How To Open a Jewelry Store
Jewelry designers know that there is more to having a thriving jewelry business than creating beautiful pieces.
Bangle maker Carolyn Rafaelian knows this all too well. She started Alex and Ani in 2004 working out of her father's jewelry shop. She was wildly successful, and Forbes named her as one of the Richest Self-Made Women in America.
However, her business suffered due to rapid growth and problems with financing. As a result, the company filed for bankruptcy protection in 2021.
What can you learn from Alex and Ani? Before opening your doors for business, organize your legal, financial, and business structure to handle your growth.
Outline a Plan for Your Shop
A goal without a plan is just a wish. So be sure to commit to your goals by creating a business plan. Not only does a business plan identify what you need to operate your company, but it also attracts financial investors.
A business plan covers many areas. In starting a jewelry business, you will want to address:
- What will you call your business?
- Do you need a storefront? Are you selling jewelry online?
- What type of jewelry are you selling? Costume jewelry? Precious metal or stones?
- Do you make only one type of product, for example, rings? Or do you make a variety of pieces?
- Who is your target market? How will you reach potential customers?
- Are you an owner/operator, or will you hire staff?
- Do you have your own jewelry studio, or are you buying jewelry pieces from others?
- Who is your competition? What makes your jewelry different?
- What is your startup capital need and ongoing operating costs?
- What prices will you charge?
- What profits do you project?
- How can you scale up?
Traditionally, jewelry stores calculate prices based on the cost of goods plus labor and markup. See what your competition charges for similar items.
Your business plan is flexible. Therefore, you can update it as you face business challenges or find new opportunities.
Define Your Brand
Your jewelry brand separates you from your competition. Think about a unique name, logo, slogan, and brand colors to set your brand apart.
Search and Register Business Name
A critical step in defining your brand is choosing a name for your business. You will want a name that is catchy and not used by anyone else.
First, check with your Secretary of State's records to see if the business name is available. Then, search the Trademark Electronic Search Service (TESS) database at the United States Patent and Trademark Office (USPTO) to check if the name already has a trademark.
Once you know your name is available, you can register the name with your local Secretary of State's office. To do this, file a certificate of incorporation for a corporation, limited liability company (LLC), or partnership.
Alternatively, if you operate your businesses as a sole proprietor, you file a fictitious name. The fictitious name or "doing business as" (DBA) is filed at your state, city, or county office.
Trademark Business Name, Logo, and Slogan
After you have selected and searched your name, protect your brand with trademark registration. A registered trademark has a "®" after the name. It signals to others that they cannot use this name.
Trademark law also protects a logo or slogan you create for your business. If you want exclusive rights to a name, logo, or slogan, be sure to register them.
A logo is an image that uniquely identifies your business. For example, think of the Pandora name brand with a small crown over the "O."
An advertising slogan is a memorable phrase or tagline that you associate with a business. For example, Jared® Jewelry's slogan is "He went to Jared."
You apply for federal trademarks at the USPTO. According to the USPTO, "A trademark can be any word, phrase, symbol, design, or a combination of these things that identifies your goods or services. It's how customers recognize you in the marketplace and distinguish you from your competitors."
An intellectual property lawyer handles trademark, copyright, and patents. Therefore it is wise to consult an attorney to safeguard your brand.
Set Up and Register a Formal Business Structure
The next step is choosing your business structure. You can operate your jewelry business as a sole proprietorship. Alternatively, you can form a corporation, limited liability company (LLC), or partnership. There are advantages and disadvantages to each.
A sole proprietorship is a one-person, unincorporated company. You include all business income or losses on your individual income tax return. But, as a sole proprietor, you are personally responsible for all business debts and lawsuits against your company.
There are other options to avoid personal liability. For example, by creating a formal business structure, you can insulate your personal finances from the company's operation.
A corporation is a business entity that segregates business activities and liabilities of the business from the business owner's personal assets. Therefore, if someone sues your company, they can only go after the corporation's assets.
However, there is an issue of double taxation. As a corporation, you pay taxes on the corporation's profits. Additionally, you pay taxes on any income you receive from the corporation on your individual tax return.
You can apply to the IRS for an S corporation to get a special tax status. This election allows you to pass -through your profits and losses to your personal income tax return. This way, you eliminate double taxation.
Limited Liability Company (LLC)
A limited liability company (LLC) allows for pass-through taxation similar to a sole proprietorship. It also provides the liability protection of a corporation. For a one-person business, an LLC is a popular option.
If you have a partner in your jewelry business, you might consider a partnership. However, like a sole proprietorship, you and your partner are personally liable for the business operations.
Therefore a corporation or limited liability partnership is a better choice for you and your partner.
Choosing a business structure has many legal and tax implications. You may want to consult a small business attorney to select the correct entity.
Register Your Business Entity
Once you choose your business structure, you register it with the Secretary of State. You can find the formation documents for your business entity at your Secretary of State's office.
This registration protects your business name from being used by someone else. Additionally, the filing gives you corporate protection.
Apply for Employment Identification Number (EIN)
After registering your business entity, you apply to the IRS for an Employment Identification Number (EIN). The IRS assigns a nine-digit number to identify your business. You use this number to file business taxes, open bank accounts, and get business licenses.
Open Bank Account and Get Funding
You may need money to launch your business. First, open a business bank account and then look for business financing or investors. Know all your startup costs. Calculate your cost of materials, equipment, and supplies. Include fees for business formation and workshop or retail space. If you plan to hire staff, estimate those costs.
If you need expensive equipment, equipment manufacturers may offer financing options.
Apply for Business Licenses and Permits
Whether you sell only online or at a retail store, you need business licenses and permits to operate. Check with your local municipality, county, and state to know all license and permit requirements.
General Business License
A general business license allows you to operate your business in your jurisdiction.
In some states, you may also need a seller's permit to sell jewelry. This registration allows you to collect and remit sales tax on customers in your state. This permit is also called a "sales and use" permit.
If you are a home-based business, check with local zoning laws and homeowners associations regarding operating a business from your home.
If you have a storefront, there are additional requirements:
Certificate of Use and Occupancy
A certificate of use and occupancy permit allows your jewelry store to operate at a particular business location. If you lease space, your landlord may already have the use and occupancy certificate.
Local Ordinances and Zoning
When establishing a storefront, be aware of local ordinances and zoning. For example, your city may have rules about your hours of operation and the type of business you run.
Set Up Your Jewelry Shop
You need a space to work on your jewelry. You might work out of a home workshop or lease a space. If you want to sell in a retail store, rent space in a mall or shopping center.
You may want to have a real estate lawyer review any lease agreements for your business.
Purchase Materials, Supplies, and Equipment
Find sources for your equipment, materials, gems, and metals. You may also need jewelry displays and cases.
Negotiate favorable terms to pay back creditors. Look into loans or lines of credit to finance your purchases.
Get Insurance for Your Business
Any business needs business insurance, especially if you have high-value items like jewelry, precious metals, and gemstones. While the risk of personal injury is low in the jewelry industry, theft is high. So be sure to safeguard your business with insurance.
Business Owner Policy
A business owner's policy covers business liability and property insurance under one policy. So, if someone slips and falls in your shop, you have coverage. Or suppose there is a fire in your store. In that case, the business owner's policy replaces business personal property and reimburses loss of business income. Additionally, the policy covers damage or theft of your inventory.
Jewelry Block Insurance
If you deal in precious gems or high-value items, jewelers block insurance covers those particular items.
If you hire staff, you need a worker's compensation policy. Worker's compensation pays lost wages and medical expenses for employees who suffer injuries on the job.
Ask several insurance companies for quotes and compare their price and coverage amounts.
Initially, you may not need employees for your one-person jewelry business. But suppose you operate a retail store or expand operations. In that case, you will need to hire staff such as salespeople and jewelry designers.
Know the employment laws in your area, from hiring practices to wage compensation and benefits. There are rules regarding hourly wages and when to pay overtime. An employment lawyer can draft employment agreements and help navigate employment issues for you.
Protect Your Designs with a Patent
If you create unique jewelry designs, you want to patent your innovation. For example, Alex and Ani patented their distinctive bangle so no one else can copy it.
Even if you have a small business, you may want to protect your designs. But, again, talk to an intellectual property lawyer about patenting your creations.
Advertise & Market Your Jewelry
Whether a storefront or online business, you should know what you can and can't do when advertising and marketing your business.
If you are a storefront, you might use print, tv, or radio ads to market your jewelry business.
If you are a home-based business, there are many creative ways to market your designs:
- Set up a website to showcase jewelry and sell online.
- Use Etsy, Amazon, or eBay for online sales.
- Sell your designs at local craft shows.
- Partner with boutiques and sell your jewelry on consignment.
- Make social media posts on Facebook or Instagram to show off designs.
Jewelry is every evolving in the fashion world. Keep up with trends for fashion jewelry, so your jewelry pieces are current.
Opening a jewelry store is a lucrative way to share your creations. However, successful businesses need the proper legal and financial structure. So take the time to plan and enlist professional help for a company that is solid gold.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
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