Setting up an online business can be a daunting prospect for some but here is some advice on how to stay the right side of the law.

For those who are just setting out, testing your business idea locally is a must, as it’s essential to know your business model works well before blowing thousands of pounds in six months only to find it will never fly.

Part of that is to get your shop window, your website, right from the outset and I don’t mean just making it easy to navigate – people often don’t think to check their website is legally compliant.

Get it wrong and you could be fined by Trading Standards or the Information Commissioner’s Office and it doesn’t end there as people using your site can also bring a claim against you if they can prove they suffered some sort of loss by using your site.

Ensure you list your cancellation rights

One of the pitfalls online entrepreneurs fall into is failing to notify their customers, via their website, of their cancellation rights, or cooling off period in terms of returning goods.

If a customer bought a three piece suite that they wanted to return but their cancellation or cooling off period was not stated on the website, the default position of these rights could run up to a year and a day and the customer would still be eligible for a full refund no matter what state the furniture was in when it was returned to your business.

That might be bearable if the item in question was of low value, but in the case of big-ticket items your losses could be tremendous – you’d be left with a used item that had less value than the refund you would be forced to pay out.

Communicate your limited liability for breach of contract

While you might have every intention of doing a great job for your customer, should the unthinkable happen: something goes badly wrong and you breach your contract, you will need to put a financial limit on your liabilities. This can easily be written into your contract terms on your website.

Failure to do so means that your financial liabilities could be endless, which could easily affect the viability of your business going forward.

State your privacy policy

The Data Protection Act and the eCommerce Regulations mean you have to state whether you collate the personal information about those people visiting your site. If you do, you will need to say what information you collect and how you will use that data.

Declare who owns the business

There are at least four different pieces of legislation that state you MUST declare on your website who owns the business. A good place for this to appear is within your “terms of use”.

The list of information needed includes: your company name and number or other business identity; your registered office and place of registrations (for instance, in England and Wales); if applicable, your VAT number; contact details that also include an email address; information on how you can contact the office by non-electronic means and finally, details of a relevant trade body or regulator registration.

Don’t take the biscuit – state your cookie policy

If you use “cookies” to track which web pages are receiving the greatest traffic in terms of visitor numbers, it is a legal requirement to say so on your website.

Selling to consumers

If your sales are done through your website you will need to state in your terms of business a variety of key points in relation to: correcting mistakes online with their transactions; written confirmation of their order; cooling off/cancellation period; delivery details and arrangements and an outline of the goods and services you are offering.

By Stephen Avila, solicitor and e-commerce expert at Birkett Long