Someone wise once told me (and it was probably my Mum), if you’re going to do something, do it right, or don’t do it at all. It’s a message I’ve carried with me through life.
When I started out making things to sell, I was clueless. Let’s admit it. Most of us are when we decide to start something new. It’s been a process – a steep learning curve – and I’ve been lucky to have some fantastic advice and support along the way.
But from the very beginning I was committed to ‘doing it right’.
I’ve had my share of hiccups and faux pas along the way, but I am happy to say that Little Toot Creations is now a registered business. I hold an ABN and have a registered business name. Although I will admit my record keeping leaves a lot to be desired (at the moment), I do report all of my meagre earnings to the tax man. I try as best I can to be original and to observe other people’s intellectual property rights. I’m a stickler for the rules – just ask my husband – it’s something that drives him a bit nuts, I think!
I am by no means an expert in running a handmade business, but I’ve learnt a lot along the way, and my ultimate goal (apart from seeing Little Toot Creations succeed) is to see the handmade industry establish itself as a quality, professional alternative to mass-production.
And so, here is my little checklist.
Hobby or business?
I could write a whole post on this one! It’s the question we all seek answers to when we first start out. A good place to start when making your own decision about this is the Australian Taxation Office (http://www.ato.gov.au/corporate/content.aspx?doc=/content/00199712.htm).
Generally speaking, if you conduct your operation in a business-like manner and intend to make a profit (no matter how small), then it is considered a business.
For me, it took a few months to take that step and formalise my operation. But when I weighed up the facts – I had a business name, a logo, labels for my garments, I marketed my product, keep customer lists and measured myself against other businesses in the industry – I decided that I was, in fact, a business.
But regardless though of whether you choose to become a business for tax purposes, or to consider yourself a hobbyist, there are still other rules and requirements you must meet if you’re selling a handmade product.
Registering your business name
In NSW (and I presume in most other states), it is compulsory to register your business name if you intend to trade under a name other than your own. For example, if I were to operate only under the name Rebecca McAlister, then I wouldn’t need to register. However because I am known as Little Toot Creations, I am required by law to register than name with the NSW Department of Fair Trading (see here http://www.fairtrading.nsw.gov.au/Businesses/Business_names.html).
The only exception to this is if you trade ONLY on the internet.
Business name registration does not protect your name from being used by others. If you want this protection, you need to register a trademark.
Australian Business Number
If you decide to become a business, then you will need to apply for an Australian Business Number. Don’t panic – that doesn’t mean hours and hours of paperwork, registering for GST and completing business activity statements. Visit the Tax Office website (http://www.ato.gov.au/content/57752.htm) to get feel for what’s required and talk to your accountant if you’re unsure what to do.
There are a couple of reasons to get an ABN. Firstly, so that other businesses you deal with (for example wholesale customers) don’t withhold 46.5% of their payments to you. But secondly, because having an ABN opens many doors in terms of purchasing your supplies at wholesale rates and setting up trade accounts. You also won’t be able to register a .au domain name for a website without an ABN.
Whilst not essential (unless you’re attending markets), a public and product liability insurance policy is something you should seriously consider.
What if something you made caused someone an injury? Could your family wear the emotional and financial burden of a claim against you?
There are quite a few insurers who now cater for our type of small business. Shop around, get quotes, and weigh up which one is right for you.
Care labelling for clothing and textiles
Did you know that there are legally-enforceable standards that apply to the construction and sale of clothing and textile products in Australia?
Regardless of how small you are, or whether you’re a hobby or a business, you need to comply with the Mandatory standard—Care labelling for clothing & textiles (http://www.productsafety.gov.au/content/index.phtml/itemId/971636).
Basically, the standard requires you to accurately label all textile products with their care (wash temperature, can be tumble dried etc) and content (100% cotton etc) information. Some items (such as reversible clothing) do not have to carry a sewn-in label but you still have a responsibility to inform consumers about how to properly care for their purchase.
The mandatory standard for textiles labelling covers:
· household textiles
· piece goods made from textiles
· plastic coated fabrics
· suede skins
· leathers, and
And it doesn’t just apply to the manufacturer, or creator of a product – it also applies to retailers who on-sell. They have a duty to ensure the items they are supplying comply with the standard.
Supplying clothing and textiles that do not comply with this mandatory standard can make you liable for heavy fines and recall of non-compliant products.
Nightwear for children
Like the care and content standard, the Mandatory standard—Nightwear for children exists to protect consumers. And in this case, our children.
Walk into any fabric store and pick up a bolt of cotton flannelette and it will clearly state on the label – not suitable for children’s sleepwear. That is because – contrary to popular belief – cotton is a highly flammable material.
If you want to make and sell children’s nightwear (sizes 00-14), then you need to comply with the standard. This means all garments need to be appropriately labelled (either Low Fire Danger or High Fire Danger), their cut and style needs to comply (not too loose etc) and the fabric they are made from must be tested for flammability (particularly fabrics with a pile, like fleece or flannel).
It is quite complex, and if you’re serious about selling onesies, pyjamas or children’s sleeping bags, then I recommend purchasing a copy of AS/NZS 1249:2003 Children’s nightwear and limited daywear having reduced fire hazard.
There are various testing labs around the country that will assess your garments for you, to ensure you comply.
Copyright, patents and all that jazz
It’s been a hot topic in handmade circles in recent months and someone should (seriously) write a book on it.
I’ve written to the Australian Copyright Council seeking clarification of the issues that plague the handmade industry – it’s been a month and I’m still waiting on a reply.
I’m no expert in this area (and I truly wish I was!) but I will just say this.
It is your responsibility to act RESPECTFULLY and RESPONSIBLY when using someone else’s pattern or design. If you’d like to make items to sell, contact the pattern maker or designer. I do, and in most cases they are happy to grant permission. Just changing one or two things doesn’t get you around the law – so take care.
With regards to trademarks and patents, one of the biggest breaches I see in handmade circles is in the sale of ribbon blankets, or taggies. I have the team at Handmade Kids to thank for bringing my attention to this one, when I first started making mine. There is a company in the US – called Taggies – who hold trademarks on the name taggies (and also taggie). They have also patented the technique of folding a piece of ribbon in two and stitching it between two pieces of fabric. To the best of my knowledge, this doesn’t preclude Australian sellers from making ribbon blankets, but it does prevent them from calling them taggies or taggie blankets.
It’s these sorts of issues that we, as handmade sellers, need to make ourselves aware of. Network, chat to other handmadies, join forums, ask questions. It’s the only way to get answers.