How to LEGALLY build YOUR online business

Written By Alyssa Malchiodi

For Paid Content Creators and Digital Product/Course/Service-Based Online Businesses

If you are a paid content creator (User-Generated Content Creator, Influencer or Hybrid Creator) or you own an online business and sell digital products/courses or your services, then this post is for you. 🥰


Learn how to scale your online business with confidence by building a legal foundation that will protect you AND skyrocket your business from an amateur to a professional biz. 

Running a successful online business means you are wearing many hats all at once…the list can feel endless. 

  • As a UGC Creator, you’re busy building your portfolio, pitching to brands, researching marketing trends, responding to inbounds, recording/editing content, onboarding brand deals, negotiating contracts, and managing your social media.

  • As an online business owner with digital products/courses or services, you’re busy creating your product/service, building a website/landing pages, promoting your business, managing your social media accounts, creating content to promote yourself, working with clients/customers, and more.

Am I right? 

Here’s the thing: you have big dreams of your own, that you shouldn’t ignore.  

It is time for you, as the owner, to build the kind of business you’ve dreamed about. 

One that empowers you and provides you with the freedom and flexibility you crave. 

That journey starts with getting certain things done, like building your business the legal way and protecting the business you are building. 

Like I said, this all starts with a solid legal foundation. 

What is the legal foundation for your business? 

In my opinion, a solid legal foundation consists of choosing a proper trademark-worthy name, forming the proper business structure, running it like a professional with expert legal contracts and policies in place, owning your brand with trademarks, and owning your copyright. 

Before we get into the Solid Legal Foundation (Ideal) versus the Somewhat Legal Foundation (Realistic) checklists below, let’s cover some common legal questions first:

  • What is the difference between a sole proprietorship and a limited liability company (an LLC)?

When you start your business as a sole proprietorship (the fancy legal name for your individual business without a formal entity registration), you are the business and the business is you. Any business debts or obligations will become your own personal debts and obligations.

This means your personal assets are at risk for any business related liabilities/obligations.

The main benefit of forming an LLC, which is available in the U.S. only, is for that liability protection.

An LLC creates a legal barrier between your personal assets and the business’s debts or obligations - as long as you operate your business as an LLC (no commingling of business and personal funds, sign contracts in the name of the LLC, etc.).

  • When should you form an LLC (or even an S-Corp)?

My lawyer response, would be to form an LLC right away to get that liability protection.

But, a more realistic response is that it depends.

It depends on your personal circumstances, so I would ask yourself these questions to see if it makes sense for you:

  1. Initial & Ongoing Costs: What is the cost to start and operate an LLC in your state? Look at the initial filing fees and mandatory annual reporting fees to keep your LLC in good standing. Then, look to see if your state has any minimum annual taxes or franchise tax. Based on the start up costs, annual reporting fees to maintain the LLC, and franchise tax, determine if it makes economic sense for you to form it now or later. If the cost to start and operate an LLC are low, then it might make more sense to start it now to get that personal liability protection.

  2. Tax Considerations (S-Corp Election): Are you making over $100K USD net profits? If you are earning around $100,000 USD net profits (gross profits minus business deductions), then it might make sense to elect to be taxed as a S-Corp, and being an LLC will help you do that. Remember, that an S-Corp is not a separate business entity, but instead is a tax election available to LLCs and Corporations. If you make over $100K net profits, then you should consider speaking with a CPA/tax professional to see if the costs of maintaining an S-Corp (like, setting up payroll) makes sense based on the offset tax savings.

  3. Privacy Considerations: Do you want to hide your legal name? When you operate as an individual (a sole proprietorship/sole trader), you’ll be using your legal name as your business name. If you’d like to hide your legal name or to not put a spotlight on it, then you can do so by creating this separate business entity so that you can use the LLC’s business name instead of your own on your website policies, email disclaimers, etc.

  4. Commitment Level: How committed are you to this business? Once you've closed the back door and gone all-in on your online business, you're less likely to question the investments in it, including setting up an LLC and taking care of the legal aspects. It's a mindset shift from seeing these costs as expenses to viewing them as essential investments in the future and security of your business. So, consider your commitment level carefully when deciding on the right time to form an LLC.

Ultimately, the decision on whether to form an LLC will largely depend on your own personal circumstances.

Next, are the legal steps to take to form a solid legal foundation for your business.

➡️ SOLID LEGAL FOUNDATION (IDEAL)

In a nutshell, this means (ideally, you would): 

1.)  Business Entity Formation.

  • Pick an appropriate entity for you with a trademark-worthy name- i.e. decide to become an LLC or a corporation.

  • Get a Registered Agent & virtual office address for privacy reasons before filing your LLC paperwork

  • File your LLC paperwork with the state’s business registration office (usually the Secretary of State)

  • Decide whether to elect to file as an S-Corp within the first 2 months and 15 days of incorporation.

  • Calendar major due dates for state compliance (i.e. Statement of Information, ongoing annual reporting requirements)

  • File for DBA (doing business as) if you are going to operate with a name other than the business’s legal name and if your state, county, city requires such a filing.

2.) Federal EIN. Apply for a Federal Electronic Identification Number (EIN) number with the Internal Revenue Service. 

3.) Bank Account. Open a business checking account and have all monies earned deposited into this account and any bills paid from this account.

4.) Licenses/Permits. Obtain a business license/permit to operate your business (check city, county & state government websites for info). This includes a seller’s permit if your local government taxes digital products.

5.) Contracts/Terms & Conditions/Policies: Run your business like a pro - get solid lawyer-drafted contracts in place and terms and conditions/privacy policy for your website and/or third-party landing pages.

6.) Trademark. Own your brand - trademark your name or logo, or copyright any signature products/services and monitor your IP for infringement 

7.) Protect your online activity:

  • If you have a website, you’ll need a privacy policy (legally required) and terms of use or legal disclaimers.

  • If you sell any digital products/courses from a third-party landing site, like Stan Store, you’ll need a Terms & Conditions to protect your work from copycats and more. Go check out our Digital Product/Course Terms & Conditions template.

  • Buy your brand’s domain name and set up a professional email (hopefully, you searched all social media and Googled whether your brand name was available or not before you named your business, which is what we suggest in our free legal checklist).

8.) Business Insurance. Purchase a business insurance policy for your business- this is financial protection in case of a lawsuit or threat of a lawsuit. 

9.) Tax Professional. Hire a tax professional and know your tax liability (i.e. self-employment tax) and deductions.

10.) Sales Tax Collection. Don’t forget to collect and remit sales tax if your state taxes digital products (or you’ve reached another country’s/state’s nexus threshold and owe taxes there too). A tax professional or your state’s tax commission will help you understand your sales tax obligations.

  • Checkout our other blog post - all about taxes and digital products - here.

11.) NEW LEGAL STEP- BOI Report: As of January 1, 2024, all US-based LLCs (and corporations) must now file a Beneficial Ownership Interest (BOI) report. This report is simple - but complex - and you could be subject to $500 a day fine or imprisonment if you fail to file it on time or incorrectly. That’s why we created a training, to make sure you understand the law and your ongoing legal obligations and get it filed correctly, the first time.

  • Grab the BOI Training here.

This is not an exhaustive list or legal advice. 


If you’d like a more comprehensive checklist, go grab our FREE “Legal Checklist: Build YOUR Online Business”

But in reality, we are juggling so much stuff that sometimes all this legal stuff paralyzes or overwhelms us so we don’t even start. 

I don’t want that for you. 

So if it makes more sense for you to just get started, and to create the LLC and focus on other legal stuff later, let’s go the more realistic approach below.


Next are steps to take if you start out as a sole proprietorship, and eventually become an LLC.

➡️ SOMEWHAT LEGAL FOUNDATION (REALISTIC):

It is better to start and get legal along the way than to never have started in the first place.

So here is a realistic legal foundation that will keep you "somewhat" legal as you build your business:

1.) Sole Prop. Become a sole proprietorship by starting your business with your legal name (potentially file a DBA if it's not your legal name).

2.) License/Permit. Obtain a business license/permit to operate your business (check city, county & state government websites for info). This includes a seller’s permit if your local government taxes digital products.

3.) Contracts/Terms & Conditions/Policies. Run your business like a pro - get solid lawyer-drafted contracts in place and terms and conditions/privacy policy for your website and/or third-party landing pages.

  • If you have a website, you’ll need a privacy policy (legally required) and terms of use or legal disclaimers.

4.) Bank Account. Open a separate personal bank account to keep track of your business finances.

Then after you start making money, reinvest into your business:

5.) Business Formation. Establish your LLC with a proper, trademark-worthy name (if LLC, decide whether to elect to file as an S-Corp within the requisite time period):

  • Privacy Considerations. Get a Registered Agent & virtual office address before filing your LLC paperwork, if you’d like to keep your home address private

  • LLC Paperwork. File your LLC paperwork with the state’s business registration office (usually the Secretary of State)

    • Decide whether to elect to file as an S-Corp within the first 2 months and 15 days of incorporation.

    • File for DBA (doing business as) if you are going to operate with a name other than the business’s legal name and if your state, county, city requires such a filing.

    • Transfer any licenses/permits from your legal name to the LLC’s name or close/re-apply

  • EIN. Apply for an EIN number from the IRS

  • LLC Bank Account. Open a business bank account (transfer funds to this account and close the personal checking account you were using for your sole proprietorship)

  • Calendar Major Dates. Calendar major due dates for state compliance (i.e. Statement of Information, ongoing annual reporting requirements)

  • NEW LEGAL STEP BOI Report: As of January 1, 2024, all US-based LLCs (and corporations) must now file a Beneficial Ownership Interest (BOI) report. This report is simple - but complex - and you could be subject to $500 a day fine or imprisonment if you fail to file it on time or incorrectly. That’s why we created a training, to make sure you understand the law and your ongoing legal obligations and get it filed correctly, the first time.

    • Grab the BOI Training here.

6.) Trademark. Own your brand - trademark your name or logo, or copyright any signature products/services and monitor your IP for infringement. 

7.) Business Insurance. Purchase a business insurance policy for your business- this is financial protection in case of a lawsuit or threat of a lawsuit. 

8.) Tax Professional. Hire a tax professional and know your tax liability (i.e. self-employment tax) and deductions.

9.) Sales Tax Collection. Don’t forget to collect and remit sales tax if your state taxes digital products (or you’ve reached another country’s/state’s nexus threshold and owe taxes there too) or transfer these licenses/permits to your LLC’s name. A tax professional or your state’s tax commission will help you understand your sales tax obligations.

  • Checkout our other blog post - all about taxes and digital products - here.

The problem with this second approach is that legal is not retroactive, so you will not have the benefit of an LLC for liability/damages reasons. Also, you’ll need to update and revise all your contracts and policies for the new business entity. 

But, ultimately, the choice is up to you - because, well….YOU'RE THE BOSS. 


👉 Want an in-depth checklist on how to set up your online business legally?

Go grab our FREE “Legal Checklist: Build YOUR Online Business”


👉 Ready to legally level up your online business and gain confidence that you’re legally protected? 

Go check out our Contract Templates Shop, Make.Your.Mark Trademark packages and/or our Legal Services. 


👉 Overwhelmed by setting up your LLC all by yourself and need our expert help?

Check out our “Start Your LLC” service.

DISCLAIMER: The information provided in this blog post is for informational and educational purposes only. This is not a substitute for customized legal advice - if you need legal advice, please consult with an attorney.

Alyssa Malchiodi https://legaldoer.com
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