Contracting principles and practices

E-Commerce

When conducting business as an e-commerce, with your main lines of sales and marketing being over the Internet and through email, there are many unique concerns that must be addressed prior to the business in launched. When the business plans to conduct business both domestically and internationally, these issues become even more complex. For instance, besides issues of how to set up your business, there are issues as to what law governs a transaction, the effectiveness of electronic contracts and the enforcement of warranty disclaimers.

One of the first steps a start-up e-commerce business must take is to decide what type of business entity they want to be. One choice is the partnership, which is a form of business entity where partners (or the members of the business) share with each other both the business' profits and losses. The benefit of this type of entity is that the partnership structure eliminates the use of the dividend tax, which is a tax on the profits realized by the business owners. Instead, the partners are only taxed once, as individual taxpayers and thus the partnership itself is not taxable. However, in a general partnership, the individual partners are in charge of managing the business and thus can be held personally liable for their (and thus the partnerships) debts.

Another business structure available to the e-commerce business is the corporation. A corporation essentially becomes an individual entity in and of itself, completely separate from its owners and managers. Thus, the corporation can be sued and sue others with no liability extending to the individual owners. However, being a separate entity, the corporation is thus taxed directly like an individual would be. For this reason, the corporation is often associated with double taxation in that the corporation's profits are taxed and the owner's take home income is also taxed.