With the world transitioning online in a fast pace, many entrepreneurs 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 on-line 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 few major differences (from the legal point of view) of an e-commerce and a regular business:
a. 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 the regular brick-and-mortar businesses.
b. You are not aware who is buying your products/services and have no chance of assessing buyer’s adequacy. As an opposite to the brick-and-mortar businesses, we do not see our clients, we do not communicate with them.
c. 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.
d. 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. First question that a business owner must answer Is whether to incorporate or operate as a 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.
In my personal opinion, most online businesses should seriously consider incorporating in order to protect the assets of their owners from liabilities of the business operations.
Additionally, I usually suggest to incorporate federally – this provides better protection for your name and will look better for your international clients and partners.
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 legal foundation is one of them.
3. As a business owner, you should properly understand what happens during a transaction from the 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, 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:
a. Price and taxes
b. Cost of shipping
c. Warranty – terms, how it applies, where, will the manufacturer cover?
d. Consequences for improper use
e. Limitation of liability
Continued in the attached comment
Our website – https://cbes.ca/
Facebook – https://www.facebook.com/CanadianBiz
LinkedIn – https://www.linkedin.com/company/cbes
All information provided in this video is for informational and reference purpose only. Nothing contained herein shall be considered as a legal advice or instructions to be acted upon. CBES – Canadian Business and Enterprise Services does not offer legal advice online or on its YouTube channel. Please consult a professional before you act in reliance on the information contained in our videos.
#ecommercecanada #onlinebusinesscanada #businessincanada