The top legal mistakes online business owners make (and how to avoid them)

Introduction 

Starting an online business is exciting, but without the right legal protections, you could be exposing yourself to costly mistakes. Many business owners unknowingly put themselves at risk by skipping over important legal safeguards. In this guide, we’ll explore the most common legal pitfalls in online business and how to steer clear of them.

Not having proper contracts in place 

Why contracts matter 

Contracts are the foundation of a legally sound business. They outline expectations, responsibilities, and payment terms, preventing misunderstandings that could lead to disputes, non-payment, or even lawsuits. Without contracts, business relationships are left open to interpretation, which can quickly become problematic when things go wrong. 

Real-world example: A client who refused to pay 

Imagine working for a client on a project, delivering everything as agreed, and then finding out they refuse to pay. Without a contract detailing payment schedules and late fee terms, you might struggle to recover your earnings. Having legally binding contracts protects your interests and ensures both parties understand their obligations.

How to create strong contracts 

Many online business owners assume contracts are only necessary for large companies, but every agreement—no matter how small—should be in writing. A good contract should clearly define: 

• The scope of work 

• Deliverables and deadlines 

• Payment schedules and late fees 

• Termination clauses 

• Intellectual property ownership 

You don’t have to draft a contract from scratch. Using a contract template drafted by lawyers tailored to your industry is a smart way to protect your business. We have a number of industry specific services agreements. 

Failing to protect your intellectual property 

Copyright vs. trademarks: What’s the difference? 

Your brand and content are valuable assets. Copyright law automatically protects original creative works like blog posts, videos, and graphics. Trademarks, on the other hand, safeguard business names, logos, and taglines. 

If you don't secure your intellectual property, someone else might trademark your business name, forcing you to rebrand. Additionally, if a competitor starts using your content without permission, enforcing your rights could be difficult if you haven’t taken proactive legal steps. 

Steps to protect your brand and content 

1. Register your trademark – Secure exclusive rights to your business name, logo, and tagline before someone else does. 

2. Use copyright notices – Clearly label your original content to deter unauthorised use. 

3. Monitor infringement – Regularly check for unauthorised use of your brand and take legal action if necessary.

Not complying with privacy laws 

The importance of data protection 

Many online business owners collect personal data—email addresses, payment details, or customer information—without realszing they must comply with privacy laws. GDPR (Europe), CCPA (California), and Australian privacy laws dictate how businesses handle personal data, requiring transparency and consent. 

How to stay compliant 

• Ensure your website has a privacy policy outlining how you collect and store data. 

• Obtain explicit consent before collecting user information. 

• Use secure payment gateways and data encryption to protect customer information. 

Non-compliance can lead to hefty fines and reputational damage. Even if your business is small, privacy laws may still apply.  Furthermore, Google and Meta insist on a privacy policy for anyone utilising their services.

Ignoring business structure and liability protection 

Sole trader vs. company – which is right for you? 

Operating as a sole trader is simple, but it provides no personal liability protection. If your business is sued, your personal assets are at risk. Setting up a company legally separates you from the business, offering financial protection and credibility. 

Setting yourself up for growth 

If you plan to expand, hire employees, or work with large clients, structuring your business correctly from the start prevents complications later. Consulting with an accountant or business advisor can help determine the best approach for your long-term success.

Ready to get legally legit?