Brought to you by Thomas C. Grajek, Attorney At Law:
You’ve worked hard to reach your ecommerce business goals. You’ve put in the hours, invested in your dream – and succeeded. The last thing you need on your hands is a costly, drawn-out lawsuit that could potentially sink your enterprise.
That’s why it’s crucial to understand what liability is and how it affects your online venture. Thomas C. Grajek, Attorney At Law, says that adequate legal representation is vital when facing charges. So, what can digital business owners do to prevent a lawsuit or at least mitigate the expenses?
The answer to that question and a few helpful pointers are below.
What is Liability?
In the business context, liability is the principle of being financially responsible for something. It can refer to debts payable, as your company is accountable for any outstanding loans.
Similarly, as a digital business owner, it’s your duty to abide by any applicable legislation, such as:
- State and federal privacy laws
- Online sales tax regulations
- International and customs laws
- The Digital Millennium Copyright Act of 1998
Therefore, you could be liable for:
- Data theft
- Security breaches
- Product misinformation
- Copyright infringement
- False testimonials
- Missed project deadlines
- Negligence
On top of that, an online business is still subject to regular company law, which comes with its own set of liabilities. These include off-site assets, employee injuries, malpractice, and property damage.
Protecting Yourself and Your Online Business
As you can see, ecommerce business owners could end up being responsible for various incidents, possibly resulting in lawsuits and exorbitant expenses. That’s why it’s imperative to minimize the risks and protect yourself and your online venture. Here are a few ways you can accomplish that:
Create a Limited Liability Corporation (LLC)
This is one of the most popular routes that individuals take to protect their assets from business-related liabilities. By establishing an LLC, your company becomes a separate entity that carries its own debts.
In most cases, you won’t be liable for any of your LLC’s financial obligations. However, you could still be exposed to personal risk in some instances.
Get Insurance Coverage
Unforeseen incidents can occur even when you’ve taken the necessary steps to fulfill your legal business responsibilities. Therefore, sufficient coverage is imperative to protect your company from financial damages.
Aspects like your budget, debts, unique digital risks, and company size should all be taken into account when you’re considering coverage options. Typically, an ecommerce business requires the following types of liability insurance:
- General – protects against negligence, property damage, and third-party claims
- Product – covers defective goods implications
- Professional – protects against malpractice, errors, and omissions
- Cyber – helps pay for data breaches, security leaks, and public relations
Now You Know
Liability extends into various aspects of your online business, so it’s vital to understand what it means. Armed with sufficient knowledge, you can protect yourself by creating an LLC. Plus, with ample digital insurance coverage, you’ll be able to minimize any financial expenses.
Thanks for such useful information, Thomas. The regulatory environment for online businesses has been evolving rapidly. And, ignorance doesn’t exonerate you from having failed to abide by the law. It is crucial to understand both federal law and the law of the state in which the business is based. The services of an experienced corporate law attorney can be very useful in just that.