The Risks of Selling Online

Protect yourself with these legal measures.

By Joan E. Lisante

Opinions expressed by Entrepreneur contributors are their own.

Q:I'm building a Web site that will allow university students tobuy and sell textbooks. In a sense, I'm acting like eBay sinceI will be the middle man. Should I incorporate myself forliability's sake? The Web site will be free and won't costme anything to start because I have my own Web server and Internetconnection. I want to be covered if someone pays for a book butnever receives it. The last thing I want to do is offer a free Website and get sued for it.

Resource Guide
Increase your odds ofsucceeding with your online business with these books:

Form Your Own Limited Liability Company(book and disk) by Anthony Mancuso, Esq.

Selling Online: How to Become a SuccessfulE-Commerce Merchant by Jim Carroll and Rick Broadhead

A:First, let's briefly address the incorporation question.It's easy to incorporate these days-you can frequently do itonline, at minimal cost. One popular option is the limitedliability corporation, or LLC, which, in most states, you can startwith just one person. The "limited liability" means thatyou risk only capital paid into the business; none of your personalassets is at stake. This means less reaching for the Maalox at 4a.m. over a business glitch.

Incorporating is one defense against liability. Another isbuilding a Web site that has a clear idea of how the business (inyour case, selling books to college students) will go and builds insolutions to possible problems.

One place where it's all laid out on many Web sites is the"terms of use" or "terms and conditions"section, which Web site users must read and consent to beforetrading on the site. Here are some topics covered in many useragreements or policy statements:

  • Who's eligible to use the site
  • What fees apply
  • Details of bidding and buying
  • What you can and can't sell
  • Exclusion of warranties or guarantees on products
  • Advisory that sales/income tax may be due
  • When the webmaster can suspend an account or stop a trade
  • What happens when the buyer doesn't pay or doesn'treceive the item advertised

And others customized to fit your business. The point of thisagreement: You set out the circumstances under which you'redoing business. By clicking an "I agree" button at theend of the terms and conditions, a user forms a contract as bindingas one completed with pen and paper. These terms should bemandatory and agreed to before someone can trade on thesite-you'll have much more leverage.

Two more provisions you'll want to have in your terms ofuse:

  • A "hold harmless" or "release" section,stating that the buyer releases you and your company fromresponsibility for a deal gone wrong
  • A "dispute resolution" provision setting out howdisputes will be settled. One possibility is using an onlinemediation service such as, which can work out conflicts online.

And while you're certainly not planning anything on thescope of eBay, think through the issues involved in dealing withstudents:

  • Age necessary to enter into a contract in your state
  • Whether you'll accept checks, money orders, VISA, etc.
  • Dropping a class after ordering the book
  • Different editions of the same text

Since you have a captive audience, your book business should dovery well.

And don't forget that there's help out there-two greatinformation sources are the Independent Online BooksellersAssociation and the AmericanBooksellers Association..

Joan E. Lisante is an attorney and freelance writer who lives inthe Washington, DC, area. She writes consumer-related legalfeatures for The Washington Post, the Plain Dealer,the Spokane Spokesman-Review and the Toledo Blade(Ohio). She is also a contributing editor to and
In her practice, Lisante is counsel to andwas counsel for Zapnews, a fax-based customized news service forradio stations. Previously, she served as Assistant DistrictAttorney in Queens County, New York, and Deputy District Attorneyin Nassau County, New York.

The opinions expressed in this column are thoseof the author, not of All answers are intended tobe general in nature, without regard to specific geographical areasor circumstances, and should only be relied upon after consultingan appropriate expert, such as an attorney oraccountant.

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