Starting an Online Business in California

Posted by Mohsen Parsa | Dec 22, 2020 | 0Comments

It's an exciting time for online businesses. The internet makes online innovation and entrepreneurship an easy endeavor. But if you're contemplating starting an online business in California, there are many legal considerations you should take into account. And it doesn't end with simple contracts for business ventures. You'll need to consider the legal ramifications of every decision you make, from your business entity to online data privacy.

Forming a Business Entity

First, you'll need to consider the best option for your business entity and where you should form the business. A simple organization like a limited liability company or S corporation may work for you and provide your personal assets some legal protection. But if you intend to accept venture capital funding, a C corporation may also be an option for your business. Corporations are attractive for venture capital firms because of the ease with which the organization can create securities to attract investors.

When forming your new company, you'll also need to carefully consider and draft your Founders Agreement if you have partners in your new venture. Everyone in the company needs to be on the same page concerning equity, business interests, and ongoing commitments. Your Founders Agreement should also consider what happens if a founder leaves the company and how equity in the company will vest.

Data Privacy

When you're starting an online business, you need to make sure that you know and understand all the federal and state laws that can affect online data and privacy. California online privacy laws require that all online businesses with California customers have an easily accessible privacy policy on their website. Moreover, the Children's Online Privacy Protection Act of 1998 requires businesses to get permission from parents before collecting personal information from children under 13.  

Two important state laws for businesses to understand are the California Consumer Privacy Act (CCPA) and the California Online Privacy Protection Act (CalOPPA). Both acts are data protection laws intended to protect California consumers. 

  • California Consumer Privacy Act

The CCPA regulates how businesses around the world may handle the personal information of California residents. It applies to any for-profit business that sells the personal information of more than 50,000 California residents annually, has a gross revenue of more than $25 million, or derives more than 50% of its revenue from selling California residents' personal information. Under the CCPA, California residents can: (1) opt-out of having their information sold; (2) request disclosure of information already sold; and (3) request that the company delete their data.

  • California Online Privacy Protection Act

The CalOPPA applies much more broadly to all online services or web sites that collect personally identifiable information from California residents through the internet. The law requires that website providers display a privacy policy on their website disclosing the categories of personal information the website collects and the categories of third parties that might receive the information.

Intellectual Property

Every business should consider how they will protect their intellectual property, whether through patents for new technology and business processes or copyrights and trademarks to protect the company name and branding. Before choosing a name, you'll want to ensure that the business name is not already in use. When you're just starting, an experienced business attorney can advise you on a plan for protecting your intellectual property from the beginning and as your company grows.

As you can see, there are many legal considerations when you're starting an online business in California. If you're contemplating the start of a new business, you should discuss your plans with an experienced California business attorney.

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