Legal Requirements For An Online Business Australia

Starting an online business in New Zealand is a common step to take – and a big one! There’s a stable market and plenty of opportunities for businesses when you expand your reach.

Not only do you reach more customers, but there’s a lot more flexibility in how you deliver products or services.

However, like any other type of business, there are a number of legal considerations to take care of in order to make sure your online business is legally compliant and protected. For example, what happens in the case of a data breach? What kinds of documents do you need to protect your website internationally?

In this article, we’ll go through the legal requirements for an online business in New Zealand – read on to learn more.

What Are The Legal Requirements For Starting An Online Business?

Starting an online business means you need to consider some additional matters, such as how to protect your business in an online environment.

But, of course, let’s go through the basics first – how does business registration work?

Online Business Registration

The first step to getting any business off the ground is getting it registered. Business registration is a fairly simple process that can be completed online. Once the application is successful, a New Zealand Business Number (NZBN) will be generated for you. So, what business structures can you choose from?

What Business Structure Should I Choose For My Online Business?

Deciding on the structure of your business will determine how your business operates and what the registration process will look like. It will also set out how liability will work moving forward.

A sole trader and company structure are prevalent types of businesses and they are vastly different. A sole trader is an individual running a business, whereas a company is a legal entity of its own with additional members such as directors or a company secretary (although this can be one person).

Other types of business structures involve partnerships, trust, social enterprises and even dual company set ups. For more comprehensive advice on the structure that is right for your business, we recommend talking to a legal professional.

Do I Need To Register My Business Name?

Yes, it’s important to register your business name. Once you have registered your business name, you will be able to trade under it.

Registering a business name does not mean the name is in your possession. If that is something you’re interested in, then you will need to look into getting it trademarked (we’ll discuss this in more detail later).

Before you decide on a name you want registered, check the Business Names Register to avoid disappointment later on. It can also be worthwhile to see if there are any domains or trademarks with your business name.

Register With The Companies Office

If you will be running a company, then the New Zealand Companies Office is important as they are one of the main regulatory bodies you will be reporting to.

All companies must be registered with the Companies Office. If you make any changes to your company, these will need to be reported to the Companies Office too.

Protecting Your Intellectual Property As An Online Business

Intellectual property refers to the intangible assets owned by your business. As an online business, much of your business activity will depend on your IP, so one of your biggest priorities is protecting it.

Luckily, there are a number of registration processes and legal documents you can have in place to protect your IP.

Non-Disclosure Agreements

Non-Disclosure Agreements (NDAs) bind the parties to the agreement to secrecy over particular matters. When it comes to intellectual property, an NDA can ensure that if you have allowed someone to view your business’ intellectual property, they cannot reveal what they saw to another party.

For example, some businesses choose to have an NDA for their business plan so they can disclose their business venture’s future to investors without the risk of that inside information falling into the wrong hands.

Example Shannon has hired a consultant for advice on growing her business. The engagement will require the consultant to look at some internal documents of the business. Prior to working with the consultant, Shannon has them sign an NDA to make sure they don’t reveal insider information, such as her intellectual property, to anyone outside of the business.

Confidentiality Clauses

Much like NDAs, confidentiality clauses also prevent others from revealing information about your business to another unauthorised person. Confidentiality clauses can be inserted into contracts such as Employment Contracts or Contractor Agreements to bind the other party to secrecy.

Non-Compete Clauses

Non-Compete Clauses take privacy a step further by preventing the signing party from working with a competing business. It places a limitation either by time or geographical location, stopping the other party from associating with a potential competitor.

Non-compete clauses must be done within reason and not unnecessarily control the party being held to it. If it is unreasonable, it will not stand in court.

Register A Trade Mark

Getting your trade mark registered is another way to protect your business’ intellectual property.

A trade mark is anything that can be used to uniquely identify your business (as long as it’s not too descriptive). For example, sounds, logos, phrases, names and even smells can be trademarked.

When you register your trade mark with the Intellectual Property Office of New Zealand (IPONZ), it adds your IP to the register and prevents other people from using it.

Copyright And Patents

Copyright and patents can also apply, depending on the kind of business you are running.

For new designs, substances, methods or processes a patent could potentially be registered. In order for a patent to qualify, it must meet the requirements of being:

• Original
• Useful
• Innovative

Once a patent is registered, you have the right to manufacture, licence and otherwise use it.

What Are My Privacy Obligations As An Online Business?

Privacy obligations are a major consideration when running a business online. Since you’re handling personal information from users and other people you may work with, certain regulations will apply to your business activities.

It can be something as simple as asking users to create an account using their email when they sign up to your website. An email is considered personal information, so this means the Act will apply to you.

You need to make sure you are compliant with privacy laws in New Zealand to avoid hefty fines and other penalties.

Privacy Act 2020

The Privacy Act 2020 is one of the key pieces of legislation determining how private information should be handled. Much of the regulations and rules that will determine your management of privacy stem from this particular legislation so it’s important to be aware of it.

For example, if your business has an annual turnover of more than $3 million, the Act applies to you and you need to comply with its requirements, such as having a Privacy Policy for your website.

The Privacy Principles also work alongside the Privacy Act, so it’s worth familiarising yourself with these.

GDPR

The GDPR is the European Union’s General Data Protection Regulations (GDPR). Much like the Privacy Act and Privacy Principles, the GDPR determines how private information is handled in the EU.

If your online business plans to establish itself in the EU, then it must meet the privacy requirements set out by the GDPR.

Do I Need A Privacy Policy?

Yes, according to regulations, any business that collects private information (names, phone number, emails, bank details, addresses) must have a Privacy Policy in place.

A standard Privacy Policy details what information is collected, how it is stored, what it is used for and the length of time it is stored for.

If you’re an online business that deals with health information, you may be held to a higher standard of care when it comes to data privacy. As such, your Privacy Policy will look a bit different to a standard one.

Our lawyers can draft a Health Service Provider Privacy Policy, tailored to your business’ requirements.

Do I Need A Cookie Policy?

If your website uses cookies, it is recommended to have a Cookie Policy in place.

A Cookie Policy lets users to your website know what cookies you track, how it’s stored and the use of third party cookies for remembering information. While a Cookie Policy is not a legal requirement, it’s always wise to be transparent with your customers and even give them the option to not have their cookies tracked.

This also helps build a healthy relationship with your users, which is better for your business’ online presence overall. As an online business, your reviews are vital as it affects your branding and the way people perceive your business.

As such, you want to keep your users happy.

Data Breach Response Plan

A Data Breach Response Plan is a proactive way to deal with potential data breaches. While there are many measures you can take to protect your business in an online environment, there will always be the risk of personal data being compromised.

As such, a Data Breach Response Plan sets out a process for key personnel to follow if a breach actually occurs. It’s also a great way to show users and customers that you take your privacy obligations seriously, and that you’re prepared to protect your users’ personal information in the case of a cyber attack.

Legal Documents For Online Business

For any business, the legal documentation is what binds your venture together and keeps it protected. There are a number of legal documents you will need to look into when starting an online business and most of them are connected to some key parties your business will be interacting with.

Let’s go through some key legal documents below, based on the different commercial relationships your business may have.

Employment Relationship

Hiring staff means you will need an agreement that sets out your obligations along with theirs. Generally, employers hire either contractors or internal employees of the business, and both will need different contracts.

This is because employees and contractors are different, and they have different entitlements. As an employer, it’s your duty to ensure you understand the difference between employees and contractors so you can ensure you are not breaching your respective obligations to them.

Employment Contracts

When a member of staff is employed internally within the business, this means you owe them certain obligations under New Zealand employment law. For example, you need to ensure they are provided with a safe working environment (this applies even where your employees work from home!).

It also means you are responsible for certain taxes, insurance and their superannuation contributions. This is different to what you owe to contractors, which we’ll cover below.

A contract with an internal employee should not only cover their duties, hours and pay, but also any additional entitlements.

Contractor Agreement

Contractors are hired externally from the business, usually for a certain period of time or until a specific task is complete. Businesses commonly engage contractors for short-term projects.

However, contractors have different entitlements to an employee since they are not considered internal staff. So, as an employer, you don’t need to worry about their taxes or insurance – they take care of that themselves.

As such, a Contractor Agreement should specify they are not an internal member of the business and their role and arrangements should reflect this.

It’s important to be careful here – if a contractor begins to look too much like an internal employee, you may end up owing them the same rights.

Sometimes, employers make working arrangements so that their employees look like contractors. They often do this so they can avoid meeting their obligations to employees, such as paying them minimum wage.

This is known as sham contracting and it should be avoided at all costs. If you need help with your employer obligations, Sprintlaw has a team of employment lawyers who are happy to chat you through your options.

Working With Suppliers

Suppliers are other businesses or providers your business will interact with in order to purchase necessary items. For example, a business that sells art online may have a supplier for their materials. Having the right legal agreements with your suppliers is a positive step towards having a well operational relationship.

Supply Agreement

A Supply Agreement is the legally binding contract between the supplier and your business that sets out the key terms of your relationship.

It should generally address the following:

• The items to be supplied
• Date and time of delivery
• Payment terms
• Warranties and liabilities
• Termination
• Dispute resolution

Internationally Enforceable Agreements

If your online business is going to be reaching a market outside of New Zealand or you are simply ordering materials from overseas, then it’s important to make sure your contracts can be enforced in multiple jurisdictions.

An internationally enforceable contract takes into account the contract will need to apply in

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