How To Start An Online Business: 8 Legal Things You Must know

Starting a business is not everyone’s cup of tea. Many came forward with great business ideas but couldn’t survive.

If you are here to find the answer to the question “how to start a successful online business,” you will learn all about it here.

Starting your fashion business online from anywhere makes the boss of everything even your work hours.

Since everything’s digital, you won’t need a huge startup cost either. Ready to start your fashion company? Before you do anything, you must know the legal side of starting a fashion company.

Follow this step by step explaining all the legal aspects of starting a fashion business successfully:

Step 1: Choose a Business Structure

Regardless of the type of business, you must first decide the business structure. In other words, do you want to be a sole proprietor, a company, or a corporation?

Any individual can be a sole proprietor. It’s the simplest type of business and requires minimal paperwork to set up.

The downside of this type of business structure is there is no protection from liability for business obligations and debts.

The next option is to choose an LLC ( limited liability company). Owners of this type of business are not personally liable for business obligations.

Starting an LLC is a more flexible option and don’t have to keep records or reports.

Last but not least, a corporation is a good option if you are looking forward to attracting investors and bring more money.

Step 2: How to Register an Online Business

The next step in starting an online business is to have it registered. Each state or country has a different procedure for online business registration.

Find out how to register an online business in your state. You can always hire an agent to register your business online.

Some business owners prefer to operate in their home state only. If that’s you, it’s recommended to register business online yourself. If you live in Los Angeles California, you can file your fictitious business name here.

If you expect your business to have a nationwide activity, you should consider incorporating in Delaware.

Your location and business structure will determine how to register a online business. For most small businesses, the procedure is straightforward.

You just have to register your business with the state and local government. In some cases, there’s no need to register online business at all.

For instance, if you are conducting the business yourself and using your legal name, you are not obligated to register. However, by choosing not to register, you could be missing out on legal benefits, personal liability protection, and tax benefits.

Some states allow the business owner to register online. Others make you file documents in person. In some cases, you can send the paperwork through mail too.

Most states require the business to register with the office of the Secretary of state, a business bureau, and in some cases a business agency.

Step 3: Choose a Business Name

For setting up an online business, you will definitely have to work on the business name. Give some time and thought to this.

Your business name will eventually become the next fashion brand, at least in your local area.

The benefits of having a unique business name are endless. You are able to market your business with it, stay out of trademark infringement, get a domain name that matches your business name, and more...

Once you have decided the name for your business, run a Google search just to be sure that no other business has the same name.

When starting online business, it’s best to search trademarked names on the official website of the U.S. Patent and Trademark Office to be certain that your name is exclusive. 

Choosing a business name is a crucial step in how to start a online business. This name should reflect your fashion brand’s identity. It should not clash with the outfits you will be designing and selling.

After the name is finalized, you must protect it because you have put a lot of thought into it. The best way to do that is to register the business name.

Here are four different ways of doing that:

  1. Get an entity name (it protects at the state level)
  2. Get a trademark (it protects at the federal level)
  3. Get a DBA (doing business as)
  4. Buy a domain name

Step 4: Search and Register A Domain Name

Let’s discuss the fourth way of registering your business in this guide on how to start a business online.

Once you have picked the name, for creating an online business website, it’s time to register your domain name.

It’s another way to register a business online. This domain will be your site’s URL through which people will find you.

To check the availability of the domain name, simply enter the proposed name in the search bar of the provider you are planning to shop the domain from. For more details, explore these steps:

1.Make a list of names you would like for your fashion business. Chances are you like a name and it’s already taken. You need to be very creative here. Consider a domain name with common keywords related to your business.

2.Choose a domain registrar to buy a domain name online. Settle for the one that’s well-established because buying and owning a domain is a recurring expense.

Have a look at their pricing structure as well. Popular options include Godaddy, NameCheap, and Bluehost.

3.Check the availability of the domain name. If it’s available buy it right away. is the most popular choice when it comes to domain registration. Sometimes, .com domains are not available. You can always pick from the alternatives available. Do make sure they suit your business

Along with the domain name, get a web hosting plan too. If the domain is available, choose a hosting plan and buy the domain. This isn’t a one-time expense, you must renew the domain name each year.

File Your Business Formation Papers

Step 5: File Your Business Formation Papers

Setting up online business takes a lot of hard work. To make your fashion business a business entity, you must file documents with your state agency that handles business filings.

For starting a business online and making it legal, this step is mandatory. You will have to pay a filing fee and this amount varies from one state to another. After your business becomes a legal entity, you will receive a certificate for that.

In most states, the total cost of registering the business is less than $300. However, the fee can vary depending on your business structure and the state where you are operating.

You don’t have to register for a city government or a county in order to form a business. If you are an LLC or corporation, you will have to file for permits and licenses from your country or city.

The local government usually determines the licensing, registration, and permit requirement. Therefore, visit the local government’s website to figure out what you need and how to run an online business.

In case you are confused about how to legally start a business or the legal procedures sound confusing, hire a lawyer to handle these legal matters on your behalf.

Step 6: Get a Tax ID Number

Getting a tax ID number is mandatory whether you are about to start your own online business or even if it’s an offline store. This ID is like a social security number but for your business.

This ID is also called EIN (Employer Identification Number). It’s required for paying federal taxes, opening a bank account, hiring employees, and even applying for a business license/permit.

To obtain your federal tax ID, visit the IRS’s website. If you are to start a business online and you wish to be a sole proprietor or a single-member LLC, alternatively, your social security number will serve as your tax ID.

The good news is applying for an EIN is totally free. It’s recommended to apply for it as soon as you are done registering your business.

So, EIN is a federal tax ID. In case you require a state tax ID, that’s another type of ID. It’s required for paying state taxes. You can also use your state tax ID for protection against identity theft.

Tax obligations vary from one state to another. Check your state’s website to find out more about it. Processing a state tax ID is similar to federal tax ID. Again, check your state’s requirements to learn more about the process.

To start an online business, you will need a bank account too. It helps you stay compliant and protected.

Common types of business accounts include checking, savings, credit card, and merchant services account. You are ready to open a bank account as soon as you get the EIN.

Business accounts come with perks standard accounts don’t offer. Some of these benefits include limited personal liability protection, preparedness in case of emergency, and more purchasing power.

Make sure you find an account with a low fee and maximum business. Once you have picked your bank, opening a business bank account is a piece of cake. The documents required for opening a bank account include:

  • EIN or SSN
  • Business license
  • Business formation documentation
  • Ownership agreements

Step 7: Understand Sales Tax and Licensing Requirements

While you are learning how to start a small online business, don’t forget that you will be collecting sales tax on each transaction.

The taxing procedures vary from state to state. It’s best to contact the taxation department in your respective to learn about the tax collection and payment. Seven states don’t have an income tax.

They impose a tax on income from dividends though. Those states that have income tax determine the percentage based on the structure of the business. Taxes vary based on insurance as well.

Check your state’s website to identify if you need a state tax ID for paying the state taxes. In case all this sounds confusing, another option is to hire an accountable do handle the business taxation on your behalf.

Apart from taxes, part of knowing how to start online business is also understanding the role of licenses and permits.

If you have a business in California that plans to sell items or tangible goods that are subject to sales tax you must obtain a Sales Permit.

That includes any business entity type: individuals, LLCs, corporations, partnerships, and even businesses who's corporate office is outside of California.

Another type of permit that you might need is the federal permit which you will need in case your business activities are regulated by some federal agency.

The license and permits vary depending on your business activities as well as location. Each state, county, and city has its own licensing needs and the fee also differs. Compared to the federal government, states regulate a broad range of business activities.

Licenses and permits are an on-going expense as well. They experience after a set period. The process of renewing is similar to applying for a new permit/license.

To figure out what type of license your fashion business needs, research your state, county, and city regulations.

Step 8: Set Up Your Website

Now that you know how to start an online business, the last step is to set up your website.

It’s possible to set up the site yourself if you already have prior experience with web design and development. 

Fortunately for you, If you are not a web designer or can't hire a developer there are several tools and ecommerce platforms like Shopify and Big Commerce out there that can help you to get started and help you to build a professional website in no time.

Hire a professional for this job if you have the budget so that you can focus on how to start online business and market yourself out there.

Once you have filled all the paperwork, your business is a legal entity and your website is up and running, you are ready to launch.

Learning how to start your own business online is one half of the equation. The other half is marketing the business. To be successful, promote your products through social media and other forms of online marketing.

The Internet is a busy place and it’s a lot different from running a traditional store where a customer walks t your store to shop. The online world demands that you put yourself out there to attract customers to come to your site.


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Alejandro Esparza
Fashion businessHow toHow to start an online business

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