With the world transitioning online at a fast pace, many entrepreneurs in Canada have chosen to either start or move their businesses online. E-commerce is a word we hear every day, and as a relatively young and growing industry, e-commerce businesses are being less prepared and less aware of the multitude of legal liabilities arising from online transactions. Without properly understanding the real extent of liabilities and the consequences, many business owners might end up endangering their personal assets, savings, and everything they were working so hard to create and develop.
There are a few major differences (from the legal point of view) of e-commerce and a regular business:
e-commerce businesses have a much greater reach to potential clients. Within one day you can reach hundreds and thousands of new clients – something that is not possible for regular brick-and-mortar businesses.
You are not aware of who is buying your products/services and have no chance of assessing the buyer’s adequacy. As an opposite to the brick-and-mortar businesses, we do not see our clients, we do not communicate with them.
E-commerce businesses may end up, without knowing that, selling to thousands of clients all over the world. While geographical borders do not exist for e-commerce businesses, jurisdictional differences continue – what is legal in one part of the world might be illegal in another.
Except for these main differences, online business is just like any other business out there, and except for certain unique features dictated by its nature, online business should follow the same rules and principles as any other business.
1. The first question that a business owner must answer Is whether to incorporate or operate as an SP. But in considering this decision, you should keep in mind all the differences mentioned above – they all substantially increase the risks and liabilities arising from business operations. Please see further information about incorporating your business here: • Is Corporation Right For My Business?
2. Remember there is a substantial difference between selling through one of the online platforms (Amazon, eBay, etc.), which usually would put in place some basic documents to protect its users, and selling through your own website, which will require you to put them all in place on your own.
At your own website, you will be fully responsible for payment processing, documentation, and any sales-related activities, which are usually managed by e-commerce platforms while selling through them.
It might be cheaper to sell on your own, but there are reasons for some of their added costs, and the legal foundation is one of them.
3. As a business owner, you should properly understand what happens during a transaction from a legal perspective. A contract of purchase and sale is being entered by the parties, and unless you will put in writing the terms of this contract, a judge will – and not always in your favour. Understand what it is exactly that you are selling, and which terms you want or do not want to include in the sale – warranty, returns, replacement, and more – all these should be covered by a sales agreement, which could be a digital acceptance of the terms of sale by a buyer at the check-out.
Prepare one document or a couple of them that will govern all your transactions – although it will require some investment, the cost of it will be split over hundreds and thousands of transactions, so at the end of the day, it will not be too high. But the protection that it will provide you with might be the difference between succeeding or failing business.
Cover at least these topics:
Price and taxes
Cost of shipping
Warranty – terms, how it applies, where, will the manufacturer cover?
Consequences for improper use
Limitation of liability
4. Have a proper understanding of how HST works, and how it will apply to various transactions, especially those being processed by overseas buyers. See more information about HST here: • HST Rules for small and medium busine…
5. While operating an online store our responsibilities of privacy and protection of personal information are much more diverse and intrusive than what a regular store has. We collect the personal information of our buyers, visitors, and subscribers. Almost every country has its own (usually strict) rules for the protection of personal information collected by websites. Remember that either directly or indirectly you are collecting the payment information of your clients – verify what are the rules relating to the storage and protection of this type of information.
6. Provide proper protection to your Intellectual Property, in particular – trademark, copyright, and website domain name. See my video about various types of IP and their protection here: • Intellectual Property and Trademarks …