How to Start a Retail Boutique Business

Your 10 step checklist to complete before you open

Starting a 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 dreams come true.

In this post, I’m going to share this step by step guide that walks you through some of the not-so-fun parts of how to start a retail boutique business.

From legalities to financial planning, we’re diving into the nitty-gritty 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 (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 this is set up properly, and that you have all the paperwork in place to prove that your business is completely separate in the eyes of the law.

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. I’ll do another post later on about the benefits of that, but once you reach maybe $80,000 in PROFIT, you should start considering making the switch for some great tax benefits.

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, and takes about 5 minutes.

Apply for any Required 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 agencies to ensure you have all the necessary permits.

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.

Apply for Your Sales Tax Permit

To start, you likely just need to file for a sales tax permit (also may be called resellers permit) in the state that you are physically located in. If you live near the border and plan to do pop ups in a neighboring state, you’ll need one there too.

I’ll do another post that goes more in depth into the sales tax rules & regulations because it’s 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, workers’ compensation insurance.

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 simple spreadsheet 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.

If you are ever audited, you will need to show these receipts to prove the transactions you’ve claimed on your taxes were what you said they were for. So, keep them safe & keep them organized (and not shoved in a shoebox).

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 more about Donald Millers method in this podcast episode.


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.

So, as you chase your dream, remember that even the not-so-glamorous parts can be empowering. Embrace them with enthusiasm, knowing that they are the building blocks of your successful boutique business.

Here’s to finding your own version of freedom,

Hi, I'm Megan!

Bookkeeping for the retail industry has some unique complexities that take extra time to manage to ensure accuracy. At Finding Freedom Financial Services, I provide done-for-you bookkeeping services for boutique owners that accurately track these complexities for you so you can have more time and focused energy to dedicate to running your stores. If you’re ready to get your time back, apply to work with me today!

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