Beauty
the Law
&
by Randy Friedberg
Sooner or later (and sooner is almost always better), every growing apparel line or beauty company decides to step up their business by expanding their current brand and creating a whole new line of products. Here are some things to consider:
The Entity. If you haven’t already formed an LLC or a corporation to own intellectual property and to conduct business, then now would be a good time. It is a good idea to conduct any business through its own separate entity in order to keep its cash flow and potential liability separate and apart from your core business. It can also have beneficial tax consequences. The entity should also have an operating or shareholder agreement in place. The choice of which entity to use will vary with the situation. A professional should be consulted.
Formulate the Product Line. You will need to provide a thorough description of the products being formulated, including the details as to what is proprietary and the cost of creating any new formulas. The keys here are that you own the formulations and that they are kept secret. Even if the formulas are made by a third party, they should be works made for hire and owned by the entity. Be careful here. Just because you say something is a work for hire does not automatically make it so.
Manufacturing. After your products have been formulated, you will need a manufacturer to supply the products.