Legal Issues for eCommerce Business

Incorporation
Why Incorporate? Incorporation means that your company is a separate legal and financial entity from yourself. It even has its own social security number for tax purposes, called a Federal Tax ID. Most people incorporate to limit their personal liability so that their personal assets are not at risk for debts of the corporation. For example, if your incorporated company was sued and lost the suit, the winner could not take your personal car or home.
Plus, of course, incorporating makes you look more professional, and often helps with your taxes. Also, if you plan to receive investment in your company, have employees, and grow to be more than a one-person show, incorporation is an important step that helps promote these future goals. While incorporation protects you in many regards, it does not protect you from any criminal charges by you or the corporation, which can come into play if, for instance, you run an adult or gambling business on the Internet.


Trademark
The trademark act, or "Lanham Act", 18 USC Sec. 1051 etc. is meant to ensure that consumers can correctly identify the sources of goods or services. A trademark is a word, phrase, symbol or design, or combination of words, phrases, symbols or designs, which identifies and distinguishes the source of particular goods. A service mark is the same as a trademark, except that it identifies and distinguishes the source of a service rather than a product.
Normally, a mark for goods appears on the product or its packaging, while a service mark appears in advertising for the services. A "tm" on a product indicates unregistered (common law) trademark rights, and an "®" indicates a registered mark. It is illegal to place an "®" on a mark that does not have national registration.
As your domain name and your branding is valuable, you should think in terms of trademark registration. This can be done later in the business process once you have more revenue available, but it is important to consider it upfront in choosing your domain name, company name, product and/or service name.
You don't want to use a name which is someone else's trademark, as they could sue you to stop your use, including taking the domain name. At the minimum, go to www.uspto.gov and run a trademark search for the names you're considering -- at least to get an idea of how many other folks there are who could possibly have a claim to the mark you intend to use. Be aware that getting few or no results does not mean that you're in the clear, due to the complexities of trademark law, and the fact that the USPTO database runs a year behind. However, taking these steps will still lower your risk.
When trying to determine whether you've picked a good name in relation to others' marks, remember that the point of trademark law is to prevent consumer confusion about the source of goods or services. Ask yourself whether a consumer would confuse your name with that of another product, service or company.