The boring legal layer

Nothing in this lesson grows the business. All of it protects the business, and the operators who skip it usually meet the consequences at the worst possible time, which is the week the money finally arrives. This is orientation, not legal advice. Your situation gets an hour with a professional when revenue is real. An hour of accountant time costs less than one mistake in this list.

The basics, in order

You start as a sole proprietor by default, and that is fine for the presale: the money is business income, reportable and self-employment taxed, and a separate free business checking account from day one keeps the records sane. The limited liability company question comes when there is something to protect, meaning consistent revenue, at which point a single-member LLC is the standard cheap upgrade. Money in, taxes owed, and the entity question interact, and that ground belongs to the transition guide in this catalog rather than here. What stays in this course: keep every receipt, keep business and personal money in separate accounts, and set aside a rough quarter to a third of profit for tax before you spend any of it, because course income has no employer withholding doing that job for you.

Sales tax on digital courses

The United States has no national answer. Some states tax digital products and courses, some exempt them, and the rules keep moving, with several states expanding their digital-goods tax bases in just the last two years (Multistate Tax Insights). Connecticut, as one concrete example, taxes digital courses at six point three five percent (RJM Tax Exemption). The saving grace for a first-year seller is nexus. You must register and collect in a state only after you have a meaningful presence there, and the standard threshold across states is one hundred thousand dollars in sales in that state in a year, plus, in the shrinking set of states still using it, two hundred transactions, the benchmark set after the Supreme Court's Wayfair decision in 2018 (Avalara's economic nexus guide).

Translation for year one: your home state's rule applies from your first sale, learn it once, and the other forty-nine states are almost certainly not your problem yet. If your home state taxes digital courses, register, collect, remit on the schedule it gives you. And recall the platform lesson: a merchant-of-record checkout like Gumroad collects and remits sales tax for you, worldwide, as part of its fee (Gumroad on sales tax), which is one reason a zero-monthly checkout is a sensible presale tool.

The FTC rules you actually touch

Three federal rules cover most of what course sellers get wrong. First, earnings claims. Any claim that buyers will make money must be substantiated by typical results, not by your best student, and regulators have spent years tightening exactly this, including a proposed rule dedicated to deceptive earnings claims by sellers of money-making opportunities (FTC press release, January 2025). Your protection is structural: this course has already taught you to sell the transformation and the skill, never an income. Stay in that lane and this rule never bites.

Second, testimonials. The FTC's Rule on the Use of Consumer Reviews and Testimonials took effect in late 2024 and carries civil penalties for fake or fabricated reviews, undisclosed insider testimonials, and review suppression (FTC rule summary). The rule's disclosure penalties reach reviews and testimonials from people inside the company; for outside voices, the disclosure duty comes from the endorsement rules in a moment and bites the same way. In practice: use real words from real students, with permission; disclose when a testimonial came from someone who got the course free or in exchange for something; and do not promise that their result is typical unless it is. Founder testimonials from your presale are genuinely earned. Keep them honest and they are also legal.

Third, endorsements and affiliates. If anyone promotes your course for a commission, that relationship must be disclosed in their promotion, plainly, where the reader sees it before clicking. When you recruit affiliates later, you can be held responsible for what they claim, so hand them the claims you allow and nothing else.

Email law and the refund contract

If you email a list, the CAN-SPAM Act applies, and its requirements are refreshingly mechanical: do not use deceptive subject lines, identify yourself honestly, include a valid physical postal address in every email, provide a working unsubscribe mechanism, and honor opt-out requests within ten business days (FTC CAN-SPAM compliance guide). Every serious email platform enforces most of this for you. Your job is the honest subject line and the real address, which a post office box satisfies if you work from home. If you sell to Europeans, consent rules are stricter and worth an hour of your own research before you do it.

The refund policy is a contract, so write it as one: the window, the conditions if any, the method of request, the turnaround you promise. Then honor it exactly. Operators who deliver what the sales page promises typically see refund rates under five percent, and a guarantee of fourteen to thirty days, longer than competitors offer, converts fence-sitters at a cost most sellers find trivial. One caution earned the hard way across this industry: honor refund requests from payment-plan buyers immediately, because the alternative is a chargeback, and chargebacks, unlike refunds, put your processing account at risk.

That is the whole protective layer: separate accounts, home-state tax, honest claims, real testimonials, mechanical email compliance, and a refund promise you keep. The store is now legally open. Time to put people in it.