Many creatives dream of starting a clothing business or a fashion line. If you have decided to take the plunge and launch your own clothing brand, we want to help you succeed.
The number of considerations you make before starting a fashion business may seem overwhelming, so we have put together a step-by-step guide to help you understand the legal side of the process.
Are clothing businesses profitable?
Clothing businesses can be extremely profitable thanks to high-profit margins and the ability to expand into new products and markets.
There is enormous potential in the fashion industry. With a great business plan and supportive advisors, you will likely succeed when starting your clothing line.
Should I set up my fashion brand as a sole trader, partnership, or limited company?
Deciding the legal structure of your fashion business is one of the first things you need to consider. Your business structure will dictate how you pay taxes, whether the business's financial details will be publicly available, and whether you have a structure to bring investors on board.
To choose the right business structure for your fashion company, you should take into account the following:
- Who is your target audience?
- What’s the type of business model you would like to run?
- What’s the cost of starting your business?
- What’s the price point of your products?
The most common legal structures for fashion brands are:
This is the fastest and easiest way to establish your own business. All you need to do is register as a sole trader with HMRC and fill in an annual self-assessment form. Once you hit a certain threshold, you must also pay National Insurance (NI).
Consider entering a partnership if you plan to go into business with others. Traditional partnerships are taxed in the same way as sole trader (on profits), and there is no upper limit to the number of partners who can join the organisation.
You must be aware traditional partnerships are governed by the Partnership Act 1890. As you may well guess, an Act passed in the reign of Queen Victoria is only somewhat suitable for businesses set up in 2021. Therefore, you must have a Partnership Agreement drawn up which sets out the following:
- The amount of capital contributed by each partner
- How will profits be shared
- The responsibilities and duties of each partner
- What happens if one of the partners resigns, retires, or dies
- How disputes will be resolved
- What type of business insurance do you need
The above is only a tiny sample of what a Partnership Agreement should establish. Our commercial law solicitors can advise you on any other terms that should be included.
Private limited company
A private limited liability company is an entirely separate entity from the people who established it. This means it can enter into contracts, buy property, and take on debt in its own name.
A company is owned by shareholders who are not personally responsible for any liabilities incurred by the business.
To set up a limited company, you will need Articles of Association, which you download from the LawBite template library for free.
How do I protect my intellectual property?
There are several ways to protect your creations from being copied by others. These include:
- Unregistered design rights
Copyright and unregistered design rights arise automatically, although you will need proof that the creations you want to protect are yours.
Your proof of copyright can be signed and dated copies of your drawings, photographs, and designs. It is best practice to have these kept safe by an Intellectual Property Solicitor.
Trademarks can consist of words, slogans, designs, letters, numerals (e.g. 501 Levi jeans), the shape and/or packaging of goods, internet domain names (e.g. your online store URL), smells, sounds, colours, and moving digital images.
It is advisable to work with an experienced intellectual property solicitor to register a fashion trademark, as there is a high risk that a similar trademark has already been registered. A solicitor can run extensive clearance searches and ensure your mark is registered in the correct Nice categories.
In addition, you can put a Confidentiality Agreement (also known as Non Disclosure Agreement (NDA)) in place to protect you from third parties, such as suppliers, from infringing your intellectual property rights.
Should I negotiate clothing manufacturing and fabric supply contracts?
The relationships with your suppliers and the manufacturers of your clothing business can make the difference between success and failure.
It’s a good idea to work on your relationship with your suppliers from the beginning when you are testing fabrics and creating sample lines.
It is crucial to count on a commercial law solicitor who can check your contracts with suppliers and manufacturers as they can swiftly spot if there are terms in the agreement that could adversely affect your ability to scale up and/or make a profit thanks to a fair wholesale price.
After receiving advice on the impact of particular contractual terms, you may be in a position to negotiate. If this is not possible, at least you can walk away from the deal and find a supplier who provides more favourable terms.
Starting a clothing website
Launching your online clothing store require you are aware of specific e-commerce laws.
No one expects you to have an intricate understanding of every type of e-commerce law; however, there are some key pieces of legislation and legal considerations you must be at least vaguely familiar with.
E-commerce laws that affect online fashion businesses
The following pieces of e-commerce business laws are likely to regulate your online business:
- The UK GDPR (General Data Protection Regulation) and Data Protection Act 2018: governs the protection of customer’s data, especially in terms of processing, storing, and transferring personal data
- The Electronic Commerce Regulations: sets out how you must communicate with your website users, including the requirement to display your website terms and conditions, provide clear information on pricing and delivery charges for your clothes, and identify the sender of any business communication
- Consumer Protection (Distance Selling) Regulations 2000: aims to protect consumer (the general public, not B2B) rights concerning online selling
Terms and conditions for a clothing website
There are two types of e-commerce terms and conditions your fashion store should cover:
- The terms and conditions that set out how you do business, and
- The terms and conditions for using your online clothing store
These don’t have to be separate documents; the information can be included in one policy. The most important is that your terms and conditions are visible.
To get started with your first T&Cs, you can download our free Terms and Conditions for the Supply of Goods to Consumers template. However, it’s best practice to discuss how it can be adapted to reflect your commercial needs. Using our affordable contract review service for a small cost, you can get your terms and conditions checked by a lawyer to ensure you’re protected.
What should the terms and conditions for my online fashion business contain?
Terms and conditions related to how you do business should cover matters such as:
- Shipping time frames and terms
- Return Policies
- Conditions of use
- Privacy disclaimers
- Payment terms and special fees
- Limitation of liabilities
- Product descriptions
- Intellectual property
- Cancellation policies
- External links to specific policies
The terms and conditions for using your website can include the following:
- Data protection (UK GDPR and Data Protection Act 2018), online privacy, and consent policies
- Information regarding the operator of the website
- Limitation of liability for website errors
- The law that governs the website
- Intellectual property
- Prevention measures for unauthorised access
Get legal assistance from LawBite
Ensuring you have all the legal aspects of owning a business in place will give you a competitive edge and allow you to focus on the fun elements of running your business, such as designing your line, taking your brand to market and scaling up.
LawBite has experience helping startups and small business owners achieve their commercial ambitions. To find out how we help you launch your fashion business and provide affordable and easy to understand legal advice, book a free 15 minute consultation or call us on 020 3808 8314.