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Legal pitfalls to avoid when starting a business

Written by Russell Cragun on June 7, 2016 in Strategies & Tips
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Starting an online store can be daunting and intimidating. You have to learn about ecommerce, drop shipping, shipping logistics, marketing, coding, and so much more. While trying to take in all this new information, it can be easy to miss a step or two along the way. One of the biggest items often forgotten is the legal requirements and licensing fees. Imagine how horrible it would be if you got your store running and were making a profit, but then had to be shut down because you didn’t have the right business license, or you didn’t properly file your taxes. Instead of waiting for the worst to happen why not learn how to protect yourself and your store against common legal pitfalls?

There is a common misconception that you do not need a business license to sell online, especially if you are only planning to sell on eBay or Amazon. In some instances this is true, for example if you sell one item that you found in your garage on eBay you won’t need a business license. However, if you do plan on running and operating a business, single-handed or with employees, you need to plan on getting a business license. According to, “for the most part, the steps to starting an online business are the same as starting any business.”

Listed below are a couple legalities that you should take care of while starting your own business. We will also focus on a couple other legal headaches you may come across while running your own store. 

Please note that this guide is not comprehensive, and that there are many other legal tasks that should be considered. When starting your own business, please take the personal responsibility of making sure everything is taken care of.

Business Licenses

I will be relatively short when covering business licenses because it’s tricky to be applicable to all states, counties, and cities. Business license regulations may change from city to city, and it is your responsibility to research the regulations for your city.

Most cities have a business section on their website that will help you understand what kind of license you need, and how to get one. They will also help you register your business and make sure that you meet all the legal requirements.

It is important to decide what kind of business structure you want before you register your business. You can choose from sole proprietorship, partnership, corporation, or LLC. You can read more about the different business structures and which one is best for you here


If you plan on naming your business and developing a company logo and brand for it, then you should look into getting a trademark. A trademark will protect your business from fraudulent activities, by making it illegal for anyone else to use your logo.

There are five steps that you should follow when registering a trademark.

  1. Make sure that your logo and brand can be trademarked
  2. Check the official government registry
  3. Identify your unregistered mark
  4. Seek legal advice from a lawyer to help you get registered
  5. Register the mark with the state and federal trademarks

Once you have your logo and brand registered with the government make sure you use the registered trademark symbol “®”.

It’s also important to keep in mind that “the USPTO does not allow the registration of marks that are generic, descriptive or likely to cause confusion with existing trademarks. Your mark can’t be a word or phrase used commonly in the industry or similar to another company’s mark.” -Shopify

Privacy Issues

In a world where personal data is becoming an ever growing concern, many customers worry about giving out information to any business that can be hacked and make them a victim of identify fraud.

Over the recent years there have been many improvements in this area to protect customers and people, especially with business email through CAN-SPAM.

If you do choose to explore your options with email marketing, (which I recommend) then it’s important to respect CAN-SPAM. By not following and obeying this law it could cost you up to $16,000 per email address. People are aware of this law as well and have no problem taking you to court since this is such an easy case for them. One person made over $800,000 by taking a company to court.

Following CAN-SPAM is easy to do, and can also help you keep the most interested customers around. With each email you send you must provide a way for that subscriber to unsubscribe from your communications. There is an exception around confirmation emails like order or membership confirmations. However, those emails can not contain any selling points like products, or any other means that you profit you.

When providing someone with an unsubscribe option you need to make it clear and simple.  When you give someone an unsubscribe link, by law you can not force someone to log into their account and adjust their email preferences to unsubscribe. It has to either unsubscribe them instantly, or take them to a confirmation page to make sure they really want to unsubscribe. That’s it! You can’t try to make this process hard on them. Once someone unsubscribes from all email communication with you it becomes illegal for you to contact them again via email, unless that previous contact approves you to.

Do your research

There are so many legal issues that can get you into a heap of trouble. It’s important that you take the time to make sure that you’re doing everything legally. You can avoid legal pitfalls by being properly registered, and by not lying to your customers. Don’t try to be shady and fool people. You only have to offend one person for a lawsuit to come against you, and make a world of hurt happen. Set up your business carefully and ethically to avoid any issues!


Best of luck out there and don’t forget to subscribe to the Doba blog for all the latest and greatest on ecommerce and dropshipping.

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