The Nitty Gritty of Starting a Clothing Line
After almost 10 years of studying and working in the fashion industry Kristin Potenti, fashion advisor and clothing designer, is striving to fulfill the needs of women shoppers. She recently launched a website, Self Assured, which educates women about the most common body types and advises what silhouettes look best on those figures. The site also talks about the latest fashion trends for women and what body types they work best on.
Kristin's current endeavor, which officially began in April of this year, is launching the brand Self Assured as a moderately priced, stylish clothing line for confident, sexy, fashion savvy women in their prime.
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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.