Congratulations! You’re starting your own clothing business. Maybe you’ll design clothes and sell them online. Maybe you’ll open a retail shop. Whatever you do, you’ll need to get the appropriate licenses and permits for your new business. For example, a few states require anyone engaged in the business of garment manufacturing to register with the state. That includes brand owners who hire vendors to make the clothes. Or for example, some cities require registration with them in order to conduct business there. The list of requirements to starting an apparel business can be confusing, so we’ve outlined how to comply with the basic requirements and provided helpful website links.
1. Choose Your Business Entity
First, you’ll need to choose what type of business entity to be. Options range from a sole proprietor, a partnership (general or limited), a limited liability company, to a corporation. All have pros and cons, and different fees and tax consequences. It’s best to speak with an experienced professional to help you decide.
2. File the Appropriate Papers for Your Business Entity
The type of entity you choose will determine where you file the appropriate papers – at the county or state level.
- A. Sole Proprietors Need Not Register
Generally, most states, like California and New York, do not require sole proprietors to register with the county or state. However, as noted below, sole proprietors must register with the county if they do business under a different name.
- B. DBAs and General Partnerships Register with the County
Most states require businesses that “do business” under a different trade name to register with the county (or state). For example, if John Smith is a sole proprietor and does business under the name Smith Electronics, then he must register as a “fictitious” or “assumed” name. Below are requirements for California and New York.
In California, any business (e.g., sole proprietor, general partnership, or formed entity), who does business under a different trade name must submit a Ficticious Business Name Statement in the county in which it does business. Once that Statement is filed, it must be published in a local newspaper for four successive weeks. See the various requirements for these California counties: San Francisco County, Santa Clara County, LA County.
General partnership agreements may (but are not required) be recorded at the county recorder’s office in the county where the general partnership is located. See this website for more detailed information: California Secretary of State.
In New York, sole proprietors and general partnerships doing business under a different trade name must file a Certificate of Assumed Name in the county they conduct business. For information about filing the Certificates of Assumed Name in New York City, see New York City Business.
On the other hand, corporations, limited partnerships, and limited liability companies who do business under a name different from the name they were formed under, must file an Assumed Name Certificate with the New York Department of State (who then forwards it to the County). See this web page for more information: NY Dept of State – Cert Assumed Name.
- C. Formed Entities Register with the State
Most states require formed entities to register with the state, including corporations, limited liability companies, and certain forms of partnerships.
In California, corporations, limited liability companies, limited partnerships, and limited liability partnerships must file the appropriate papers with the California Secretary of State. For example, corporations must file Articles of Incorporation, and limited liability companies must file Articles of Organization.
General partnerships are not required to file anything with the Secretary of State, but they may file a statement of partnership authority with the Secretary of State (Form GP-1) to specify the authority of each individual partner. As noted above, they may also record their general partnership agreement with the county.
For more information about what to file, see California Secretary of State.
In New York, corporations, not-for-profit corporations, limited liability companies, limited partnerships, and limited liability partnerships must file the appropriate papers with the New York Department of State. For more information see New York Dept of State.
As noted above, general partnerships file a Certificate of Assumed Name with the county (not the state) in which they are operating. See New York City Business.
If a corporation, not-for-profit corporation, limited liability company, limited partnership, or limited liability partnership operates under any name other than the one they were formed under (trade name), they must also file a Certificate of Assumed Name with the Dept. of State (who then forwards it to the County Clerk). See this website for more information NY Dept of State -Cert Assumed Name.
3. Register with Your City (if required)
Whatever your business entity (e.g., sole proprietor, corporation), many cities require that you register to do business in their city just to operate there.
There are numerous cities in California that require registration, including the cities of San Francisco, San Jose, Los Angeles, and Santa Monica. See these websites for filing requirements: City of San Francisco, City of San Jose, City of Los Angeles, and City of Santa Monica.
Some cities in New York also require registering your business to do business there, like the City of Albany. Manhattan has no such requirement.
4. Obtain Federal and State Employer Identification Numbers
Generally, you’ll need a Federal Employee ID Number (FEIN) if you operate as a corporation or partnership, and/or have employees (among other reasons). You’ll also need a FEIN to obtain various permits, including a Garment/Apparel Certificate. Visit the IRS Website for more information.
In California, if you have employees, you’ll need to apply for a state employer ID number with the Employment Development Department. See California EDD Website.
In New York, once a corporation if formed, the New York State Tax Department automatically assigns it a tax ID number, and sends it to the corporation. See New York Tax Dept.
5. Obtain A Permit to Sell Goods and Collect Tax
If you sell taxable goods – like apparel – you’ll likely need a “seller’s permit,” “certificate of authority,” or something similar. These permits allow you to buy raw materials to make goods (e.g., fabric) without paying sales tax, and to collect sales tax on goods sold to customers (which are then paid to the state and/or local governments).
In New York, sellers of apparel must obtain a Certificate of Authority from the NYS Department of Taxation and Finance. Find out more here: NY Dept Tax & Finance Sales Tax Bulletin and
6. Obtain A Garment/Apparel Registration Certificate
Some states, like California, New York, and New Jersey, require that if you are engaged in any part of the manufacturing process of making a garment, then you are required to register with the state. That includes anyone engaged in cutting, sewing, finishing, assembling, pressing, or otherwise preparing garments, and anyone who contracts for those services. If you are a brand owner and hire contractors to make your garments, then you are required to register. Importantly, you need to obtain a certificate before actually engaging in business.
Additionally, if you are from out of state (e.g., Minnesota) and contract with a manufacturer or contractor (e.g., pattern maker) from a state that requires registration (e.g., New Jersey), you may need to register with that state.
The applications for these states vary widely, with New Jersey being the simplest, and California being the most extensive. All require general information about the applicant, such as name and contact information of the legal entity, employee tax ID numbers, with whom you’ve done business, and proof of worker’s compensation if you have employees, among other things. California and New York require documentation, including proof of legal entity (e.g., Articles of Incorporation for a corporation). California additionally requires information about family members in the garment industry, proof that no outstanding employment taxes are due, and requires the applicant to take and pass an examination, among other things.
For more information, see the following links:
California Garment Registration Certificate: CA Dept of Industrial Relations.
New York Apparel Industry Certificate of Registration: NY Dept of Labor.
New Jersey Apparel Industry Certificate of Registration: NJ Dept of Labor & Workforce Dev.
7. Other Requirements
There may be other city and local permits, licenses, and requirements you’ll need depending on how and where you operate, and whether you have employees. For example, if you work from home, you may need an occupational permit. If you have a burglar alarm on your storefront, you may need an alarm permit. If you remodel your retail space, you may need a building permit. If you have employees, you’ll likely need worker’s compensation insurance, among other things. Some cities also require you to report taxable business assets.
California has an informative interactive website to help get through the maze of additional requirements that may be needed: Cal Gold Permit Assistance. New York City has a similar interactive site: New York City Business Wizard. Another good resource is the SBA which sets forth requirements per state: SBA Website.
© 2017 by Anne E. Kearns (visit www.annekearnslaw.com)
This article is for informational purposes only and not meant as legal advice. Always contact a lawyer when seeking legal advice.