SecProbe.io

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Mail Stop 4-6

	October 29, 2004

Mr. Michael Nouri
President and Chief Executive Officer
Smart Online, Inc.
2530 Meridian Parkway
Durham, North Carolina 27713

Re:	Smart Online, Inc.
	Registration Statement on Form SB-2 filed September 29, 2004
	File No. 333-119385

Dear Mr. Nouri:

We have reviewed your filing and have the following comments.  Where
indicated, we think you should revise your document in response to
these comments.  If you disagree, we will consider your explanation as
to why our comment is inapplicable or a revision is unnecessary.
Please be as detailed as necessary in your explanation.  In some of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure.  After
reviewing this information, we may or may not raise additional
comments.

Please understand that the purpose of our review process is to assist
you in your compliance with the applicable disclosure requirements and
to enhance the overall disclosure in your filing.  We look forward to
working with you in these respects.  We welcome any questions you may
have about our comments or any other aspect of our review.   Feel free
to call us at the telephone numbers listed at the end of this letter.

Registration Statement Cover Page

1. We note from your disclosure on the outside front cover page of the
prospectus and your "Plan of Distribution" section that the shares of
common stock being registered "may be sold from time to time by the
selling security holders...."  Further, we note that you have included
the Item 512 undertaking relating to 415 offerings.  If a delayed or
continuous offering is intended, please indicate the offering as a
delayed or continuous offering by checking the appropriate box on the
cover page.  Please see Interpretation G.133 of the Division of
Corporation Finance`s July 1997 Manual of Publicly Available Telephone
Interpretations for information regarding the availability on Form SB-
2 of Rule 415 offerings.

Prospectus Outside Front Cover Page

2. We note from the cover page and page 6 of the filing that the price
at which the shares of your common stock are sold may be based on
market prices at the time of sale, on varying prices determined at the
time of sale or on negotiated prices.  As there is not yet a market
for your shares of common stock, please revise the outside front cover
page of the prospectus to include the following language:

"The selling shareholders will sell at a price of $x.xx (or a range)
per share until our shares are quoted on the OTC Bulletin Board and
thereafter at prevailing market prices or privately negotiated
prices."

Prospectus Summary

3. We note your disclosure summarizing the company`s business.  In the
second paragraph under the "Company Overview" section of the summary,
you indicate your various sources of revenue by stating that "[t]hese
sources of revenue include syndication partners, integration partners,
OEMs, subscriptions from businesses, one-time purchases  by small
businesses and barter transactions with media companies."  In the
prior paragraph, you briefly describe your Web portal business and
your syndication arrangements.  If material, please briefly explain
your integration and OEM arrangements and your barter transactions
with media companies.

Risk Factors

4. You are required to disclose the "most significant factors" that
make this offering speculative or risky.  Please revise the first
paragraph of the "Risk Factors" section to indicate clearly that you
are describing the material risks associated with the offering of
shares of your common stock.  Please refer to Item 503 of Regulation
S-K by analogy.  In addition, to the extent that you do not deem
certain other risks material at this time, you should not refer to
them in this section.

5. We note from your disclosure, including on page 91 of the filing,
that your common stock may be subject to the "penny stock" rules.
Please revise your "Risk Factors" section to include a risk factor
discussing the penny stock rules and the additional risks they pose to
investors.

6. We note from your disclosure that you have a significant amount of
revenue generated from related parties.  Please advise us as to why
you do not deem this a material risk meriting disclosure.  Otherwise,
please revise your disclosure to add a risk factor elaborating on your
related party transactions.

7. We note from your disclosure that you have an outstanding tax
matter with the IRS and that an unfavorable outcome on such matter
would likely have a material impact on your financial situation.
Please consider providing a separate risk factor addressing this tax
matter.

We Have Never Been Profitable, p. 7

8. We note the disclosure in the first and second sentence regarding
an aggregate loss of $31.3 million since inception including a loss of
$1.2 million during the six months ended June 30, 2004.  The
subsequent sentence, however, seems to state operating losses since
inception of $28.1 million.  Please clarify.  Further, please provide
disclosure regarding your inception date as well as the duration of
your existence since inception.  Please also revise the heading to
this risk to identify the risks rather than merely stating the fact of
situation.

Our Independent Auditor Has Indicated That it Has Substantial Doubts
That Smart Online Can Continue as a Going Concern. Our Independent
Auditors` Opinion May Negatively Affect Our Ability to Raise
Additional Funds, Among Other Things. If We Fail to Raise Sufficient
Capital We Will Not Be Able to Implement Our Business Plan and You
Will Lose Your Investment, p. 7

9. We note the disclosure in this risk factor attributing your
independent auditors` going concern opinion to your lack of operating
history and revenues to date.  It does not, however, appear that your
lack of operating history was relevant to the going concern opinion,
particularly given that you have been in operations since 1993.  We
refer you to Note 1 to your financial statements, which appears to
attribute the going concern opinion to your net losses, negative cash
flow and deficiencies in working capital and equity.  Please explain
how your lack of operating history contributes to your independent
auditors` going concern opinion or otherwise please revise your
disclosure accordingly.

10. We note that this going concern risk factor primarily focuses on
the impact such risk factor has on your financing prospects.  Please
revise the disclosure or add another risk factor to elaborate on the
factors, e.g., net losses, negative cash flow and deficiencies in
working capital and equity, that contributed to the going concern
opinion by your independent auditors and the possibility that you may
cease to be a going concern as a result of such current factors.

We Will Require Additional Financing To Fund Our Operations Or Growth.
Financing May Not be Available or May Harm Existing Stockholders, p. 7

11. The disclosure that begins with the sentence "If we raise
additional funds through the issuance of equity securities or debt
convertible..." and ends with the subsequent sentence addresses a
different risk than that which is disclosed at the beginning of the
subject risk factor.  One risk addresses the need for additional
financing and the risk in not obtaining such financing.  The other
risk addresses the dilution of ownership to stockholders upon an
additional financing.  Please separate such risks into separate risk
factors.  In addition, please clarify your disclosure regarding
existing or current stockholders to indicate that such references also
include investors in this offering.

12. Please revise your disclosure regarding the need for additional
financing and the risk in not obtaining such financing to disclose
that you will not be receiving any proceeds from this offering.
Further, please discuss the prospect that you may cease to be a going
concern as a result of not obtaining additional financing.

Many of Our Current Users Do Not Pay For Our Products, p. 8

13. Please provide additional disclosure on the business strategy for
currently allowing many users access to your products without charge
and how long you plan to continue such a practice to the extent known.

We Will Rely Heavily On Successful Development and Market Acceptance
of Our Next Generation Platform, OneBiz Conductor(sm), p. 8

14. Please provide additional disclosure summarizing the status of as
well as your plans for introducing OneBiz Conductor(sm) to the
marketplace.

We Rely on Third-Party Hardware and Software That May Be Difficult To
Replace or Which Could Cause Errors or Failures of Our Service, p. 11

15. Please provide additional disclosure regarding any licensed
software or hardware that is material to the operations of your
business and indicate in such disclosure the material terms of any
such licenses and/or lease agreements.  In this regard, we would
expect to see information regarding the term of such agreement, the
payments under such agreement and any other material terms of the
agreement.  Additionally, such agreements may need to be filed as
exhibits to the registration statement.  Please see Item 601(b)(10) of
Regulation S-B.

We Depend on Corporate Partners to Market Our Products Through Their
Web Sites and OEM or Integration Relationships Under Relatively Short
Term Agreements. Termination of These Agreements Could Cause A
Substantial Decline in Our Revenue and a Substantial Increase in
Customer Acquisition Costs, p. 14

16. Please identify any significant partners and provide the material
terms of any agreements with such significant partners.  In this
regard, we would expect to see information regarding the term of the
agreement and any other material terms of the agreement.
Additionally, any such agreement with a significant partner may need
to be filed as exhibits to the registration statement.  Please see
Item 601(b)(10) of Regulation S-B.

It is Important for Us to Continue to Develop and Maintain Strategic
Relationships, p. 14

17. We note your disclosure in the last sentence of this risk factor
stating that your "strategic partners also may interfere with our
ability to enter into other desirable strategic relationships."  If
applicable, please revise your disclosure to elaborate on any present
agreements with any strategic partners that may limit or interfere
with your ability to enter into other relationships.  Otherwise,
consider adding disclosure to indicate that no such agreements
presently exist.

We Face Significant Competition, p. 15

18. We note that the Summit Strategies reports posted on your Web site
under Media Coverage identify specific software-as-services
competitors other than the large companies you have identified in this
risk factor.  The companies identified include Corio, Employease,
EchoMail, RightNow Technologies, salesforce.com and Surebridge.
Please supplementally inform us whether such companies are competitors
to you and whether they fit within the framework of competitors you
have disclosed in your risk factor-large companies with multiple
software products or smaller competitors who sell single applications.
The fact that such companies also operate under the software-as-
services business model suggests they are direct competitors to you
and may merit discussion.

We Depend on Nonrecurring Revenue, Which May Cause Our Revenue to
Fluctuate Substantially From One Quarter to Another or to Decline
Permanently as Market Conditions Change, p. 15

19. Please revise your disclosure to include the specific percent of
revenue for the six months ended June 30, 2004 and the fiscal year
ended December 31, 2003 that was nonrecurring revenue.  We also note
your disclosure on pages 55 and 56 of the filing that a significant
amount of revenue was derived from transactions with related parties.
Please confirm whether such revenue may be considered nonrecurring
revenue in light of this risk factor.

All of the Shares of Common Stock Owned by Our Officers, Directors and
Consultants Will be Registered Later in a Registration on Form S-8 and
May be Resold by Them, Which May Have a Negative Impact on Their
Interest in Smart Online`s Future, p. 19

20. Please revise your disclosure to elaborate on the restrictions and
limitations with respect to registering shares for resale pursuant to
Form S-8.

Our Ability to Protect Our Intellectual Property is Limited and Our
Products may be Subject to Infringement Claims by Third Parties, p. 21

21. We note your disclosure in the third sentence of the second
paragraph of this risk factor that states "Our technologies may not be
able to withstand any third-party claims or rights against their use."
If applicable, please revise your disclosure to include any third-
party infringement claims or rights that you are currently aware.
Otherwise, please clarify that you are presently not aware of any such
third-party claims or rights.

Anti-Takeover Effects of Charter Documents and Delaware Law Could
Discourage or Prevent a Change in Control, p. 22

22. Please revise your disclosure in this risk factor to further
elaborate on the risk presented by the anti-takeover devices you have
identified.  In this regard, we would expect to see a statement
regarding how a change of control may be beneficial to stockholders
but that such anti-takeover devices may prevent such a change of
control from occurring.

We May Not Qualify to Have Our Stock Quoted for Trading on the Over-
the-Counter Electronic Bulletin Board, and Therefore You may be Unable
to Sell Your Shares. Even if We Qualify to Have Our Stock Quoted for
Trading, Trading Volume May Not Develop and You May be Unable to Sell
Your Shares, p. 22

23. We note your disclosure regarding your intent to list on NASDAQ or
a national securities exchange if you were to satisfy the applicable
listing criteria.  However, it does not appear that you would current
satisfy their quantitative or qualitative listing/quotation standards.
Please advise.

24. Please revise your disclosure to include a statement that the
OTCBB does not have listing requirements for issuers quoted on its
service but that in order to remain eligible for quotation on the
OTCBB, an issuer must remain current on its filing obligations with
the Commission.

25. Please revise your disclosure to elaborate on the over-the-counter
market commonly referred to as the "pink sheets."  The disclosure
makes reference to the pink sheets, but does not provide a description
of the pink sheets nor an explanation as to how your listing on the
pink sheets will impact the investor.

If Securities Analysts Do Not Publish Research or Reports About Our
Business or If They Downgrade Our Stock, the Price of Our Stock Could
Decline, p. 22

26. Please revise your disclosure to elaborate on the risk of not
receiving any analyst coverage.

Our Quarterly Revenues and Operating Results may Fluctuate in Future
Periods and We may Fail to Meet Expectations of Investors and Public
Market Analysts, Which Could Cause the Price of Our Common Stock to
Decline, p. 23

27. We note your disclosure in which you state that you believe
period-to-period comparisons of your operating results may not be
meaningful.  Please elaborate on why you consider such comparisons to
not be meaningful.

Our Stock Price is Likely to be Highly Volatile and May Decline, p. 23

28. Please revise the reference to "NASD`s Over-the-Counter Bulletin
Board."  Instead, you may indicate that NASDAQ administers the OTCBB.
Please also delete the reference to the OTCBB being a stock market.
The OTCBB is quotation medium for its members and is not an issuer
listing service, market or exchange.  Please revise.

Selling Security Holders

29. Please note that the column titled "Percentage of Common Stock to
be Owned by Selling Security holder after Completion of Offering" in
the selling security holder`s table on