New Online Clothing Business

[handslikesecrets]

Hi,

I have recently decided to start my own clothing business, custom designing clothes under my own brand name and ordering them in mass from factories in China. I have a dot com web domain purchased and to start off, most of my business will be done on ebay. I have no physical office other than my home. I have just begun ordering samples from factories before I start to order product in mass, and I hope to have the website up & running and selling by January.

Forgive my ignorance, but though I have been through lots of good information on this site, I was wondering if someone would be so kind as to give me some basics. Do I need a business license if I'm not selling much and primarily just using ebay to do business? What other precautions should I take? Thanks for any feedback!

[vangogh]

Welcome to the forum handlikesecrets. I'll do my best to answer, but take what I say with a grain of salt. A lawyer or account will be better able to give you the answers you need. We have a couple here so hopefully they'll see this thread before too long and offer some advice.

I would think whether or not you need a business license is something that would be determined by the state where your business is located. Look for the department of state website in your state. Usually the information you need will be there. If not try other official state sites, probably finances after the dept of state. I want to say you won't need a license, but since you'll be dealing in physical products you might need something.

You should register your business name with the state. That should be at the department of state site. Here in Colorado it was a simply search on the site and then a quick form to fill out. When I registered I had to go into their office, but now it's online. I think it only cost $6 and it's $1 to renew. It'll prevent anyone else in the state from using your business name. You may want to go beyond that and register a trade name either in the state or nationally. That's will offer more protection for your business name and keep others in the same industry from using it in other states (assuming you register it nationally). The costs will be a few hundred I think to register at the national level and probably less at the state level. We have a few people here who've registered a trade name and hopefully they'll be able to offer more details.

You may also want to consider insurance. Since you're dealing with a physical product there may be some issues.

My guess is you don't need to do any of the above. Registering a business name is something you should do, especially as it's so inexpensive. The rest are up to you, but they all have pros for doing, with the only real downside being cost.

And again keep in mind I'm not an expert on this so consulting an attorney or accountant is probably a good idea.

[Patrysha]

Starting up in January is going to be a challenge in most markets for a new clothing line. Typically the slowest month of the year in retail behind July. I don't know how that reflects into online sales as all the data I've seen has been pretty much from brick and mortar geared sources, but I suspect the buying curve is similar.

Do you have a marketing and publicity plan? Unless you are working with a low volume, under the radar type clothing line, those are going to be essential to promotions. Have you worked in fashion before so that you have a name and connections within any of the fashion niches, what are your plans for generating interest prior to the sit lanching and traffic after it's ready?

[boogle]

I am going to piggy back off of Patrysha, if you are focusing on ebay sales, marketing is going to be pretty important. There are a few really good books that can get you started, I personally enjoyed "The Ebay Marketing Bible" by Cindy Shebley. An amazon search can pull up a few others. I would also look for blogs and forums specific to what ever niche you are in. A lot of product forms have classifieds where you can post ebay auctions or sales listings.

[handslikesecrets]

As of right now, it is just me working on this company. Should I/can I form an LLC if it just consists of me running a website and selling through it and through ebay?

[boogle]

A sole proprietorship LLC can be complicated. Each state has different laws regarding LLC. Short of Nevada, all LLC's come with hefty paperwork and fees. You can form and LLC, but it may be more hassle than it is worth. Check with your state laws to find out what is required.

[Steve B]

I formed a couple different LLC's in Kentucky and it was extremely easy and cheap. I think the paperwork was one page.

Giving yourself and your personal assets significant legal protection probably IS worth the hassle in my opinion.

[Spider]

I question the amount of protection an LLC gives you - or any other form of legal organization, for that matter. If you want to borrow money, it is likely a personal guarantee will be needed. Credit is likely to require a personal guarantee. If a trade license is needed (doctor, plumber, accountant, pest control, etc.) this will be issued to a person, not a company. If you screw up and poison someone or injure them in any way, the offending person is just as likely to get sued as the company.

When more than one person is involved in the company, everyone becomes liable for everyone else's actions, to some extent, I think. For example, if one party gets caught cheating on their personal taxes, I would expect any IRS investigation to include the company and the other individuals. If one party injures a member of the public, any lawsuit against the company will hurt the other members of the company.

Certainly, there are good reasons for incorporating in one form or another, but I don't think personal protection is a main one of them until the company is of a certain size. What do our legal minds have to say on this?

[SEOHelp]

The one piece of advice I would give is that you have to start from day one with your marketing efforts. That way, it will be ingrained in every decision that you make as you go forward with your new business. Because we want people to find your business online and off.
Believe me - I spent years building my business first then working on trying to market it online - and got no where. But, when I started my last business and focused on marketing from the very beginning, I had a lot more success. Good Luck with your new clothing business.

[simplybusiness]

Regarding your insurance, some insurers now offer an "online retailers insurance" or "Ebay business insurance". Because you're not based in the UK (I am..) I can't give you specific advice but you will need to add specific cover for retailers. Insure your goods with stock cover would be an useful additional cover.

Hope this helps

[Paper Shredder Clay]

"Cheap" How much do you mean by cheap? I think it cost my parents $500 from their accountant to do the LLC. Granted it is definitely worth the protection. Then there is the annually upkeep for it.

[bturley]

Thank you all for your great input, it is for sure an eye opener on the amount of work that goes into it. There's a company called gym rules, @ www.gymrules.com this is kind of where I got my idea from starting off small with designing tshirts first. Thank for the advice on custom hi quality fabric, I totally agree with that, people want something comfortable to workout in that looks great. You guys are great, much success to you all! I'll give you an update in the future.

[handslikesecrets]

Thanks for all the help, I'm going to form an LLC, it seems relatively easy. One more question- I found this website which will do it for me (though it seems easy enough to do it myself), but with it comes things like an EIN and an LLC Operating Agreement. Do I NEED to purchase these things additionally?

<please set up a signature>

Thanks!

[vangogh]

An EIN is something you get from the IRS. It was a 10 minute call to get mine, though it's possible you can get one online now. It doesn't cost anything.

Just did a quick search and you can get your EIN online (http://www.irs.gov/businesses/small/article/0,,id=102767,00.html) at the irs.gov site. I'm not sure about the LLC operating agreement though I would think it's part of the LLC process.