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How does the state I live in affect my online business?

Where you live can make a difference when it comes to running an online business. Depending on the size of your business, your industry, and where employees are located, different state laws may apply.

While you are not required to start your business in the same state you reside, it may be preferable or more convenient to do so. Many states require businesses to register if they operate within the state, have employees in the state, or make a certain number or dollar amount of sales in that state. Businesses that operate in multiple states may be required to register in each state they operate.

Additionally, regardless of where you incorporate or register your business, if a business sells to a consumer in a different state, or another country, they may be required to comply with the laws of that state or country. For example, if a product is legal in the place where your business is located, but violates the law where you are sending your product to a customer, your business could face legal trouble. Furthermore, privacy laws, like California’s Consumer Privacy Act (CCPA), or the European Union’s GDPR, may require online businesses located anywhere to be rather careful when it comes to storing and using customer information. For example, the CCPA requires commercial website owners to make and link to an Online Privacy Policy. Fortunately, consumers of all types value privacy and transparency, so stating your policies may increase their confidence in your website and business.

Online businesses, however, may be able to limit their liability by using Terms and Conditions that require customers to agree to be bound by a specific state’s laws, or agree to specific terms when using the website, services, or purchasing products. It can be helpful to talk to a lawyer or get help when setting up your online business’s Terms and Conditions.

Is a separate business checking account required?

The short answer is that it depends on your respective state’s law and the type of business you are running. Sole proprietorships may be able to use their own personal checking account to open and operate their business, although this is typically not recommended.

Whether it is required or not, it is a smart idea to separate your business finances from your personal finances. A separate bank account keeps business expenses organized, which helps with tracking finances and deductions when it is time to file your small business taxes.

It may not seem ideal to manage several bank accounts, but if your business is set up right, doing so can go a long way in protecting your personal assets from business debts and liabilities.

How do I establish an online business presence?

With so many online businesses out there, there is a lot of competition for the same potential customers. To get their attention, you may want to put some effort into establishing an effective online business presence.

When you make your Business Plan, it can help to include an online marketing plan. A marketing plan can help you stay organized, create targets, and adapt when circumstances change. If you have settled on a name for your business, and it is available to register in your state, you may want to register the same domain name for branding purposes. It can also be helpful to claim social media names on the platforms you plan to use, as well as set up profiles for your business on search platforms, like Google and Yelp.

As part of your online branding, you may want to consider trademark or copyright protection. Protecting your business intellectual property protects your reputation from competitors who may try to copy your business or your brand.

How can I market my online business?

For many small online businesses, social media can be an effective marketing channel. Videos and pictures on social media can promote your brand, services or products, and can demonstrate how your product or services work. Once you establish your online business presence, you may want to start promoting your brand, and your products or services to your target audiences across social media platforms. Social media can provide businesses with valuable information based on the engagement that ads and posts generate.

You can also leverage the power of online retail marketplaces, such as Etsy, eBay, and Amazon, which have their own marketing ecosystems. You can sell your products or services both through an app and on your own website.

If your goal is to drive more traffic directly to your website, you may want to consider researching SEO optimization, or hiring help. An effective email marketing campaign can also work wonders for exposure, however, it can be complicated and costly to obtain quality email lists, and craft engaging emails.

What federal laws apply to online businesses?

Several important federal laws apply to online businesses. The following examples and resources are a good place to get started.

  • Children’s Online Privacy Protection Act (COPPA, 15 U.S.C. § 6501-6508). Under this rule (16 C.F.R. Part 312), operators of websites or online services have certain requirements regarding collecting personal information from children under the age of 13 years. If an online business violates this law, it could face civil penalties of up to $2,500 per violation and up to $7,500 per intentional violation of the statute, as well as $7,500 per unintentional violation of the consumer privacy rights of minors.
  • United States Small Business Guide. This guide by the Small Business Administration (SBA) walks you through the steps to determine whether you need to register your business based on its location and structure. Most small business owners can get away with just registering their business name with state and local government entities as well as filing for federal and state tax IDs. If you want your online business to register any trademarks or brand or product names, you can register with the U.S. Patent and Trademark Office (USPTO). Additionally, you may need to file additional forms with the Internal Revenue Service.
  • Anticybersquatting Consumer Protection Act of 1999 (ACPA). This law is designed to protect consumers and businesses and to promote online commerce. Essentially, it (15 U.S.C. § 1125(d)) prevents bad or unwitting actors from using a brand name or logo similar to an established brand in a way that may cause confusion for consumers.
  • Prompt Delivery Rules. Enforced by the Federal Trade Commission (FTC), these spell out the ground rules for making promises about shipments, notifying customers about delays, and refunding customers’ money for orders placed by phone, internet, or fax. Your online business must have a reasonable basis for believing that it can ship its goods within 30 days. For any delays, you must communicate with the customer about it, provide an alternative shipping date, and explain the consumer’s right to cancel the order. Also, online businesses have the right to cancel any orders that they cannot fulfill and to make a prompt refund.

Additionally, the products or services you offer may come with their own laws. The Consumer Product Safety Commission (CPSC) regulates a whole host of products, like appliances and toys, whereas other federal agencies regulate other products. For example, the Food and Drug Administration (FDA) regulates drugs, food, tobacco, and cosmetics. The National Highway Traffic Safety Administration (NHTSA) oversees automobiles, trucks, motorcycles, tires, and car seats. Some products are regulated by state agencies, such as liquor sales and shipping alcohol across state lines.


If you have more questions about starting your own online business, reach out to a Rocket Lawyer network attorney for affordable legal advice.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.


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