how do i start a clothing business
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Starting your own clothing business is an exciting venture and a big commitment. Whether you’ve decided to sell your clothes online or in a retail store, you’ll need to get the right licenses and permits for your business.
It’s also important to make smart decisions about your business tax structure and what type of entity you’ll file as. This will help ensure that your company is following the appropriate legal requirements from the start.
To help you keep track of the requirements for starting your own clothing business, we’ve outlined a list of where you should start.
Choose Your Business Entity
Choosing the business entity that best fits your business usually boils down to asset protection, financing, tax issues, and how all of these factors factor into the business you want to own. Potential businesses include:
- Sole Proprietorship: As a sole proprietor, you are a single person responsible for all profits and debts of your company. You will be your own boss and have full control, but also full responsibility. This type of entity does not offer separation or protection of personal and business assets.
- Partnership: This type of enterprise is owned by two or more persons. In a general partnership everything is shared equally. In a limited partnership, one partner has control of the operations, while the other person contributes financially and receives a share of the profits. This type of entity is ideal for anyone who wants to go into business with a family member, friend or business partner. Note that the partners will share profits and losses, make decisions together and both will be held responsible for the decisions made.
- Limited Liability Company (LLC): This entity is similar to a hybrid structure that allows owners to limit their personal liabilities while enjoying the tax and flexibility benefits of a sole proprietorship. Owners are immune from personal liability for business debts, as long as it can be proven that they have not acted illegally, immorally or irresponsibly in carrying out the business’s activities. Your personal and company assets are segregated, and your profits and losses are not taxed at the corporate level – just “passed through” to your personal tax return.
- Corporation: It is an entity separate from its owners with its own legal rights. For example, corporations can be sued, others can be sued, property can be bought and sold and their ownership rights can be sold in the form of stock. There are five types of corporations: S corporations, C corporations, B corporations, closed corporations, and non-profit corporations.
File Appropriate Paperwork for Your Business Entity
The type of business entity you choose will determine where you file the appropriate paperwork and what you need to file at the county or state level. For example, a sole proprietor does not need to register. A general partnership or “Doing Business As” (DBA) will register with the county, and other entities will register with the state. Don’t forget to register with your city, if applicable — many cities require you to register to do business within their boundaries.
Obtain Federal and State Employer ID Numbers
It is likely that you will need a Federal Employer ID Number (EIN) if you choose to operate as a corporation or partnership, or if you have employees. You will also need an EIN to register for various permits, including a clothing/apparel certificate (see below).
Obtain a Permit to Sell Goods and Collect Tax
Since you are starting a clothing business and your business will sell goods, there will be taxes associated with your products. You will need a “seller’s permit,” “certificate of authorization” or something similar that allows you to sell clothing. These permits will allow you to buy raw materials to make clothes (such as fabric) without paying sales tax. It will also allow you to collect sales tax on the clothes you are selling to your customers. This tax is then paid to the state or local government.Since you are starting a clothing business and your business will sell goods, there will be taxes associated with your products. You will need a “seller’s permit,” “certificate of authorization” or something similar that allows you to sell clothing. These permits will allow you to buy raw materials to make clothes (such as fabric) without paying sales tax. It will also allow you to collect sales tax on the clothes you are selling to your customers. This tax is then paid to the state or local government.
Obtain a Garment/Apparel Registration Certificate
Finally, if you live in California, New York or New Jersey, and you are involved in any part of the garment manufacturing process, you must register with the state. “Making” includes cutting, sewing, finishing, gathering, pressing or manufacturing of garments. This certificate is also required for any vendor you decide to use for any of these services. You must obtain this certificate before engaging in business.
If you are in a state not listed above but work with one of the three states that require registration, you may also need to register with that particular state. . It is best to do your own research on this certificate to be positive whether you think it is needed or not.
This post gives you a high-level idea of where to start, but this list covers just a few of the permits, licenses, and requirements for clothing businesses. There are many other types of permits and licenses you may need in your area before starting your business.
If you’re not sure where to start, Infile’s Business License Research Package is a great resource. Their experts can provide you with the information you need on licenses and permits, and even take care of the paperwork for you.
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