to register for VAT. Read more about how to register here. If you are registering your online business as a limited company, or a partnership, then you may also have additional responsibilities such as registering a company name.
Other online business regulations
When you sell goods and/or services online you are subject to certain laws and regulations. It is your responsibility to read these regulations carefully and thoroughly, and make sure that you fully understand them. These regulations include:
Consumer Rights Act 2015 - addresses the condition that goods sold must meet their description, be of satisfactory quality, be fit for purpose, and sit at agreed price. If not, the buyer has the right to a refund.
Consumer Contracts Regulation - addresses the legal responsibilities a seller has to provide the following about a business:
- Name or corporate name of the company, and its address.
- Clear and accurate description of product or service, and the price. You also need to specify whether whether the applicable taxes and shipping costs are included.
- Tax identification number.
- Payment details.
- Codes of conduct to which the company adheres.
- Cancellation rights and the relevant time limits.
The Electronic Commerce Regulations 2002 - addresses a set of legal rules and responsibilities that online retailers and service providers must comply with when dealing with customers in the EU. These rules include the following:
- The technical steps to follow when placing an order.
- The terms and conditions of sale must be made clearly available on the website.
- Company name and information (address, email, location).
- Registration number and place of registration.
- Prices must be indicated clearly, and state if VAT.
In addition to these laws, you should also take into consideration the General Data Protection Regulation 2018. This law addresses the protection of data collection and handling procedures, and all businesses that handle data within the EU must comply with the GDPR, or otherwise face heavy penalties.
The GDPR introduced a new set of standardised regulations on the handling of personal data gathered by websites and online services. It is your responsibility to ensure your business is GDPR compliant, and see what the GDPR means for you as a business.
As an online business owner, it is your responsibility to protect and insure the data of your clients.
As you can already see, the legal aspect of starting an online business can take take more than just “a couple of clicks”. There are a number of different elements, laws, responsibilities, and decisions you need to take into consideration, before bringing them all together.
As an online business, your front face to your customers is your web page. It is therefore so important that you put a lot of effort and thought into the design of your web page. You need to consider the font, logo, colour theme, layout, and many many more.
Managing your online business
Now that you are getting closer and closer to launching your online business, you need an effective system to track your business finances. Debitoor invoicing software is an easy to use, intuitive, and efficient program, designed to help small businesses thrive.
Debitoor aims to make it as easy as possible for you to get paid and maintain an accurate overview of your business. Debitoor provides you with all the tools you need to record all revenues and expenses, manage your customer and product lists, and track your financial activity, and much more! Sign up today, and watch your business grow.