How to Register an LLC for Fashion and Apparel
Introduction
Before you dive into the world of LLCs and fashion business ownership, it’s important to establish a solid strategy. These instructions should help you get started with your new endeavor:
Determine the type of business entity you wish to form
If you are planning to create an LLC, you should consider the following:
- The LLC is the most common type of business entity, accounting for 63 percent of all new businesses in the United States. It is a hybrid between a corporation and a partnership—it has the characteristics of both entities. The LLC allows its members to pass their losses through to their personal taxes, but also allows them to enjoy limited liability protection. In addition, it is easy to form, maintain and dissolve an LLC; these tasks can be done by mail or online with minimal paperwork required on your part.
- Ownership transfer occurs when one member sells his/her interest in an existing business or transfers ownership to another member who then becomes responsible for paying taxes on that share.
- You may need more than just one type of entity depending on how many people own shares or how many partners are involved with each other’s finances
Name your company
Your company’s name should be unique and distinct from all other businesses, so it can easily be recognized by customers. Avoid using your own name or that of anyone else in the company, especially if they live in a different state or country. This will help prevent confusion when people try to locate the business online or on the phone.
- If a potential business name sounds similar to another brand’s name, find something else!
Using names that are too similar could lead consumers and clients to think they’re buying products from one brand rather than another because both names sound similar on paper. Choosing a very common word such as “Donuts” could cause even more confusion for consumers trying out different types of food like coffee shops offering donut holes instead of regular-sized ones!
Appoint a Registered Agent
To register your LLC, you must first appoint a registered agent. A registered agent is an individual or company who will receive and respond to legal documents on behalf of your LLC. They are required to be available and accessible during all hours of the day throughout the year. The specific duties of a registered agent include:
- Receiving service of process from courts, government agencies, and other entities that need to contact your business
- Filing tax returns on behalf of the LLC
- Confirming the validity and existence of the business at any time in case someone needs proof
- Dealing with informational requests such as property searches and other information requests
File a Certificate of Organization with the Secretary of State
Once you have your LLC documents in hand, you’re ready to file your certificate of organization with the state. The Secretary of State will ask for some basic information, including:
- Name of your business
- Address where you operate from
- Registered agent’s name and address (this is how they can get in touch with you)
Once filed, you should receive a Certificate of Organization for your LLC that includes its effective date and registration number. This is important information! It’s not just a piece of paper: it’s legal proof that your business exists as an entity separate from its owners.
Create an Operating Agreement
An operating agreement is a document that outlines the rules and structure of the LLC. It will include information about how profits are distributed, who can sign contracts on behalf of the company, what happens if someone leaves or gets fired from their job, and so on. You should make sure everyone signs it before filing your application for registration as an LLC.
What should be in it? You can find templates online but many states have specific requirements for operating agreements that differ from each other. Be sure to consult with an attorney when creating yours; any mistakes could cost valuable time down the road.
Get licenses and permits
You’ll need certain licenses and permits to conduct business in your state. These include the following:
- Business license: If you’re conducting business under an LLC, you must get a business license from your state government.
- Sales tax permit: If you’re selling products or services online, it’s likely that you’ll be required to collect sales tax from customers living in states other than where your business is located. In order for the state where your business is located to charge sales tax on behalf of another state, all businesses are required to apply for a permit through their respective states’ revenue departments or taxing authorities before collecting any money from customers outside their jurisdictions.*
Open a business bank account and credit card
Your business bank account will be used for paying your business expenses, while your credit card will act as your payment method of choice when you order supplies or products from vendors.
For more information on opening a business bank account, please refer to our guide on How to Open a Business Bank Account.
Next, you’ll need to apply for one or more credit cards in the name of your LLC.
Apply for an EIN from the IRS
The first step in registering your business is to obtain an Employer Identification Number (EIN). This is a tax ID number that the IRS will use to identify your business. You can apply for this online if you are a sole proprietor, partnership, corporation then you must submit Form SS-4 on paper by mail or fax it to the IRS.
You can also apply for an EIN through the Electronic Federal Tax Payment System (EFTPS). You may find this convenient if you plan on paying taxes electronically, as well as obtaining one of their other services such as filing W2s and 1099s.
An EIN is not the same as a social security number though; it’s just another way of identifying your business so that it can receive payments from customers, vendors and banks alike.
A solid strategy will ensure success as you navigate the world of LLCs and fashion business ownership
A good strategy answers who, what, when, where, why, and how questions about a company’s operations.
Who are your customers? What do they want from you? When should they expect to receive your product or service? Where are they located (geographic area)? Why would someone buy from you instead of someone else? How do you plan to reach them with your products or services?
By answering these questions before beginning an LLC in fashion line, you can create a clear vision for success and build a sustainable enterprise that meets customer needs while achieving personal goals.
Conclusion
When you’re ready to take the leap and start your own fashion business, it’s important to make sure that you know what you’re getting into. Make sure that you have a solid strategy in place by creating a business plan and getting the right legal protections in place—you don’t want to end up losing everything if something goes wrong!
