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Starting your own boutique business is an exciting journey, full of creative freedom and endless possibilities.

But guess what?

It’s not all about trips to Market, trendy mannequins, and raking in the profits. There’s a whole lot of behind-the-scenes work that needs to happen to make your boutique a success.

Today, I’m going to share this step by step guide that walks you through how to start a boutique business.

From legalities to financial planning, we’re diving into the not-as-glamorous details that are essential for your boutique’s success.

Choose the Right Entity Type

I always recommend that a new boutique starts off registering as a Limited Liability Company, or an LLC. This helps protect all your personal assets (money, house, belongings, etc…) in the unfortunate even that someone were to sue your boutique. It will also protect all your business stuff if anyone were to sue you personally.

I recommend working with a lawyer to make sure all your ducks are in a row, and nothing was missed to make sure that protection is in place.

Establishing an LLC now also makes it really easy to switch to an S Corp tax status later on once your business becomes becomes more profitable (More on the benefits of that in this post).

Get an EIN

This is like your business’s Social Security Number. You’ll need one to open a business bank account, hire employees, and file your taxes properly. You can do this yourself for FREE on the IRS website here, and it takes about 5-10 minutes.

Business Licenses & Permits

Some states, counties & cities require you to apply for business permits to operate within their borders, even if you only operate as an online boutique from your home. Check with your local government to ensure you have all the necessary permits and licenses to operate legally.

Open a Business Bank Account & Credit Card

As SOON as you possibly can, you want to open a separate business bank account. If you plan on using a credit card, apply for one of those too in order to avoid using your personal one.

You can put some starter money in there from your personal account, but make every effort to keep all business related money flowing in and out of these business accounts. It is going to make your life SO much easier when it comes to your bookkeeping.

Plus, if you set up your LLC like I recommended earlier, this is actually a requirement to prove that your business is operating completely separate from you as a person.

Sales Tax Permit

To start, you likely just need to file for a sales tax permit (or resellers permit) in the state that you are physically located in. If you live near the border and plan to do pop ups in 2 different states, you’ll need one in each state.

If you wanna learn more about sales tax, and when you might need to file in additional states, you can read this post. Sales tax rules & regulations are undoubtedly one of the most confusing & overwhelming bookkeeping & tax topics in the retail industry.

Get Insurance

In order to protect all the time & money you are investing in this business, you want to ensure you have the appropriate insurance to protect it all. Consider liability insurance to help protect against accidents, property insurance to protect all the “stuff”, and, if you’re going to have employees, you may need workers’ compensation insurance. I would work with a local insurance agent to see what your state requires.

Set Your Store Policies

Before you ever make your first sale, create clear and consistent store policies that address returns, exchanges, shipping, and more. This not only keeps you organized but also sets expectations for your customers. Be sure these are clearly displayed in your store & on your website, as well as printed on any receipts.

Choose a Point of Sale/Inventory Management System

Your inventory is the lifeblood of your boutique. Invest in a reliable point of sale and/or inventory system to keep track of your merchandise purchases and sales. You want to ensure you can run reports to see what’s selling, what’s not, what you have incoming, what’s been delivered, and keep track of the costs of each and every item.

Set Up Your Bookkeeping System

You need a system to help you track every single penny that is flowing in and out of those bank & credit cards you opened a few steps ago. If you’re in the very early stages, you may be able to use a specialized spreadsheet like this one to start out. But, at some point you’ll want to upgrade to a bookkeeping software such as Wave, Xero, or my personal favorite, Quickbooks Online.

Related to that, you’ll also want a system to organize & save all your receipts and invoices to go along with those transactions. If you’re old school, you can use a filing cabinet, or if you’re a little more tech savvy you can use a Google Drive folder or a software such as Hubdoc.

Keeping your receipts is an essential step in the bookkeeping process, because if you are ever audited, you will need to show those to prove those transactions were what you said they were for. So, keep them safe & keep them organized (and not shoved in a shoebox).

If you wanna learn more about how to set up your own bookkeeping system, you can watch my free, on demand masterclass, “Make Your Money Make Sense”

Set Up a Cash Flow/Budgeting Plan

It can be SO easy to let the flashy new merchandise, software or technology pull you in, and your spending can get out of control. Be sure to set a PLAN for your money – this includes setting aside a portion of each sale for taxes, for paying yourself, and to reinvest in inventory & operating costs.

There are two resources that explain 2 different ways you can approach this. One is the Profit First method, based on the book Profit First by Mike Michalowitz; and the other is called Cashflow Made Simple based out of a chapter in the book of How to Grow Your Small Business by Donald Miller. You can also learn a little more about how the Profit First method can be used for your retail business in this post.

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Starting a boutique business is an incredible adventure, and one that can be wildly fulfilling. Start off by setting a good foundation before you ever open your doors (or the cart) so you can ensure a smoother path as you continue to grow & scale and live your dreams.

I may not be able to help you when it comes to your licenses & insurance, but I’m your gal if you need help with the numbers! Be sure to follow me @findingfreedomfinancial on Instagram, and tune into The Boutique Bookkeeper Show to start feeling more confident in the money-side of your boutique.