Apr 25,2019 | 15 min read

Legal Requirements to Know Before Starting an Online Business by Advocate Khyati Dhuparr

Author:  Advocate Khyati Dhuparr and Associate Runa Jasia

Most people believe that starting an online business is easy. Just make a website, do the needful and start it. After that, do the branding and marketing, and that's it. But in reality tha is not the case. Online businesses are easy to reach out to the customers, but it's still is a business. Business means the exchange of goods and services and getting money in return from that. Online business has become a significant part of our business sector. The popularity of online business is rising day by day. Nowadays millions of people are involved in the online business, and more people continue to join. Today's technology-oriented world has a great chance to develop its business market online. 

Online businesses offer tremendous opportunities to entrepreneurs and hobby-business owners alike. When it comes to initiating an online business, it must comply with federal, state, and local laws.  Starting a business is both exciting and challenging. After doing the required research, writing a business plan or roadmap, and deciding on a business structure, the business owner needs to consider the other legal requirements involved so that their business successfully operates with all of the required licenses and permits.

More often than not, independent contractors aren't willfully avoidant of these laws; they are just unaware of what is necessary.

One should know a few of some essential legal requirements before starting any business online:

Registering the company/business:

This is usually the first step before starting a business. One company will have the required business name and it must be a unique one. The business name must be short, simple and easy to remember. This process lets the state or local government know the name of the operating business under. First of all, having an LLP or private company is right for online business. A company or LLP helps to deal with the VAT or tax-related issues.

On the other hand, the limited liability protection in litigation is none. In this case, it is in the best to sell a company or LLP. Such company or LLP is the true identity in the marketplace.

This registration, though doesn't provide trademark protection, it does allow creating and using the name of the business owner for branding purposes without having to incorporate. 

Copyright, Trademark, and Patents:

Several companies have trademark and copyright issues. So the due filing and establishment of trademarks is a legal requirement. Many business owners don't give much attention to trademarks. But when the time arrives, it can cost a lot. 

Establishing Privacy Policy:

Most online businesses collect information in some way or the other. To protect the company legally it is required to create a Privacy Policy. This policy sets forth what information will be obtained from website visitors. Once the Privacy Policy is published online, the company needs to follow it. 


Another legal requirement an online businessperson should keep in mind is the taxes. The business owner has to bear in mind that every country or every state has different rules of charges. It is generally suggested to have a tax professional to research market for understanding the target market.

Shipping restrictions:

Most shipping companies note their restricted items. The company must take a look at the trade commission's guide before shipping internationally.

Compliance with other different laws:

In some instances, compliance with labor laws is also required. Other workers and labor-related legislations cover areas like employees provident fund, employees state insurance, etc. One of the crucial legal requirements is the maintenance of several laws like contract laws, e-commerce laws, etc. All online businessmen and entrepreneurs must follow the proper techno laws before opening websites.

The Internet intermediary liability in India may be frequently invoked against e-commerce websites in India. The Information Technology (Intermediary Guidelines) Rules 2011 prescribes stringent obligations for e-commerce websites in India. The owners have to maintain the laws to avoid cyber-crimes. 

VAT Registration and Bank Account:

Another crucial legal requirement is a bank account. In the formation of a private company or LLP, it is a pre-requisite to open a bank account using the name of the company. VAT registration is another important thing to start an online business.

Age Restrictions

As far as age verification requirements for e-commerce stores selling age-restricted items are considered, the online business should look into their country's specific codes. There must be an age restriction for children under a particular age. 

Payment Gateway:

However, one payment gateway is enough for a company to clear payment issues because one payment gateway accepts many forms of online payment. There must be multiple options available to pay on the website.

Business Insurance:

There are various types of insurance for online businesses, including general liability, product liability, professional liability, commercial liability, and home-based insurance.


It's important to document everything including every detail like time and date, price, etc. When a business operates in the market, the legal documents or seller's agreements are provided. It is imperative to read such agreement properly before signing the deal.

Also refer our article at “Know These Legal Requirements Before Starting an Online Business

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Khyati Dhuparr

A foreign-educated Indian lawyer skilled in utilizing strong legal knowledge focusing on Indian and International Comparative Competition/ Antitrust Laws , M&As and Corporate Laws including special focus on Start-ups. Highly motivated and results driven with a proven successful track record of running a legal practice in a boutique law firm in India.