The Nitty Gritty of Starting a Clothing Line
When I decided to just go for it and start my clothing line I was very unsure of where to start and what I needed to do legally. Though I realize these topics have been touched upon elsewhere on Startup Nation I am going to detail all of the steps I have taken to get my business, Self Assured, up and running.
There are a number of legal requirements at the federal, state and local level when starting a business. First you need to decide which business structure is best for you. In my case I chose an S-Corp because it limits your personal liability and you only pay taxes once because the business income or loss (more likely in the first year) is reported on the owner’s personal tax return. You do not have to hire a lawyer to incorporate your business. The process is very easy and can be done online at your state’s Division of Corporation’s website. I am in Florida so I incoporated at Sunbiz.org.
You will then need to file form SS-4 with the IRS to receive a federal Employer Identification Number (EIN) which can be be found at www.irs.gov/pub/irs-pdf/fss4.pdf. This number will be needed to complete some of the other registrations required in the business setup so it is best to do it right away.
You will need to file a “Fictitious Name” registration, also known as “Doing Business As” (DBA). At this point, my question was, do I really have to spend the money to file a “fictitious name”? The answer is yes you should. Just so you know, when filing the Fictitious Name, the registration number is the document number from your Articles of Incorporation and the FEI number is the same as an EIN number. I know this information may be obvious to some people but these were questions I had.
Each city, county (if you’re lucky enough to have both city and county), and state require various licenses. You can contact your city hall or Chamber of Commerce to find out the requirements. In my case I needed a Business License which was also known as an Occupational License but is now known as a Local Tax Receipt from the county and city. Can we choose a name and stick with it?!! It’s enough to figure out all the forms you need to file but if the name keeps changing it’s that much harder. Also, please note that the occupational license office may be in a random spot…my city has decided that it fits in well in the Building Services office which is not anywhere near city hall.
At some point in the near future I will be purchasing fabric, etc. from wholesalers, then making it into garments and reselling it to retailers where consumers make the final purchase (yeah!!). Consequently, as a designer you need a Resale License aka Sellers Permit aka Sales & Use Tax Certificate. I know, I know, here we go again with the multiple names! At any rate, this I was able to apply for online at the State Board of Equalization website and it was free. Amazing, I know. Even more so because if you file in person at the local office they charge $5.00. Do not sign the license when you get it. You will need to make copies and should carry them with you when you go to trade shows. Whenever you purchase something the supplier will ask you for a copy and that’s when you will sign it. No tax is paid on your wholesale purchase but you must keep records of all purchases using the resale number. You will also require the resale numbers of the stores you sell goods to, if within the same state. The following is a very important piece of information. Even if you do not have any taxes to pay you must file a return! Once you receive your certificate you will find out on what basis you must file your tax return and when your next return is due.
Well, I think that is enough to get you going. Of course there are a few more licenses, numbers, and taxes you will have to file for once manufacturing and importing begins but we’ll get to that later. Next time I’ll address Trademarks, because you need to protect that fabulous name and logo you’ve come up with.
August 1st, 2008 at 9:14 am
Hi Kristin!
First of all, I love the name of your company! How’s the business coming along?
Just hearing about “starting your own company” sounds daunting, but you’ve broken it down pretty easily. After being in my photography business a little over a year I am still learning how to do my taxes “correctly.” (Funny, but not funny. I’m a photographer! Not an accountant 
It’s nice to see another “artist’s mind” here on StartupNation. You know, clothing line, photography… it’s all clumped into that artsy category.
Thanks for your wisdom! I’m a subscriber.
Carli
{ inkedFingers Fotography }
http://www.inkdfingers.blogspot.com
inkedfingers.com
August 1st, 2008 at 10:06 am
Hey Carli,
Thanks for checking out my blog. I’m glad you like my company name! The business is coming along…right now I’m designing my fist collection and will attend a major tradeshow at the end of August to source fabric and hopefully find a manufacturer.
It is nice to connect with other “art minded” folk seeing that where I live there is a serious lacking.
I checked out your blog…nice photos, the first one with your company name is really nice; very soothing. I look forward to hearing from you in the future.
Take care,
Kristin
Self Assured
http://www.selfassuredwomen.com
August 1st, 2008 at 4:08 pm
Kristen,
WOW! Why didn’t you write this 2 years ago when I was starting my fashion accessoires biz…Cuff Luv Stuff! My (fashionable) hat is off to you for getting going on your creations. If you’re like me, any and all the time you spend will be soooo satisfying.
I would add to your suggestions for “getting started” to get QUICKBOOKS. This has been a tremendously helpful accounting and business management tool. You really can’t make any mistakes with the program except not to use it. Definitely get it during your start up phase when you’re spending all that $$$$.
Will we be seeing you on Project Runway anytime soon?!!
Best of Luck!
Julie
August 4th, 2008 at 10:12 am
Julie,
Thanks for the Quickbooks tip, I have it already but am womdering if I should get the merchant version once I start selling. Which version do you use?
No Project Runway plans as yet but I am definitely addicted!
August 4th, 2008 at 10:13 am
Janet,
I’m happy to help, it took me a while to find the info when I was starting. Stay tuned for more…
Kristin
August 5th, 2008 at 1:04 pm
After working in the apparel industry for over 25 years, helping people start clothing lines, I just assume a motivated entrepreneur will cover their bases with business 101 that apply to any business so I usually pass on writing about that on my blog EXCEPT for specific legal matters that relate to licensing in the *apparel industry*.
For example, if you live in certain states or hire services in those states, you MUST have a garment registration license. Otherwise, they’ll tag and confiscate all your goods as well as the “means of production” (sewing machines, tools, fabrics, patterns etc). California is quite strict. There, you aren’t even allowed to sew your own samples in your own home! The regulations apply even if you don’t live there but are hiring services to make your products in the state. A lot of people have gotten into trouble with that. There was also a recent case in NY, the designer had to pay over $600,000 dollars to have the tags the state placed on the goods, removed. Unfortunately, even if you’re doing everything ethically, are paying fairly etc but you don’t have a garment license, your goods are legally considered “hot goods”.
In sum, once you finish the gamut of basic business formation and getting square with the IRS and local authorities, check with your state. I’ll include some links to specific guidelines (for California, they’re the most strict) and how tos but don’t know if those will publish.
http://www.fashion-incubator.com/mt/archives/apparel_manufacturing_in_california.html
http://www.fashion-incubator.com/mt/archives/california_garment_license_for_out_of_state_companies.html
http://www.fashion-incubator.com/mt/archives/studying_for_the_california_garment_exam.html