The Legal Paperwork Needed to Start a Consignment Business
written by: W. A. Swan•edited by: Jean Scheid•updated: 5/14/2010
If you are wondering how to start a consignment business, there are legal considerations which every retail business must face. A consignment store is a special type of retail store and requires slightly different legal considerations. Because of this there are two legal forms you will need.
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Consignment Business Forms: Why You Need Them
If you are looking at starting a consignment shop you will need to know the basics of how to start a consignment business. When you are planning to open a consignment store, you know there are legal considerations which every retail business must face. A consignment store is a special type of retail store, and requires slightly different legal considerations. Because of this there are two legal forms which you will need to start and operate your consignment store.
One of the most important consignment business forms is the retail store lease. One of the worst things you can do in looking at how to start a consignment business is to not get at least a year lease with your retail space. When you are looking at the legal paperwork for starting this business you need to get the facts about money in writing; this includes the amount of rent you will pay each month. This also includes who will pay for what repairs, and to what extent. A commercial lease will be your only way to ensure that you know the main cost of keeping your business open. Obtain a year lease at a minimum, with a goal of three years as a best effort. If you can get a renewal clause which allows you to simply keep paying the same rent without having to renegotiate, even better.
Equally important in the consignment business is the consignment agreement between the store owner and the people dropping off items to sell, the consignee. The questions concerning how to start a consignment business should always include how to properly write a binding consignment agreement. The reason for this; this piece of legal paperwork is what gives you the right to sell the merchandise in your store. By definition, a consignment store is a store that sells items belonging to other people; so you actually don’t own the inventory, you are just taking a percentage of the income from the sale in return for helping to sell it. A consignment agreement outlines the rights of the consignee and the seller; it outlines the split of income between them, as well as what happens if the item doesn’t sell in a set amount of time. This is important as it acts as physical proof of the agreement in case of dispute. It becomes a business agreement between you and a vendor.
When looking for consignment business forms you can always find general, generic forms on the Internet, or you can download and print the Sample Consignment Agreement found in our Media Gallery and modify it to fit your needs. The best way, however, to make sure legal paperwork fits specifically to your needs is to take whatever forms you are using and show them to a lawyer. The lawyer can tell you if the documents will work for you as is, or to what extent they should be altered. While this will cost you some money, it may save ten times more in the long run. Finally, make sure your consignment agreement includes a clause about who will insure the items take in for sale at the consignment store. If you want the owner of the items to insure the products, make sure that is clearly outlined in your consignment agreement.