To be a successful fashion entrepreneur, you have to remain on the right side of the law. No entrepreneur wants to start their business and be faced with legal issues, that could have been avoided, along the way.
For your fashion startup to grow and be attractive to investors for expansion, there are legal steps you must take to start your business right. Here are 5 legal steps you need to pay attention to in growing your fashion brand.
Top 5 Legal Mistakes to Avoid in Growing a Fashion Business.
1. Not Licensing or Incorporating Your Business.
This is one of the most common mistakes startup business owners make. As far as you hope to run your fashion business for years rather than months, you need to set it up as a limited liability company or a sole proprietorship.
Doing this also helps put your business in the right tax category and protects your personal assets from liabilities your business might suffer.
In setting your business up the right way, you also need to pay attention to separating your personal finances from business finances. Not doing this can lead you, as the fashion entrepreneur, to being responsible for business debts or claims against your company.
2. Not Working with Contracts.
Nothing you do in business is legally binding except there is a contract involved. When entering into business with independent contractors or employees, you must draft a legal document to that effect to avoid problems that might arise in future.
The terms of every deal and the responsibilities of every party needs to be clear and well-detailed. Typically, the intellectual property of an independent contractor will belong to them if no clause in your contract states otherwise. This is one reason why you need contracts.
Contracts are the best legal covering to use if you need to collaborate with anyone for your business. A handshake alone will not cut it.
3. Not Protecting Your Intellectual Property.
As a fashion entrepreneur, you must protect your intellectual property. Protecting it means that you have exclusive rights and creative control over the use of your creation for a stipulated period.
Apart from protecting things like your original designs for outfits, the method of achieving a result for an outfit, and the likes, you should also protect your brand name. It is one of your greatest assets.
In addition to a corporate name reservation with the CAC, you also need to register your brand name globally as a trademark. Also, in protecting your intellectual property, make sure to never communicate confidential information about your brand to various people without a non-disclosure agreement (NDA).
Related Post: Top 8 Mistakes to Avoid in Building a Fashion Brand.
4. Not Filing Tax on time.
As a fashion entrepreneur, you have so many things to do daily in the running of your fashion business. This sometimes means you forget to file your tax returns on time.
Doing this leaves your business open to federal and state fines. Tax is one thing you should never play with as a fashion startup, so, if you have issues with filing your tax returns, contact a professional.
5. Not Having Clear Guidelines.
Always have clear guidelines for everything you do in your fashion startup. This can save you a whole world of trouble in case of issues arising between you and employees or partners in the future.
“Taking shortcuts when forming a business can seem like the easiest or fastest solution in the moment, but it can also put business owners in a number of dangerous situations. Paperwork often feels daunting, but taking time to do things the right way saves businesses from major headaches down the road.” – Paul Kassabian.
It might seem hard and tiring to have everything in writing, but doing this protects your business in the long run. Always get the help of a good lawyer in everything you do in your business so you do not miss out on certain clauses or important phrases your guidelines should have.
The most important mistake any fashion entrepreneur should avoid is waiting for an issue to arise before getting the help of a legal adviser. Always make sure to have a strong legal foundation for your startup fashion business.