5 Fundamental Considerations for Selling a Product Online

The light bulb has clicked, and it’s your million dollar business idea; you’re going to sell to the world…“widgets.” (What’s a widget you ask? That’s for you decide; after all, it’s your brain child and your ticket to retirement.) Moreover, these widgets are pure genius, and everyone will need one. In order to reach the masses, you know you need to sell them online. But now what? Create a website and start selling the widgets, right? It’s probably best to tug the reins, at least a little bit. Below are five important issues to consider before launching.

Does My Product Require a License to Sell?Online shopping

Governmental regulations may require that you obtain a specific license to sell your widgets. If so, this requirement exists regardless of whether you only intend to sell those widgets online. The type of license, and procedure for obtaining that license, will vary depending on the widget. Some products are regulated more strictly than others (for example, a person selling custom printed t-shirts will incur fewer impediments to the market than an individual selling dietary supplements subject to the rigors of the Food and Drug Administration regulation). Be sure to research and understand all licensing requirements associated with your widget and obtain any necessary license before you begin production or stocking inventory, as licensing could hinder or halt the entire process.

Where Should I Store My Widgets?

This, again, depends on the nature of the widget and should be examine prior to building any inventory. For example if you’re selling a product regulated by the Food and Drug Administration it may require certain storage conditions (e.g. temperature). If you’re thinking about storing your widget inventory in that empty space in the garage, you’ll want to familiarize yourself with the local zoning laws and/or HOA restrictions. Renting commercial space is a viable option and requires a little research, planning, capital, and negotiation because if you’re not careful you may end up personally liable on a multi-year commercial lease, which is not a position you want to be in (and a good reason to incorporate your business as discussed below).

Do I Need to Create a Company?

No; but you probably should. The most popular is the limited liability company (LLC). It avoids double taxation (i.e. taxation of the company’s income and your individual income) and offers protection from personal liability. LLC’s are created by filing articles of incorporation (the term may vary by state) in the State in which you wish to incorporate, which is most likely your home State. For Illinois and Wisconsin entities, you’ll want to visit the Illinois Secretary of State and/or the Wisconsin Department of Financial Institutions’ websites to research what corporate names are already in use. It’s also a good idea to create a set of bylaws to structure the LLC’s governance because doing so at the forefront can save you serious headache and hassle in the future, especially if there are multiple members to the LLC. Keep in mind that your specific widget and circumstances will dictate what entity form and governance is right for you, and you should contact a professional if you’re unsure what entity will best serve your business.

Do I Need to Create My Own Website?

Even if you’re using a third party’s website to sell your widgets, you should also create your own. To do so, you’ll need to obtain a domain. As an analogy, consider the domain as the land on which you will build your house (website). You get to choose and create your domain name. You can use the name of your business, the name of your widget, or maybe you want to have various domains route to your main site. Whatever strategy you choose, you should use domain names that are unique and catchy, but practical and to the point. No one wants to type or read “MyWidgetIsTheGreatestWidgetOnEarth.com.”

There are some excellent sources for creating your own website, but if you’re unfamiliar with website development it’s best to farm this process out to a developer. Shop around and preview the developers’ other sites before you enter into any contract for services with them. Your website needs to be appealing, informational, functional, and secure. There are laws governing privacy protection protocols, security for transactions and payment systems, as well as requiring certain disclosures to consumers. So before you allow people to hit that “buy button,” make sure you’ve covered these issues with your attorney. Your domain name and website will serve in part as the face of your company, and are essential advertising and marketing tools. Be sure to consider them carefully and use them wisely.

Is This Everything?

Absolutely not! This is by no means an exhaustive list of all the business or legal considerations that go into selling products online or starting a business (e.g. market demand, financing, competitors, etc.). However, these are some very important issues that you need to consider in your new venture. Furthermore, do not let these issues overly stress, demotivate, or deter you from your business aspirations. Use this information to gain knowledge about the business landscape, and that knowledge will better prepare you to navigate your road to success.

This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

If you need assistance with a related matter, contact us.