Ecommerce

In recent years, India has seen a lot happening in the online sphere. We have witnessed a paradigm shift in the way businesses are conducted and customer is approached. Earlier, physical stores such as mom and pop shops, malls etc. were on the radar of each entrepreneur, but now both online and offline presence seems to be the necessity of current times for businesses. Easy availability of smart phones and laptops, coupled with internet penetration has led to this shift. Therefore, every entrepreneur wants to have web presence in addition to physical presence depending upon the nature of business, capital investment etc. However, starting a retail website might be an easy task for established business but from the perspective of a start-up, it is not easy. A plethora of nuances and technicalities have to be kept in mind by an entrepreneur while starting an eCommerce business; some of which are discussed below in brief:

1. Structure of Business: The first and the foremost thing to be decided is the structure or form of the proposed business. An entrepreneur has to decide at an early stage, which form of business structure should be adopted on the basis of certain key factors. A particular form (structure) of the business should be opted after considering factors like taxation issues, flexibility aspects, recognition of the business structure in community (trust and transparency), regulatory compliances, costing aspects etc. Every form is unique in its own way and offers advantages and disadvantages peculiar to its nature and therefore need to be decided after proper considerations. Depending upon the overall objective of the business, the entrepreneur can choose from a proprietorship firm, partnership firm, LLP or company.

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2. Website and Policies: In an eCommerce business catering directly to the consumers, website is one of the most important assets of the organization. Therefore, it should not only be eye-catching, saleable and marketable but compliant with all legal and statutory aspects.

An entrepreneur, depending upon the nature of business and other peculiar aspects, must have legal policies as required under various laws including but not limited to Information Technology Act, 2001 and Companies Act, 2013. These legal policies may include Terms of Use, Privacy Policy, Refund Policy, Disclaimer Clause etc.The name and nature of the policies may differ, however, an eCommerce business must have clearly defined policies because these policies may well be said to be an agreement between you and your customer, as in eCommerce there are no physical agreements executed and online terms/policies (i.e. shrink wrap agreements) play a crucial role. Secondly, these legal policies should be drafted well in line with the intent and business requirements and should not be copied from other online sources for simple reasons that (i) every business in unique in its own way, and (ii) to avoid legal issues for copy-paste aspects later on.

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3. Legal Aspects: An entrepreneur may have to comply under this headfrom two standpoints (i) from statutory point of view i.e. what laws are applicable on the business which is going to be set up and whether the proposed business has some kind of additional licenses/registration requirements (ii) from contractual point of view i.e. which document / agreement may be needed as far contractual commitment of the business is concerned for example, appointment letters, NDA for employees, rental agreement for proposed lease or agreements relating to key operations of the business like vendor agreements.

From statutory point of view, the kinds of licenses/registrations varydepending upon the nature of business i.e. sector in which business will be working, central and state laws as applicable. For example, for selling medicine, one may need drug licenses as applicable. Additionally for office purposes, one may need license under Shops and Establishment Act, Police/Fire NOC etc. Thereforefrom a broader perspective, a business may need license under two category (i) licenses which are required by every business alike irrespective of the nature, such as fire NOC or license under Shops and Establishment Act(ii) licenses/registration requirements depending upon the sector / domain in which the business is going to operate, for example, for doing insurance business, you need license from Insurance Regulatory and Development Authority (IRDA).

From contractual point of view, the list of the documents may vary depending upon the size of the business and immediate operational requirements. One may need non-disclosure agreements, non-compete agreements, logistics related agreement; operational related agreements like franchisee agreements, labour supply agreements, model hiring agreements, etc.Additionally, all intellectual properties like the website, trade mark, logo, domain name etc. of the business are very crucialand therefore, it is always advisable to have these assets registered with the appropriate authority, at the earliest. To know more, please click here

4. Human Resource: Depending upon the size of the business, intent of the management and culture, a business may need lot of documents from human resource perspective. This may include a proper policy framework covering appointment, salary terms, compensation, confidentiality agreements, leaves, prevention of sexual harassment policy and exit option after considering industry practice and laws applicable to the business. Additionally, businesses may also require documents pertaining to confidentiality, anti-poaching, anti-competition especially for senior employees after considering industry practice, applicable laws and contractual arrangements etc. With brick and mortar establishments reducing, the demand for human resources in e-commerce industries is more compelling than ever. With the pace at which e-commerce industry is expanding, the exigency for human resource roles will only surge with it. Now-a-days no physical address is needed by businesses to operate, so the human resource team is an integral part to building a strong and lasting business. To know more, please click here.

5. Financial Aspects: This is one of the key aspects in every business irrespective of the sector it is operating in. All receipts and payments should be well documented and in compliance with applicable laws. Business decisions should be analyzed from taxation point of view. Proper advice on accounting and financial planning should be taken from financial advisors before embarking uponan entrepreneurial journey. It includes planning related to policies regarding receipt and payment, invoicing, taxation compliance, banking, management, branch level authorization, financial delegation authority, creditor management, debtor management, inventory management and lot more. To know more, please click here

6. Operations: Execution is the key for operational success and a lot depends upon rightly framed policies, organizational structure and underlying documentation. As far as an eCommerce business is concerned, operations may relateto vendor management, IT infrastructure, payment gateways, logistics, storage facility, call center management etc.It is essential to ensure that eCommerce operations strategy are as detailed and focused in-length. It is merely because a well-defined plan of action ensures that orders are fulfilled and dispatched on-time, keeping the customers happy and ultimately fueling your success.Every operation, including but not limited to the ones outlined above, need a proper policy and standard operating procedure to maintain the right amount of internal control and underlying documentations. It is always advisable to have a modest amount of documentations in line with the objective of the proposed business.

Disclaimer: Please take note this article is for information, knowledge sharing purposes only and offers very precise and indicative reference only and therefore users are advised to take proper opinion/advice from their lawyers/financial advisors before initiating any action. For any clarification on the above, please contact us at ___________

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