Summary
Licenses and permits are like fuels. Without proper documentation, you cannot start on your eCommerce journey. When it comes to starting your clothing line business in the USA, this part is crucial. Hence, today, we’ve made a list of licenses and permits needed for an online apparel business in the USA.
Before starting any business, deciding on your business entity is crucial.
There are a number of business entities as follows.
– General Stock Corporation
– Close Corporation
– Professional Corporation
– Nonprofit Mutual Benefit Corporation
– Nonprofit Public Benefit Corporation
– Nonprofit Religious Corporation
– Common Interests Development Association
– Limited Liability
– Limited Partnership
– General Partnership
– Limited Liability Partnership
You can also choose to be the sole proprietor of your company.
However, if you are unsure of the business identity, a legal counsel is highly recommendable to avoid future hurdles and maximize your profit seamlessly.
If you plan to open only an online store, you only need a few licenses and permits, which are easy to acquire. On the other hand, if you also decide to open an offline store alongside, some additional licenses and permits add up.
Also Read: How to Start a T-Shirt Printing Business
Note 1 – The licenses we will discuss in the section to follow will be common for both online and offline businesses. The section following this section will discuss some additional licenses or permits for an offline business.
Note 2 – Some of the licenses may vary from one state to another or even from one county to another within the same state. However, there are some common licenses that you will learn here – especially those for offline stores. If you are new to the clothing industry and don’t know how to start a uniform business, then our latest blog will help you with the same.
What Permits Do You Need To Open a Clothing Store In The USA (Online or Offline)
1. Incorporation Certificate
Whether you have an online or offline business, an incorporation license is important as it shows your company’s date of incorporation or formation.
It is proof that your company ‘exists’ in real life. It also shows your business entity type – whether GP, LLP,or LP, etc.
To acquire this, you should file a GP-1 form or ‘Article of Incorporation’ depending on your business entity type. In general, filing a statement of partnership authority (or Form GP1) would suffice for sole proprietors or General Partnerships.
If you own an LLP, LP, or other business entity, you will need to file articles of incorporation according to the entity type.
2. Business License (or Business Tax Certificate)
A business license lets you conduct your business anywhere within your city limits. Virtually all business owners need this license.
In some states like California, you may need to see ‘County Unincorporated’ for business outside your city limits. For example, if you live in Agoura Hills but want to run a business in Nevada city, you may need to search for ‘ Nevada Unincorporated’.
3. Fictitious Business Name (Doing Business as Statement)
If you run your business under a name other than the registered ‘legal name, ‘ a fictitious business name (DBA) certificate is mandatory. This certificate is also known as a ‘Certificate of Assumed Name’ in some states, like New York.
For instance, if you use ‘Bill Smith Apparel Store’ in your documents of incorporation, but want to run your business with any name other than this – say ‘Bill Smith Clothing Store’; a DBA certificate will be required. Also, the regulations around this license may also vary from state to state. In general, you can file this certificate when filing documents for incorporation. The statutory requirements to get this certificate are often easy to follow and fulfill. It is recommendable to consult your private legal counsel or an attorney to understand the implications of this practice.
Note: Sole proprietors or general partnerships don’t need to file this certificate. They just need to file a business certificate with the county clerk, as discussed above.
4. Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a federal tax ID number issued by the Internal Revenue Service (IRS) that identifies your business as a distinct tax identity. Technically, it is not a license but an identification number that ensures your business collects payroll tax and complies with all tax rules and regulations.
Therefore, if you plan to hire employees down the road, expand your business, or open multiple business accounts, an EIN is extremely important to avoid any hassle while filing business taxes in the future.
5. Sales and Use Permit (Seller’s Permit)
While a seller’s permit is 100% mandatory for an offline business owner, almost all ecommerce businesses should also acquire it. Nearly all states require you to produce this license as proof that you sell products online legally and comply with all laws. So, ensure that you get this license ready even if you are selling digital or intangible products or services online.
The requirements and fee to obtain this license can vary depending on your state in the USA. Check with your Secretary of State or Department of Revenue to ensure you fulfill all the conditions properly and obtain this permit easily.
6. State Tax Information Forms (Sales Tax License)
If you sell taxable products and services, you must obtain appropriate State Income Tax Forms from the Franchise Tax Board. Filing this state tax information form will help you get a sales tax license. And it is this sales tax license that you will need to fill out your annual Business Income Tax Statement (income tax returns).
Note: As sales tax differs from state to state and even from county to county, you must comply with the rules properly. You can always check with your country clerk or revenue officer for that.
7. Home Occupation Permit
A home occupation permit is necessary for businesses operating from their homes. While a home-based ecommerce business can exempt businesses from commercial taxes, but cannot from this license. In some states, it is also ‘Zoning Approval’. Filing for a Zoning Approval ensures that your neighborhood is zoned for home business – and your business is not complying with all parking regulations, permissible noise level regulations, etc.
Check with your city’s government website or visit the office in person to know the regulations you need to follow to acquire this permit.
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Permits and Licenses Must for an Offline Clothing Store
Before discussing the permits and licenses for offline businesses, you must understand one thing very clearly. These permits and licenses are subject to the type of your business.
Further, these licenses are also classified at various levels – Federal, State, Regional, County, and City. So, always check with your local jurisdiction to ensure that you have obtained all permits and licenses to avoid any issues ahead.
Note: While some of the licenses and permits required for an online business can also be required, all of them are a must for an offline business.
So, let’s discuss a few additional permits and licenses that you may need now:
1. Burglar Alarm Permit
If you feel that your clothing store requires a security system for alerts – like a burglar alarm; a permit is required. To get this permit, you should contact the police department of your state (or your county to be specific).
2. Business Personal Property Statement
Very rarely, you may need to file this annual statement in case you have an ecommerce business; you will definitely need to file it in case you have an offline store. This is because the property you use in business operations – machinery, equipment, trade fixtures, etc. – is taxable and subject to assessment.
Note: Filing a property statement for those businesses with personal property and fixtures costing less than $100,000 is generally not mandatory. Even if you have an offline store, but your property’s worth doesn’t exceed this amount, you may be exempt from filing this statement.
Again, this upper limit of property’s worth varies from state to state. The above example applies to Los Angeles, California. However, the amount can change for another state. Therefore, checking with your local jurisdiction beforehand is a must.
3. Hazardous Waste Management Permit
In case you are handling any hazardous materials, generating or treating hazardous waste, storing that waste in underground storage tanks or above ground in your store; clearance from the Environmental Department is required. This permit is subject to local CUPA/HMUPA, and you can visit the Fire Department located in your county or state to learn about its rules and regulations.
4. Occupational Safety and Health Permit
If you have employees working at your store, you must be ready for an Injury or Illness Prevention Plan. Your state offers a free consultation service to help you determine how you can assist employees with preventing workplace hazards or unsafe working conditions.
5. Wage/Hour Laws
Not exactly a permit, Wage/Hour Laws are the rules and regulations you must comply with laws establishing minimum standards for wages, hours, and working conditions. To ensure you comply with them all, contact the Labor Commission’s Office of your city to know all the rules and regulations.
6. Workers’ Compensation Plan
Maintaining Workers’ Compensation Insurance coverage is necessary for businesses with employees, primarily offline businesses. They can do it on either a self-insured basis, provided through a commercial carrier, or through the State Workers’ Compensation Insurance Fund.
Note: In general, this part is the most expensive. So, you must think and plan well before you choose a particular insurance scheme.
All Set to Get Licenses and Permits for Your Clothing Line Business?
Getting proper licenses and permits for your clothing line business will save you from unnecessary issues and problems that can present challenges at any point in time. Hence, ensure you have all the required licenses and permits based on your business entity type and mode. For the first-time entrepreneur, who don’t know how to start an online clothing store, our quick guide can provide the assistance you need
Note/Disclaimer: Though all the main permits and licenses you need are mentioned above, it is ideal to refer to your city’s government website or visit your local jurisdiction office for confirmation and cross-verification.
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