Success With Shopify by lhywantk - HTML preview

Chapter 8:

Laws, regulations and restrictions for

store and business

There is a lot to think about when you are starting your ecommerce website and if you want to stay in business, understanding the laws and the regulations that govern your store is going to be paramount. There are six main areas that we’re going to focus on when it comes to regulations, encompassing very different aspects of an ecommerce website. This information is based upon the laws that govern ecommerce websites that are based in the United States and the information may be different if you are starting your site elsewhere. In addition, there may be other regulations that govern your store if you are selling an unusual or regulated product.

Business Licensing

The first legality that we’re going to discuss is your business license. Do you need to get one and how is that even accomplished? Let’s start with what a business license actually is. A business license gives you the ability to operate a ‘for profit’ business in a certain area, usually a city or county. If you don’t have a business license and you start a business, you can be fined and the city may force you to close your doors.

The business license is obtained through whatever city or county office gives them out in your area and each one will have different requirements or different types of licenses, which may or may not apply to an internet only business. The best thing to do is check with your local licensing office and get the current information for your city and state. You also should be aware that you cannot do business under that name until you are licensed, which means that banks aren’t going to open a business account for you unless you can provide proof of your business name, commonly called a D.B.A.

Your Domain & Website Security One of the reasons that you’re going with Shopify is that it makes it much easier to build a store because most of the difficult stuff is already taken care of. That is the case with site security as well. Shopify has taken care of that aspect of your site for you, and in fact, is one of the most highly rated sites when it comes to security. As long as you’re using the platform, chances of your store being hacked or your customer’s financial information being stolen is extremely low.

However, there is one website-related thing that you’re going to need to do, and that’s register a domain. A domain will be the address where your store is located. It is an important decision because your domain will be the way that people find your store, and one of the ways that Google knows what your store is about.

Paying Taxes

Next, we’ll discuss how taxes work. There are two different types of tax that you need to be aware of – sales tax and income tax. When you are in business for yourself, you are responsible for paying both of these on every item that you sell (usually) and every dollar that you make (almost).

Sales Tax: When you have an e-store, you actually don’t have to pay sales tax on everything you sell. Your state only requires that you pay sales tax on items that you sell to people who live in your state, because a transaction from you to them means that you have “done business” in that state and that is subject to sales tax. When it comes to the other items that you sell, to people in other states, you don’t have to pay sales tax so you only have to set up your store to charge sales tax to the people who live in your state.

Income Tax: The other type of tax that you’ll have to pay is income tax. You remember when you used to get a tax refund check at the first of the year? Well, that time is over. Now, you’ll be paying taxes on the income that you get because you don’t have an employer to withhold those taxes for you. So, you’ll need to set aside a portion of your income to pay taxes at the end of the year. If you set a certain percentage in a savings account, and the actual amount of taxes that you have to pay is less than what you have saved, then you do get a tax refund of sorts.

You won’t know exactly what you have to pay until the end of the year because you get to deduct your expenses from your income and not pay taxes on any amount that you spent running your business. Your expenses can also include part of your rent, if you work from home, and even vehicle expenses if you had to drive anywhere for your business, such as to the post office to ship items. Any money that you spend running your business, that can be proven, you can deduct before you pay taxes. A tax advisor can help you make sure you get all of the deductions you deserve.

Hiring Employees

When it comes to hiring employees, there are several different laws that you’ll need to familiarize yourself with. From income tax withholding to laws governing hiring policies, you’ll need to check out the local regulations in your area as well as the federal labor laws. You may not think that you have need for employees right now, but if your business grows to the point where you can no longer keep up with the shipping, it is something that you might want to consider.

Here are some of the laws that you are going to have to familiarize yourself with if you decide to hire employees:

Wage and hour regulations

Workplace safety and health

Worker’s compensation

Employee benefits and security

Unions and their members

Employee protection

Regulations governing those in uniform

The employee polygraph protection act

Wage garnishment

Family & medical leave law

Special employment rights for veterans

Shipping Regulations

We’re going to get into how to set up your shipping in a later chapter. For now, you should just be aware that there are some shipping regulations that govern how you need to label your packages, when you need insurance, what happens if you decide to ship overseas and the type of materials you are allowed to send through the U.S. mail or other shipper. For the most part, Shopify has already taken care of this for you with their shipping labels, so you can just concentrate on building your store and attracting customers.

Special Regulations

There are a few special regulations that you need to be aware of if you are running an ecommerce website. However, they are mostly to do with site security and protecting your customer’s financial information, something that is taken care of by Shopify. There are also some rules governing online advertising that every e-store owner needs to review and then there could be special regulations governing your particular product as well. These are all things that you’ll need to research and understand before you open your ecommerce site for the first time and before you make your first sale.