Table of Contents
In our increasingly digital world, online startups are becoming more common. An online startup is a business that exists primarily online, so it typically does not have retail premises for customers to visit. Instead, it takes all orders as online transactions through a website such as an online store.
One main advantage of online businesses is a lack of investment in the physical retail space. Online startups also tend to require less staff than launching a business based at a physical location. However, some legal considerations exist when launching an online startup business in the UK. This article will explore four legal issues to give you a better understanding of how best to establish a new startup organisation with reduced legal risk.
1. Deciding Whether to Use an Existing Online Marketplace
The starting point is to decide whether to process all orders through your website or use an existing online marketplace (such as eBay or Etsy) instead.
Designing a website can be a time-consuming and expensive process, and this is especially true when using it as a sales platform. Due to this, many UK online startup businesses advertise their products on their website but use links to online marketplaces (such as eBay).
Some companies use an even simpler system, such as:
- only having a placeholder website that links directly to a goods profile page on an online marketplace (such as a Seller page on eBay); or
- not having a website and simply listing their goods directly on online marketplaces (such as Etsy or Notonthehighstreet).
The main disadvantage of using an online marketplace is paying commissions on sales. However, this is usually good value given that it reduces online hosting fees for your business and is usually more secure from a cybersecurity standpoint.
2. Suitable Delivery Provider
One of the most common and irritating problems of the online age for customers is delayed delivery of items. This is particularly the case when the delivery takes so long that the individual may as well have bought it from a physical store.
Whilst delivery costs are ever increasing, the choice of delivery company can significantly impact customer satisfaction. A common occurrence in the UK is for a business to pick a delivery partner and then change it following numerous complaints of damaged items. There is little point in processing and taking orders if a decent number of goods are getting damaged on the way.
It is worth picking a more reliable delivery partner, even if it costs more per order to do so, to avoid customer complaints. Happy customers who receive deliveries quickly leave good online reviews.
Continue reading this article below the formCall 0808 196 8584 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.
3. Sensible Refunds Policy
Some business owners believe the refund issue is more of a grey area for websites concerning physical stores. However, customers’ refund and return rights are no different for website purchases than those made in physical stores.
With this in mind, having a clear, straightforward refund policy on your website or online marketplace business page is crucial. Whilst these will vary in nature, they tend to confirm some of the following:
- the circumstances in which a full refund is due;
- when a customer should return an item for inspection or repairs;
- situations in which UK consumers can replace the item or obtain store credit; and
- evidence required to process a refund or returns request (for example, photos above a specific resolution sent to a specified email address).
Due to their inevitable nature, you should build the cost of refunds or returns into your company’s business model. It is essential to have an efficient system in place to appease customers and encourage them to return to your business.
4. Secure Payment Method System
Your business must use a safe and secure payment system. The risks of not doing so are immense.
Many online startups use online marketplaces to process payments as their payment systems tend to be more robust and covered by insurance. So, for example, your business (or online marketplace) may allow customers to use PayPal or similar payment services.
If you seek to use your payment system, the credit or debit information must be secure and encrypted so that cybercriminals cannot access it. Any credit or debit information theft is likely to breach the GDPR. Businesses are required to take all necessary steps to secure payment information. Failure to do so is likely to result in fines of up to £17.5m.
LegalVision’s Startup Manual is essential reading material for any startup founder looking to launch and grow a successful startup.
Key Takeaways
There are many legal considerations when starting an online startup in the UK. Some of these concern the nature of your business’s web presence and payment methods. Legal considerations are crucial and must be carefully thought over, and getting it wrong can lead to problems such as a fine from the ICO. Therefore, many small businesses and online startup business owners obtain legal services and documents from expert e-commerce experts.
If you need help with the legal steps required for an online startup, our experienced E-Commerce and Online Business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
UK law places various legal requirements on online businesses, including companies that carry out business through e-commerce platforms (such as Amazon Marketplace). The priority of the law is to protect consumers from harm.
Because failing to comply with these legal requirements can be costly regarding your company’s finances and reputation.
We appreciate your feedback – your submission has been successfully received.
