E–commerce and the law: 5 hints to starting your e-commerce business.

Make sure you get the fundamentals right if you plan to launch an e-commerce business. Here is a list of 5 things you must do:

Corporate Structure

The corporate structure of your business is really important and is something that should be discussed with your accountant and lawyer before the business begins trading.  This applies even if you are a one person show and are looking to set up a small eBay or Amazon e-commerce based business.

The reason for this is that different structures have their advantages and disadvantages. For example, there may be tax benefits to trading as a company operating as trustee of a trust as opposed to operating as a sole trader. It may also be valuable to you to have different entities play different roles in your business, such as owing Intellectual Property or employing staff so that there is distance between the “owner” of the business and the businesses assets.  There is therefore great value in discussing the corporate structure of your trading entity early on.

Supply Contracts and Agreements

E-commerce is the act of selling services and products online. Unless those items are produced by yourself, it is likely you will need to enter into supply agreements with third parties to provide you with the services and products you are selling.

The terms and conditions of these contracts and agreements are often overlooked, but they are fundamental to the operation of your business. For example, what would happen if stock provided to you or directly to the buyer was damaged? Would you be entitled to a refund? Would you have to return the stock to the supplier at your cost? And what happens to the buyer who may have purchased the stock and is waiting for their delivery? These are all essential to a successful e-commerce venture.

Without a suitable contract or agreement, you may find yourself in a difficult position with no option but to remedy a situation at a further cost to you. This is why it is always recommended that a legal representative review any proposed document before you sign it.

Your intellectual property and trade marks

As an e-commerce business (without a bricks & mortar presence), your brand is the key to your success. A search of the Australian Trade Mark Registry is an important first step before deciding on a business name and the branding of your business.  A trademark is the primary means of protecting your brand from competitors and forms a core component of your intellectual property. Without a registered trademark, you have limited recourse should another party use your brand name or logo. It is also interesting to note that the registration of a trademark can provide benefits to you on selling platforms such as Amazon, Etsy and eBay such as by making certain advertising or store options available to you.

Selling Platform Terms and Conditions

It is common for each selling platform to have its own set of terms and conditions or policies a seller must abide by. These are often found on the platform’s website and the seller usually must agree to the terms and conditions before being able to set up their store.

For example, eBay has strict time stipulations in relation to returns dictating when a seller needs to respond to a returns request before a decision is made automatically by eBay without the seller’s input. Taking time to read through the terms and conditions and adjust your business practices to work with the requirements of a platform will be beneficial to your business in the long run. 

Returns/Refunds 

Operating a business online has a degree of difficulty in the fact that you are not having face to face time with a buyer. However, it is rare for a returns or refund policy to consider these additional difficulties – especially when copied and pasted from a foreign website. 

Being an online only e-commerce enterprise does not exempt you from the laws governing the sale and purchase of goods and services in Australia. We assist clients to draft returns and refund policies that comply with the Australian Consumer Law and take into consideration the challenges of operating the business online. For example, how will you assess whether a product is damaged or faulty? Will the buyer have to pay the costs of having the item sent to you for repair or is this something the business will pay for? These are points that should be covered by a comprehensive returns and refund policy.

Next Steps

If you need assistance in relation to any of the above items or have any questions, please feel free to contact us.