Do you have a product or service idea? You may have thought of starting your own online business. Today, starting an online business has never been easier. There are countless online tools to build a website and platforms available to sell commodity products. Likewise, you do not need any specialized skills or prior business knowledge to get your online business started.
Most entrepreneurs, such as yourself, probably have a general idea of what they want to do. However, like any business, there are inherent risks involved with starting a business online. New business owners may not be aware of all of the risks involved and could end up with an unsuspecting lawsuit on their hands. To protect young entrepreneurs and prevent that scenario from happening, here are five risks you face when running an online business:
1. Copyright Infringement
Whenever you reproduce someone else’s work that is secured by copyright, you commit copyright infringement. With today’s internet tools, it is quite easy to download and copy pretty much any material you find online. However, if you reproduce another company’s text, images, code, music, videos, and any other content for personal gains, you can face legal persecution.
Copyright infringements are far more likely to occur online due to the immense amount of content that is both readily available and easily accessible. If starting an online business, you must advise your employees not to use content found online without having appropriate permissions, especially if it is from another company. The Digital Millennium Copyright Act (DMCA) of 1998 protects all electronic content available online, so make sure you thoroughly understand the guidelines outlined to avoid any penalties.
2. Trademark Infringement
Trademark infringement is very similar to copyright infringement. However, trademark infringement has more to do with brandings, such as using someone else’s logo, brand name, or domain name. Whenever you use a trademarked name or logo, it is not only confusing for your customers but can also get you into a great deal of legal trouble.
When you decide to file for an official business name, you must ensure there are not any other businesses using that name. You can use an online business name directory to see whether or not someone else has it trademarked before completing the necessary paperwork. Even though you cannot legally duplicate someone else’s domain name, you must also be sure you do not choose a name that is too similar to one already trademarked to avoid confusion.
3. Data Privacy and Security
When operating an online business, you are liable for all of the personal information shared through your business, which includes names, addresses, phone numbers, social security numbers, account numbers, etc. Online hackers are always looking to exploit companies with out of date software and safety measures, which is why you always want your online business at the forefront of data privacy and security.
Customers only want to do business with companies that have the proper security systems in place, so they know all of their personal information is protected. Likewise, they have the right to know how you are using their information, who you share it with, and why, how they can assess it if they need to change it. Most importantly, they must be made aware if their information is ever compromised. As a business owner, it is in the best interest of both you and your customers to have privacy policies in place if you handle personal information, as well as security systems to prevent potential security breaches.
Another significant risk for online business owners is the threat of fraud or deception. It is a lot easier for someone to commit fraud online than in person because they have the benefit of anonymity behind a computer screen. It is hard to verify whether a credit card number or bank information actually belongs to the person providing the information when you cannot physically see them.
Fraud is especially common for e-commerce businesses due to the frequent exchange of commodity products, rather than personal services. You could easily send merchandise out to someone who gave you false information, costing your company both money and merchandise. To minimize the threat of fraud, you want to monitor all account transactions and bank account information closely, as well as keep all of your online platforms and transaction software up to date.
5. Fair Trade Laws
Fair trade laws address market pricing, monopolization, price discrimination, and the right to boycott competitors or suppliers. These laws promote fair trade and competition while protecting consumers. Companies who violate these laws often engage in misleading or deceiving behavior, where they make outright egregious claims about their product or service.
If you are selling a product or service online, you are liable for the claims you make about that particular product or service. If you are intentionally misleading customers with false information, you can find yourself in a great deal of legal trouble. To protect yourself both legally and ethically, anyone who publishes content online for your business should provide proof for the claim or reference a credible source. Trust is everything between a business and a consumer. And if you do not produce trustworthy information, you are only hurting your business.
How to Minimize Your Online Business’s Risks
When running an online business, there are a lot of legal and personal risks you must face every day. If you are not doing everything you can to keep your business protected and your personal information secure, you risk losing your entire business. To ensure your business is adequately protected, you want the guidance of risk management experts.
At Harris Insurance, we can help your business analyze, identify, and mitigate and potential uncertainty and security risks your online business may face. Risk management is essential, and the consequences of not mitigating risk are dire. Fortunately for you, we are here to help to ensure you do not have to tackle the problem alone. If you would like to learn more about Harris Insurance and the services we provide, contact us today.