Online Business: Legal Advice

Online business is very diverse, so this article sets out general recommendations from our lawyers for owners and managers of online businesses.

What is meant by online business?

In this consultation, online business means any business that sells its goods/works/services through any Internet resources (websites, messengers, social networks, AI platforms, marketplaces).

For example:

– sale of courses (weight loss, self-development, psychology, education, etc.), which are essentially goods;

– sale of goods (on websites, marketplaces, via Instagram , etc.);

– sale of services (coaching, cleaning, transportation, training, etc.);

– sale of financial services (banking services, insurance, exchangers (especially in the field of cryptocurrencies));

– sale of works (service stations, development and repair works, design works, etc.);

– franchise;

– advertising activities, marketplaces, paid groups in messengers and social networks;

– channels on YouTube and other platforms, for publications in which the author receives remuneration;

– and much more.

An important characteristic of an online business is that the owner or administrator of the online resource receives income from the online resource.

A blog in which the author publishes his thoughts or other creative works without receiving compensation for it or without the intention to receive such compensation is not an online business and is not the subject of this publication. An exception may be blogs, which can be capitalised, but this is the subject of a separate publication.

What is the legal difference between online and offline business?

The main differences (depending on the situation) are:

Special requirements of currency legislation, advertising legislation and consumer protection legislation for online advertising and online sales, mostly related to distance sales.
Use of online payments in most cases, rather than cash registers (or their variations).
The need to comply with the rules (policies) of the platform (YouTube , Instagram, App Store, Google Play, Upwork, Freelancer, Amazon) that hosts online businesses.

Is it necessary to register an online business with government authorities?

Any entrepreneurial activity is subject to registration. Moreover, for correct and optimal accounting and taxation, it is necessary to select and register the appropriate tax system for the entrepreneur/enterprise.

Do you need permits for an online business?

There is no special permitting documentation for online business; it is required in the same cases as for offline business.

Can an LLC have an online business?

Yes, LLCs, JSCs and other forms of entrepreneurship can have an online business.

The online business is in most cases registered as a Sole Proprietorship (PE) due to the minimal tax burden. However, there are no restrictions related specifically to online business in this regard. Only if a certain business (regardless of whether online or offline) must be conducted in a certain organizational and legal form (for example, in the financial sector), then the online business must also be conducted in the same organizational and legal form (for example, JSC).

Which tax system to choose?

The choice of taxation system depends on the specific conditions of doing business. In most cases, a simplified taxation system is better suited for working from Ukraine in online business: a payer of a single tax of group III, who pays 5% of a single turnover tax, 1% militarz tax and a single social contribution. You can read more about the taxation system in Ukraine at the link .

This tax system is well suited for small online stores and YouTube bloggers, sales of courses, etc.

How to get paid in online business?

The main legal and recommended ways to get paid from an online business are:

Payment to a bank account or to a bank card of an enterprise/individual entrepreneur, published on the website/platform or sent to the consumer/platform individually.
Payment via payment systems: financial companies (with the appropriate financial licenses) offer payment processing services (Internet acquiring, accepting online payments).
C.O.D.

Other methods of receiving payment should be considered on an individual basis: it is important to take into account the tax system, restrictions of currency legislation, etc.

Is it possible to receive payment on an individual’s card?

Formally, it is not prohibited to receive payment for goods/works/services on an individual’s card, unless the card is issued for limited purposes (social payments, etc.). However, in this case, it is necessary to pay taxes (personal income tax, unified social contribution, military tax) as an individual, and not as a private entrepreneur. Accordingly, the tax burden will be significantly higher.

Taking into account the above, we recommend that you use bank cards of private entrepreneuror LLCs, rather than the personal cards of an individual.

Note: The fact that someone uses personal cards to receive payments without problems does not mean that there will not be problems with the tax authorities or the bank.

What contracts, policies, and regulations are recommended/required to be published for running an online business?

Each online business should be considered individually and documents should be developed individually, however, general recommendations are as follows:

The platform on which the online business is hosted may have its own requirements for the list and content of documentation.
The payment systems used may also have their own requirements for the list and content of documentation.
It is necessary to ensure transparency and regulation of relations between online businesses and consumers.

We recommend the following documents for online business publication:

Public offer agreement (regarding what is offered and sold by the online business);
Confidentiality Agreement (NDA) , including provisions on the protection of personal data;
Payment terms (if not included in the Public Offer Agreement);
Warranty conditions and conditions for return (exchange) of goods/works/services;
Terms of use of the site/page/other resource;
Price list and list of goods/works/services.

Naturally, if the platform on which the online business is hosted itself offers and sets a condition for using its documentation from the above list, then in most cases it may not be necessary to duplicate and create your own documentation.

What to do if the platform does not offer the ability to publish the specified documents? Is it necessary to duplicate the specified documents on all online resources?

In any case, we recommend that you find a way to publish the documents from the list above. This could be a separate page or section. It is important to inform the consumer about such documents and ensure access to them.

Is it possible not to publish and not to use the above documents? Many do not use them and do not bear responsibility.

The consequences of failure to use and publish the said documents depend largely on the specific situation: in the case of justified complaints from consumers, the absence of such documents may have negative consequences.

Where can I find these documents for online business?

Free sample documents that you will have to adapt to a specific project can be found at the links on the website of the legal company “Zilver”:

However, to ensure that contracts, regulations and policies are appropriate and tailored to the specific needs of your business, we recommend ordering custom documents from lawyers.

Is it possible to sell goods/works/services through Instagram?

There are no restrictions related to the use of Instagram specifically. It is important to comply with all other conditions.

Is it necessary to register a Trademark?

There is no obligation to register a Trademark, this is done at will. For a better understanding of this issue, we recommend the following links for further reading:

Why register a Trademark at all?

What is the difference between a Trade Name and a Trade Mark?

How to choose a Trademark?

How to register a Trademark?

Intellectual Property Law in Online Business.

Intellectual property rights in online business play an important role and are very multifaceted. From a legal point of view, the following recommendations can be summarized:

Monitor compliance with intellectual property rights when using third-party intellectual property (obtain licenses, consents from copyright holders). This also applies to the acquisition of online content (pictures, photographs, texts), which are then used in online business: it is important to purchase the appropriate license.
To formalize the acquisition of intellectual property rights from contractors (copywriters, designers, camera operators, actors).
To formalize the distribution of intellectual property rights with partners, platforms, etc.
In the event of a sale or license granted by an online business, enter into a contract (license agreement) prepared by lawyers with consumers.

For more details, we recommend that you read our publications on this topic:

What are the features of international online business? Is it necessary to register representative offices in the countries where online business goods/works/services are sold? Is it possible to sell goods/works/services all over the world from one platform (resource, website, Instagram page, etc.)?

The presence and content of any restrictions or special conditions for the sale of certain goods/works/services for both online and offline businesses must be clarified in each specific case. In particular, countries (unions of countries) may establish:

restrictions on advertising of a certain group of goods;
special conditions for advertising a certain group of goods/works/services;
special certification or conditions for admission to the market of goods/works/services;
special conditions for returning goods;
other special rules for the protection of consumer rights;
the need to have a representative in the country (union), for example, which is discussed in more detail in our article at the link ;
special payment terms;
special conditions for storing personal data;
and others.

Depending on the conditions listed, a decision can be made on the need to open a representative office, the ability to freely advertise/trade from foreign countries, and so on.

Entering new markets needs to be thought out and planned, including consulting with lawyers on the above issues.

How to secure/protect online business?

As in offline business, important components of legal security of online business are competent paperwork, correct accounting and payment of taxes, compliance with the rules of currency, advertising, language, financial legislation, consumer protection rules, optimal corporate structure, etc.

If necessary, lawyers from the Zilver law firm will conduct a legal audit of the online business, develop the necessary package of documents, provide tax advice, and protect interests in government agencies and courts.

It is also possible to provide services on a retainer basis.

Is it possible to buy or sell an online business?

Yes, selling an online business is possible. For the correct legal performance of the purchase and sale of an online business, it is necessary to conduct a preliminary legal audit, including an analysis of the structure of such a business. A good online business is complex, so its re-registration requires a comprehensive approach, which our lawyers can offer.

You can read about the individual components of buying and selling an online business by following the links:

Online Business: Legal Advice

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