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How to Protect Your Online Business from Liability

January 11, 2024, by Atlas Insurance Agency

online business owner looking at laptop while preparing deliveries for clientsThere are an estimated 12 to 24 million e-commerce websites worldwide, including 2.5 million based in the United States. With online businesses growing rapidly, it is essential for business owners to consider how best to protect against lawsuits and other liabilities.

The concept of liability can be confusing for new business owners unsure of how to best safeguard their investments. From data breaches and professional errors to missed deadlines and undelivered services, nearly every type of business faces many risks every day.

Fortunately, there are things that business owners can do to prevent their online businesses from liability.

Claim Ownership of Your Business Name

Starting a business only to find out that the business name has already been taken can result in legal issues down the line.

Start by checking if the business name is taken by reviewing Doing Business As (DBA) or Fictitious Name records, searching the U.S. Patent and Trademark Office (USPTO) database, and performing general business name availability searches.

If the business name is available, take ownership of it by registering it with the state and claiming trademark rights.

Consider Reclassifying to a Better Protected Business Structure

Online businesses often start as sole proprietorships. With this type of business structure, just one person owns the business and is responsible for running its operations.

While simple to set up, sole proprietorships do not always offer ample protection. Business owners that want to ensure that their personal assets are protected should consider other business structures, such as a limited liability corporation (LLC).

An LLC is an independent entity, meaning the business owner is not responsible for lawsuits and debts against the company. If the online business goes bankrupt, the business owner’s personal assets are protected.

Always Use Contracts with Partners and Customers

Having the proper contracts in place can help online businesses avoid certain liabilities due to misunderstandings or disagreements.

shopping bags incart and credit card on laptop with paper boxes on table and sales data economic growth graph on screenWhether an online business is forming a partnership with another entity or offers goods or services to individuals, it is important to have legal documents to back up all claims.

Contracts are an effective way to detail the terms of a business relationship. Either party can use the contract to gain clarity and avoid confusion.

Protect the Reputation of the Business

Businesses operate on reputation, meaning it is critical for business owners to bring integrity to all business dealings with partners, customers, employees, and competitors.

Never misrepresent the business or its goods or services. Acting in a transparent and honest manner can help online businesses avoid hits to their reputation, lost business, and potential lawsuits.

As an online business, it is especially important to use caution when posting publicly, as this information can be seen by the world.

Comply With E-Commerce Laws and Regulations

Selling online can come with specific legal issues. Each state has its unique laws for online businesses that business owners must comply with or risk strict penalties and liability issues.

Some laws and regulations affecting an e-commerce business include CCPA, GDPR, CAN-SPAM Act, FTC Act, COPPA, sales tax laws, and Consumer Review Fairness Act.

It is important for online businesses to know and understand consumer data privacy laws and how to securely handle customers’ financial information.

Purchase the Right Insurance Policies

Having the right types of business insurance is one of the best decisions an online business owner can make. Business owners can help legally protect a business against a wide range of liabilities that may not be covered by the business structure.

Some types of business insurance policies that online businesses should consider include:

  • Commercial Auto Insurance – This is generally required for online businesses that use vans, cars, trucks, or other vehicles for business purposes, such as to deliver or transport goods sold online.
  • Business Owners Policy (BOP) Insurance – A BOP offers business owners enhanced general liability and property coverage. This type of coverage is ideal for online businesses that want to protect against reputational harm, advertising-related injuries, and product liability claims.
  • Commercial Umbrella Insurance – With commercial umbrella insurance, online businesses are provided with excess liability above and beyond the existing limits of their other commercial insurance policies.

Get a Quote for Business Insurance from Atlas Insurance

online business conceptRunning an online business can be a complicated endeavor and many new business owners overlook the possibility of liability issues.

However, a business can encounter lawsuits and other liabilities regardless of size or industry. It is important to prepare for these types of issues before they arise, such as by acquiring the right business insurance policies.

Atlas Insurance has been serving the needs of businesses throughout Hawaii for more than 90 years. Through our trusted partnerships, we are dedicated to providing businesses with the best and most affordable insurance products available.

For more information or an insurance quote, contact Atlas Insurance Agency at (808) 400-6634.

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