Setting up a craft business
Setting up a craft business can be tricky – there are a lot of grey areas surrounding legalities that many crafters struggle to understand. To get yourself up and running, you can read our post on starting a craft business and start to understand the basic first steps. Then, you can move on to perfecting the legal side.
Here we answer some of the most commonly asked questions about legalities in the start-up of a craft business and list what you are required to do.
Do I need a business licence to sell crafts?
Not all areas of business require a licence. When it comes to crafting, there are very few areas in which a licence is essential. If you are working with and selling alcohol, food or have a business premise that isn’t your home, you may need a licence. Otherwise, it is mostly acceptable for a small business to simply register with HMRC and begin trading.
Do I need to register my craft business with HMRC?
HMRC are becoming increasingly strict on ensuring that all businesses are fully declared. To save yourself the hassle (and potential hefty fine) further down the line, it is advisable that you register your business with HMRC.
Firstly, you need to decide whether you are going to register as a Sole Trader or a Limited Company.
Set up as a Sole Trader
To register as a sole trader, you must be self-employed and have your own business. If you are earning over £1,000 a year through your craft business, it becomes a far more serious, legal requirement to register with HMRC.
Once you are a sole trader, you will find that:
You and your business are one; therefore, you will be personally liable for all future issues (financially or otherwise).
You are in charge of your own tax and will have to keep record of your business’s sales and expenses.
You have less overall paperwork to deal with in the long run.
Set up a Limited Company
The Gov.uk website has plenty of information to explain the process of setting up a limited company. This option can be more complex, but could offer greater benefits to your company.
As a Limited Company, you will:
Have increased protection from HMRC.
Be classed as separate from your business, meaning that your personal assets will be less at risk should issues arise.
Be required to fill out more paperwork.
Do I need insurance to sell crafts?
We cover this element a lot in our posts and we always stress the importance of insurance. You may not legally need it to do certain things, such as selling on Etsy or from home, but it certainly helps should an issue occur.
On the other hand, you most definitely do need insurance to sell crafts at certain craft fairs. Often, craft fairs and shows will request that you prove that you are fully insured before they allow you to sell at their events. Our simple craft insurance quote form can provide you with a comprehensive policy for your business quickly and easily.
In any case, crafting insurance will massively benefit your business. Your products will be protected by Product Liability Insurance and your sales processes will be protected by Public Liability Insurance.
You will want to make sure that you abide by the rules of the specific platforms that you sell on, but in general, it is worth ensuring that you are disclosing the right information and offering legal consumer rights to your customers.
- Creating clear cancellation and returns policies.
- Providing accurate delivery details.
- Listing your business address.
- Providing acceptable proof of purchase where asked for.
- Listing all standard costs and additional costs.
You can read more about the Consumer Contracts Regulations on Gov.uk, but the above points are the main areas that you need to pay attention to.
Making safe and legal craft products
One of the more serious aspects of having a craft business is ensuring that your products are safe for your customers. Crafting is a large umbrella term that covers a huge range of activities and therefore, produces goods which each require particular attention in terms of safety.
The Government provides details on Product Safety Regulations so that you can ensure that your business is operating within its required legal brackets. Here we break down some of the main areas of product safety, including:
Food safety is a huge area of concern when we consider the legalities of crafting. Keeping people safe through the correct display of allergens, following strict food hygiene measures and making a list of your product ingredients available to read, is vital.
If you are working with food, such as cake making, and want to know more about the Food Safety Regulations, you can read the official Government advice and maintain those high standards throughout your business.
Cosmetic product safety
There are a few legal areas to consider when dealing with cosmetics, such as bath and shower products. One of these areas is ensuring that you have a Cosmetic Product Safety Report. This report is made up of a series of tests that check product:
- Stability and Shelf-life
- Preservative Efficacy
You can have this report created by a number of independent companies, rather than through an official government source. You may be asked to produce this report by Trading Standards, so it’s best not to get caught out by not having it in place.
Non-cosmetic product safety
Another large area of product safety is following the Regulation on the Classification, Labelling and Packaging (CLP) of substances and mixtures and your business being CLP compliant.
What does CLP compliant mean?
To be CLP compliant means that your business appropriately labels their products, disclosing all of the necessary information. The CLP regulation applies to those who make candle and wax melts, reed diffusers and room sprays. If your product contains a hazardous substance, such as an essential oil or fragrance, it will need to have a CLP compliant label.
How do I become CLP compliant?
To become CLP compliant, you must print labels for your products that list:
- Hazard pictograms and statements
- Allergen information
- Supplier information
There are sometimes a few more elements that will need to be included on your labels. You should refer to the information provided to you by your ingredient supplier for details (usually in a Safety Data Sheet).
There are a few companies available who can help you to create legal CLP labels for your goods. Alternatively, you can contact your local Trading Standards Office who may be able to offer help. It is important that you follow the CLP regulations to avoid getting into legal trouble and potentially invalidating your insurance.
Not only is effective labelling a legal requirement, it also promotes trust between you and your customers.
What else do I need to know when starting a craft business?</h2
The legal side of starting a craft business may seem overwhelming at first, but if you take the time to carefully assess your work and research what actions you need to take to stay lawful, your business can then begin to run smoothly.
The most important aspects of selling crafts legally are ensuring that your customers are safe and that your business is protected.
Please note that there are many other legal areas in which you may need to be aware of, depending on your mode of craft. Doing your own effective research is key. You may also need to be aware of:
The use of controlled or protected materials, or materials in limited supply
- Fire safety regulations
- Toy safety regulations and CE marking
- Gas and Safety regulations depending on your equipment usage
- Dealing with tax (Folksy have a great article on dealing with tax if you sell online)
Once you have dealt with the important legal side of your business, you are ready to start crafting and selling! Remember to think about insuring your business. Now you are protected legally, it makes sense to want to protect your workspace, business practices and goods through a great insurance policy.
Don’t hesitate to contact us today for a chat about the insurance side of things, and happy crafting!