So you want to open your own clothing store to market your own sweet designs or garments, or curate collections from other labels. But where do you start? In this article, we set out some important legal issues to consider before opening a clothing store.

Decide on a Business Structure

Before opening a clothing store, you will need to decide what kind of business structure is best for you. Some commonly used structures you can choose from include:

You would also share any profits with the other partners. However, you are also jointly liable with the other partners for the liabilities of the business. This structure can also be useful if you are thinking of separating your personal assets from your business assets, protecting your business assets and expanding your business and attracting third-party investment.

 

Structure Advantage
Sole Trader This business structure is the simplest and cheapest way to set up your business. It is ideal if you want to control and manage the business on your own. You receive all the profits, but are also responsible for all debts.
Partnership If you wanted to go into business with a fellow designer, or share the costs or business with others, you might want to set up a partnership structure.
Company While a company structure can be slightly more costly to maintain, liability for shareholders is limited to paid share capital only.

 

Structuring your business is heavily dependent on tax and accounting factors. You should seek tax and accounting advice before deciding on which business structure is most suitable for your circumstances.

Get the Permits You Need

Once you find the perfect place to open your clothing store, you will need to apply for various approvals from the local council. These may include approvals to:

  • conduct commercial business on those premises;
  • carry out any development work; or
  • certify that the development meets council requirements.

Your local council’s planning officers can tell you what approvals you need, and how to obtain them. This process can be time-consuming and costly, so make sure you conduct careful research and allow plenty of time to acquire any consent.

Uphold Your Consumer Obligations

You should operate your clothing business in line with your legal responsibilities under the Australian Consumer Law. These include guaranteeing that your clothes:

  • are of acceptable quality;
  • are fit for the intended purpose; and
  • match descriptions made by advertising or packaging.

Make sure the prices of your clothing are also clearly and accurately labelled and advertised.

If you are operating your business in NSW, you will also need to comply with the Ethical Clothing Trades Extended Responsibility Scheme. This Scheme imposes obligations on clothing retailers and suppliers to maintain and submit records on clothing manufacture, to ensure outworkers are not exploited. Outworkers are people who manufacture clothing products outside registered factories, like in homes or unofficial factories.

You are only exempt from this Scheme if you have signed up to either the voluntary Retailers Ethical Clothing Code of Practice or Ethical Clothing Australia (formerly the Homeworkers Code of Practice), which achieve the same outcome as the Scheme.

Treat Your Workers Fairly

You must comply with workplace rights and obligations under the Fair Work Act when hiring and dealing with employees. Employees of clothing retailers fall under the General Retail Industry Award, which covers matters such as minimum pay, appropriate breaks for staff on shift, and superannuation requirements. The award also provides details of penalty rates. These include:

  • 25% loading for hours worked after 6 pm on weekdays and Saturday, for full-time and part-time staff;
  • 95% loading for hours worked on Sunday, for all employees including casuals; and
  • 150% loading for hours worked by casual employees on public holidays.

Before opening a clothing store, take the time to become familiar with your employer rights and responsibilities. Use the Fair Work Ombudsman website for small businesses as a starting point.

Consider Registering a Trade Mark or Design

Registering your business name and logo as a trade mark can be an effective way of distinguishing your identity in the fashion marketplace. Having a registered trade mark also helps consumers to develop loyalty and goodwill to your brand. You can apply for registration with IP Australia. It can be a costly and time-consuming process, but registration lets you take legal action against anyone wrongly using your name. Doing this before opening a clothing store can potentially save you money and protect your brand down the track.

If you are selling your own designs in your clothing store, you should also consider registering your designs with IP Australia. Your design must be new and distinct, and not already made public, to be eligible for registration. Design registration can be an expensive investment, but it is one of the best ways to stop other labels copying your work and protect your brand’s integrity.

Ensure Your Manufacturer Signs an NDA

If you engage a third-party manufacturer to turn your designs into tangible garments, you will probably be giving them access to your commercially-valuable ideas. To make sure your designs, patterns, and other information are kept confidential, get your manufacturer to sign a non-disclosure agreement (NDA). This is a legal contract that requires the manufacturer not to disclose such sensitive information without your permission.

Key Takeaways

Opening a clothing store can be an exhilarating and empowering journey, but make sure you are aware of all the legal issues involved. Getting these right can be complex and confusing. However, if you want to start off on the right foot with everything correct, call LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

Vaishnavi Prakash
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