Indie Business 101: Getting Started

Exclusively For Wholesale Brands And Retailers


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by Mita Patnaik

Indie Business 101: Getting Started


Chances are you are well on your path to creative entrepreneurship.  Most likely it started off as a hobby or on the side as you toiled away at your day job.  Now that you have had some success selling your products and getting asked if you wholesale, you are contemplating jumping into it full time.  Selling wholesale to retailers is certainly the fastest way to build a sustainable business and build a brand, all at the same time.  Your retailers get your products in front of customers that you may not be able to reach on your own.  As your brand gets more exposure, your company website gets more traffic as customers want to know more about your brand. In a way, wholesale becomes a channel for advertising.


But in order to reap the benefits of this channel, you need to be prepared to be a real business. Your branding, website, website copy, marketing collateral, line sheets, product packaging – all convey a message. Before your retail buyers commit on carrying your lines in their stores, they want to ensure that you are a real (legal) and viable business and that will be around for a while. You need to prepare for taking your business to the next level.


Take heart! While today's post contains quite a few things that designers are unfamiliar with, it's not complicated.  It’s been done successfully by designers just like you. Over the next few months, we will de-mystify how to get started, manage and thrive at running a wholesale business. We will share resources, stories of real life designers, their know-how and expertise, and how they have overcome challenges to build their wholesale businesses.


Here are some fundamental concepts that you should understand as you get started.



Business Entity Type, EIN, DBA and other acronyms


One of the first decisions you make as a business owner is the type of business entity you want to establish, which determines your liability, tax implications as well as paper work and documentation required for the life of the business.  In the USA, you get to choose between Sole Proprietor, Corporation (C or S), Limited Liability Partnership, Limited Liability Company or a Cooperative.


The US Small Business Administration site  is a good resource to explore the different types of business entities and decide on what works for your situation.


If you continue as a sole proprietor, you have the option of filing a DBA (Doing Business As) using a brand name or trade name which can be different from your personal name.  For e.g if you are Judy Smith and you want your business to be know as Judy’s Handmade Creations, you will need to file a DBA. 


DBA name is the least expensive option for sole proprietors to do business with an assumed name without having to file an altogether new business entity.  DBA also allows an LLC or Corporation to operate multiple businesses without having to form a new legal entity each time. In the USA, the law varies from state to state, but generally the DBA is registered at a county level.


Prior to incorporation, you need to obtain a Federal Tax Id or Employment Identification number (EIN) for your business. It’s the equivalent of Social Security Number for your business. The IRS uses the EIN to uniquely identify your business and it must be referenced in your business tax filings. 


Besides your dealings with the IRS, you will also need the EIN for sourcing supplies at wholesale prices. Anyone selling wholesale will ask for the buyers EIN to verify  it ‘s a valid business (not a consumer trying to buy wholesale ). While you can provide your SSN instead of EIN, you probably don’t want to give out personal information. So it makes sense to get an EIN even if you operate as a sole proprietor.


Bizfilings and Mycorporation are great online resources for obtaining your EIN, incorporating your business or filing a DBA in your state.


License’s and Permits


In most states, you will need licenses and permits to operate a retail or wholesale business. The most common permit for selling products is the “sellers permit” also known as sales tax license or reseller's permit. Check with your state or local authorities for any additional license and permit requirements. For e.g the city of San Francisco requires that every business must possess a “Business Registration Certificate” in addition to the sellers permit. Googling " your city name + business license + permit" will give you a list of resources specific to your city.


Bank Accounts


If you are a sole proprietor, you should have a separate bank account to operate your business. Banks will need your EIN and DBA document for opening your bank account. Keeping you business income and expenses separate from your personal account will save you a ton of work when it comes to filing your taxes.


If your business is incorporated as a LLC or Corporation, you can setup you business account using your EIN and incorporation documents.


Partnership Agreements


While this may not apply to all everyone, this is an important step for those of you going into business with a partner. While it is great to have a business partner that complements your skills, do take into consideration your values, goals and ideas. If it isn’t a match, think about hiring the person as a consultant.


Hire a attorney to draft a written partnership agreement. Most partnerships fail if the expectations, roles & responsibilities, compensation and exit options are not clearly outlined and agreed upon at the outset. With time, priorities change and one of the partners might want to get out and do something different. A written agreement should outline all the above scenarios in great detail. When things are spelled out in black and white, it makes the partners really think if it’s acceptable to them and they might want to talk thru certain sticky bits prior to signing the agreement as opposed to fighting legal battles later.


Here is a great article on how to start a business with a partner.


I know there's a lot here, but be encouraged: Tara told me that she registered her wholesale yarn business (DBA, EIN, reseller's permit) in less than an hour for around $20. Starting a bank account is simple and (relatively) painless and your partnership agreement is downright delightful (well, it is if your partner is delightful). Besides that, you'll need to have your business paperwork ready when you register with Vianza (click "request an invite"), because just like your wholesalers, we have to verify that you're a legal entity. 


Next week we're going to talk about getting your accounting system set-up and preparing with copyright + trademark...and then, the fun stuff of tools, pricing, and marketing. 

Got an Indie Business question? Ask in the comments and we'll answer it!


Photo Credits:: fangblog