Shopify is one of the leading eCommerce platforms globally. As a Shopify seller, you plan to boost your online sales this new year. You commit to putting your Shopify store on top of SERP, engaging with many potential customers, and converting sales.
However, it’s crucial to understand the local, state, and federal laws and regulations governing online businesses. Ensure 100% legal and regulatory compliance to avoid legal and financial implications.
Thus, this page covers the laws and regulations every Shopify seller should know. Keep on reading to ensure your business operates legally and ethically.
8 Legal Matters Every Shopify Seller Should Consider
Did you know that Shopify is one of the most popular eCommerce platforms? Almost two million businesses use this online platform worldwide. The numbers don’t lie:
Shopify is the 3rd leading online platform in the United States, comprising 10.9% of the market share. In 2020, it accounted for nearly 25% of the global eCommerce market.
As we turn over a new leaf (or year), Shopify shows no signs of stopping or slowing down. Therefore, online entrepreneurs should capitalize on this to sell more products and make more money.
Still, legal and regulatory compliance is a top priority in the eCommerce industry. That said, here are eight legal matters every Shopify seller should consider:
1. Business Registration and Licensing Requirements
As with brick-and-mortar stores, online businesses must be legitimate. To ensure this, you should register your business with the government. Obtain the necessary licenses and permits before you can legally sell products on Shopify:
Business License: It grants permission to operate an online business issued by a government agency.
Legal Certificate: You must secure a legal certificate with a minimum fee of $300, as per Become. The certificate covers license, insurance, and SSL certification. The business structure you select for your Shopify store will have significant legal and tax implications. An LLC is popular among business owners because it offers some personal protection by separating your business assets from your personal assets,. It’s also important to be aware of factors like the right state for forming an LLC, LLC cost, and the tax implications of doing so.
Mark Pierce, CEO at wyomingllcattorney, helps entrepreneurs with legal matters. “Business licenses depend on your location and the products you sell. Therefore, research the specific requirements in your area and ask the local authorities. Ensure you have everything you need before you start selling.”
2. Intellectual Property Laws
Intellectual property (IP) rights are legal protections granted to creators and owners of IPs. These include inventions, artistic works, names, images, and symbols used in eCommerce.
IP rights let you control the use of your IPs. They prevent others from using your creations without your permission. As a Shopify seller, consider the following rights:
3. Consumer Protection Laws
Consumer protection laws protect the rights of consumers, ensuring customers are treated fairly in the marketplace. They cover various issues, such as deceptive practices, product safety, and privacy. Below are some laws that apply to eCommerce businesses as well:
Logan Mallory, VP of Motivosity, underscores the importance of consumer protection. “It’s about treating consumers fairly and with respect. That is by providing the information they need and options for product purchases. Ultimately, it’s a vital part of a healthy and sustainable economy.”
4. Data Protection Laws
Data protection laws regulate personal data collection, use, and storage. They aim to safeguard the privacy and security of personal information. On the flip side, they ensure authorized personnel handle customer data responsibly and transparently.
As a Shopify seller, you collect personal information from customers like names, addresses, and bank details. Make sure to comply with laws related to data protection. Here are some:
5. Product Regulations and Compliance
Product regulations govern the production, design, labeling, marketing, and sale of goods or items. They seek to protect consumers from unsafe or deceptive products. They ensure businesses accurately and fairly represent products to their customers.
Most products are subject to specific regulations and compliance standards. For example, children’s toys must meet safety standards. Likewise, food products must have appropriate labeling. Even items such as controlled substances should be restricted.
Ben Michael, Practicing Lawyer and Founder of Michael & Associates, stresses regulatory compliance. “Online businesses must ensure 100% compliance with product regulations. They are vital for protecting consumers from unsafe or deceptive products. They are also critical for building trust and confidence in the marketplace.”
6. Shipping and Transportation Regulations
Shipping and transportation regulations govern the movement of products by land, air, and sea. They guarantee the safety, security, and efficiency of shipping and transportation while protecting the environment and the public.
These regulations cover four key elements:
Safety: These regulations establish safety standards for vehicles and equipment used in shipping and transportation. As such, companies inspect vehicles and certify they are in working condition before they drive them.
Security: These regulations set protection against potential threats to shipping and transportation security. Thus, they require using technologies and establishing practices to prevent terrorism, smuggling, and other illegal activities.
Trade and Customs: These regulations govern the movement of goods across international borders. They require the payment of duties, taxes, and other fees for imported or exported products.
Environmental protection: These regulations aim to minimize the environmental impact of shipping and transportation. They require using technologies and implementing practices for reducing emissions and protecting natural resources.
David Aylor, Founder & CEO at David Aylor, says understanding the shipping and transportation regulations is important. “eCommerce businesses must be well-acquainted with these regulations. They ensure the safe and efficient movement of products around the world. They also help protect the public from potential safety and security threats.”
7. Marketing and Advertising Laws
Marketing and advertising laws regulate how businesses advertise and market their products to consumers. They endeavor to protect customers from deceptive or misleading advertising. They also help them make informed decisions on product purchases.
Marketing and advertising laws apply all the more to the eCommerce industry. They focus on the following:
Truth in Advertising: The laws require advertising and marketing materials to be truthful and accurate. These materials should not mislead the public at all.
Endorsements and Testimonials: The laws regulate the use of endorsements and testimonials in advertising. They must be authentic by reflecting the actual experience of customers or users.
Unfair and Deceptive Practices: The laws prohibit unfair or deceptive marketing practices. These include making incorrect and misleading claims about the benefits and performance of products.
8. Tax Laws
Tax laws regulate the assessment, collection, and enforcement of taxes. These include income taxes, property taxes, sales taxes, and more. They usually cover provisions that:
As a Shopify seller, you need to pay taxes on your sales. Understand your tax obligations and keep accurate records of your sales and expenses. You could face penalties and fines if you fail to pay the required taxes. So, stay on top of the following:
Ensuring Legal and Regulatory Compliance for Ecommerce Business
Laws exist to protect both sellers and consumers. And they essentially apply to the eCommerce industry, including the Shopify platform.
As a Shopify seller, familiarize yourself with the laws and regulations that apply to your business. Thus, consider the eight legal matters discussed above and ensure 100% compliance with them.
Understand that failure to comply will result in legal and financial consequences for your business. However, legal adherence and regulatory compliance will protect your eCommerce business and ensure its overall success!