Starting a new fashion brand is an exciting venture. There are so many moving parts from brand development, design, finding and building a relationship with suppliers and manufacturers and then finding distributors and customers, so it is essential to get the right legal structure and advice, early.
Here’s a guide to the legal requirements you need to consider when starting your fashion brand in Australia.
Choose your fashion business structure
Choosing the right business structure is crucial for any business, including a fashion brand. The structure you start will can affect your potential liability and risk if anything goes wrong. Some common structures for fashion brands are sole trader and company structures.
Liability: A company can be a great option because it means that the company will usually be liable for losses. For example, if your clothing causes customers to have allergic reactions causing your business to be liable for medical costs. If this were to occur but you are set up as a sole trader, you will be liable personally which could risk your personal funds or family home. If your business is set up as a company, only the company assets can be accessed in most circumstances.
Tax implications: There are also tax implications for the business structure you pick. For example, a company is subject to a fixed tax rate in Australia.
Insurance: Keep in mind that having the right insurances in place can help minimise liability risks, so it is a risk analysis for you as to which structure is most suitable.
We recommend seeking legal and financial advice to determine the best structure to start with, as re-structuring later can be costly.
Once you have chosen a structure, we suggest considering brand name before registration.
Choose a fashion brand name and protect it with registration
Your brand name is your identity, so it is essential to pick the right one and protect it with registration in the countries you are looking to trade in.
Why selecting a registrable and available trademark is critical
A common issue we see with new fashion brands is that they tend to select a name that is already taken or is descriptive or likely to be needed by others in the industry.
Many businesses think that brand name problems can be easily fixed but we have seen many cases where an entire re-brand is required to avoid legal issues. The consequences of picking a name that is the same or similar to someone else already uses can be significant. For example, you might be required to provide a portion or the entirety of your profits from benefitting from using the name.
How to select a good brand name and trademark
It is always recommended to seek a lawyers assistance in the early stages of selecting a brand name. To make the most of your lawyers time, we recommend taking some preliminary steps when coming up with your name shortlist:
- Check whether the name is already registered with ASIC.
- Check the name and variations of the name IP Australia’s trade mark search as an initial first step. Note that just because there are no ‘exact’ matches does not mean that the name is is available.
- Do a Google search for the name to see if any existing businesses have the name.
We recommend coming up with a list of 5-10 names and then seeking some initial legal advice on which ones are most likely to be registrable. Your lawyers can also give you tips on how to choose a name that is more likely to be registrable if your shortlist isn’t suitable.
Also be sure to let your lawyer know if:
- you are planning on using a logo (and what that might look like); and
- if you are planning on trading in Australia and which key international countries you are thinking of trading in as this can affect the required trademark searches.
Registering the trademark
Once a good name is selected, it’s important to protect your brand by registering it as a trademark in the countries you are planning on using it. This is to ensure you can rely on it if someone copies you or if someone claims you are copying them.
You don’t necessarily have to register in all of the countries you are planning to use it in right away, but getting the initial legal advice and knowing your risks and next steps are important to know.
If you’re an Australian business, it is crucial that your Australian trademark is done correctly. Your first registered trademark can have a flow-on effect on all of your international trademarks and cause significant additional costs. Our lawyers can
Register your fashion business
Once you’ve chosen a brand name, consider whether you need to register a company or a business name, or both, with ASIC and obtain an Australian Business Number (ABN). An ABN is a unique 11-digit number that identifies your business to the government and community.
Our lawyers can assist you with registering your business name with ASIC and help you apply for an ABN.
Protect your fashion designs
If you have very unique designs, you may wish to register it as a ‘registered design’ with IP Australia. The protection granted by a registered design is somewhat limited as it is quite a narrow scope of protection.
Comply with fashion labeling requirements
Correct labeling is essential for textiles and clothing products, and failure to comply with labeling requirements and other mandatory standards can result in significant penalties and legal consequences should any damage or injury be caused by your products.
Our lawyers can help provide advice to ensure that your products are labeled correctly according to the regulations of the Australian Competition and Consumer Commission (ACCC).
Consider environmental impact
Sustainability is a growing concern for consumers, and it’s important to consider the environmental impact of your business. You may wish to consider implementing an Ethical or Responsible Sourcing Policy to help you manage this process and ensure that you are sourcing safe products and materials.
Review your contracts
You will need contracts with your suppliers, manufacturers, wholesalers and distributors to ensure that you are covered for any issues caused in the supply chain. For example, if you have a wholesale customer that is purchasing bulk goods but then your manufacturer can’t provide the goods in time, you could be liable to the wholesale customer.
Having a trustworthy lawyer that reviews all of business contracts can really assist in making sure these contracts are consistent or to let you know how to lower the risk of breach by managing your internal processes.
Don’t forget to get your website host, website designer or developer contracts reviewed as well.
Implement customer-facing terms and policies
As a fashion brand, you need to comply with several legal obligations, including consumer protection laws, intellectual property laws, and privacy laws. We highly recommend getting up to speed with Australian Consumer Law so you know what your customers are entitled to, otherwise there can be fines and penalties. The ACCC has many great resources to help you better understand your obligations.
You need to ensure that your Returns Policy, Shipping Policy, Store Credit and Gift Card Policy comply with Australian Consumer Law. You should also have Online Shopping Terms in place if you plan to sell online. Our lawyers can draft all of these documents in compliance with Australian law so that you have peace of mind.
Key takeaways
Starting a fashion brand in Australia involves complying with various legal requirements. Our lawyers at The Legal Shop can assist you with every step of the process.
Book a consultation with us today to speak to one of our experienced lawyers about starting your fashion brand and ensuring that you comply with all legal requirements.
