You've decided to start a t-shirt business. You've picked your equipment, chosen your designs, maybe even made your first few shirts. Now you need to make it legal — and if you're like most new sellers, this is the part where you get stuck.
This isn't the article about whether to choose an LLC or sole proprietorship — we cover that decision in detail in our LLC vs S-Corp vs Sole Proprietorship guide. This article picks up after that decision and walks you through every legal step you need to complete before (or shortly after) you start selling. Each step includes what it costs, how long it takes, and exactly where to go.
The 7-Step Legal Checklist
Here's everything at a glance. We'll break down each step below.
| Step | What It Is | Cost | Time | Where |
|---|---|---|---|---|
| 1. Register your business | Make your business official with the state | $50–$500 (varies by state) | 1–3 weeks | State Secretary of State website |
| 2. Get a DBA (if needed) | Operate under a brand name | $10–$100 | 1–2 weeks | County clerk or state website |
| 3. Get an EIN | Federal tax ID for your business | Free | 15 minutes (instant online) | IRS.gov |
| 4. Sales tax permit | Authorization to collect sales tax | $0–$50 (most states free) | 1–10 business days | State Department of Revenue |
| 5. Resale certificate | Buy supplies tax-free for resale | Free (included with sales tax permit in most states) | Same as sales tax permit | State Department of Revenue |
| 6. Business bank account | Separate business from personal finances | $0–$25/month | 30 minutes at a bank | Any commercial bank or credit union |
| 7. Business insurance | Protect against liability | $300–$1,000/year | 1–2 days for quotes | Insurance broker or online provider |
Total cost to make your t-shirt business fully legal: approximately $100–$800 depending on your state, structure, and insurance choices. Most of this is one-time or annual — not monthly.
Step 1: Register Your Business with the State
If you formed an LLC, you already did this when you filed your Articles of Organization. If you're operating as a sole proprietorship, many states don't require formal registration — but you will need a DBA (step 2) and possibly a local business license.
How to do it: Go to your state's Secretary of State website. Search for "business registration" or "business filing." Most states have online portals where you can register in a single session.
What you'll need: Your business name (run an availability search first), your address, your business purpose (something like "custom apparel and heat transfer vinyl products"), and a payment method for the filing fee.
Cost: Ranges from $50 (Kentucky, Mississippi) to $500 (Massachusetts). Most states fall in the $100–$200 range for LLC formation. Sole proprietorships are typically free at the state level but may require local licensing.
Timeline: Online filings are often approved within 1–5 business days. Paper filings can take 2–4 weeks. Many states offer expedited processing for an additional fee.
Don't forget: Some states require annual reports or franchise tax filings to keep your business in good standing. Missing these can result in administrative dissolution of your LLC. Set a calendar reminder for your state's annual filing deadline.
Step 2: File a DBA (Doing Business As) If Needed
A DBA lets you operate under a brand name that's different from your legal name (for sole proprietors) or your LLC's official name. If your LLC is already named what you want to call your business, you can skip this step.
Example: Your LLC is registered as "Smith Enterprises LLC" but you want to sell shirts under the name "CustomTees Co." — you need a DBA for "CustomTees Co."
How to do it: DBA registration happens at either the county or state level depending on where you live. Search "[your county] DBA filing" or "[your state] fictitious business name."
Cost: Typically $10–$100. Some states also require you to publish the DBA in a local newspaper, which can add $40–$200.
Timeline: 1–2 weeks for processing.
Why it matters: You can't open a business bank account under a brand name without a DBA. And if you're accepting payments through Shopify, Etsy, or PayPal under a business name, the DBA connects that name to your legal entity.
Step 3: Get an EIN (Employer Identification Number)
An EIN is a federal tax ID number for your business — think of it as your business's social security number. You need one to open a business bank account, file business taxes, and set up wholesale accounts with suppliers.
How to do it: Go to IRS.gov/EIN and apply online. It's completely free and takes about 15 minutes. You receive your EIN immediately upon completion.
Cost: Free. Always. If someone is charging you to get an EIN, that's a third-party service fee you don't need to pay. The IRS issues EINs directly at no cost.
What you'll need: Your Social Security number (or ITIN), your business name, address, and formation date, your business structure type, and the reason you're applying (typically "started a new business").
Important: Even sole proprietors without employees benefit from having an EIN. It keeps your SSN off business paperwork, which reduces identity theft risk. Wholesale suppliers like blank garment distributors and HTV vinyl suppliers often require an EIN to set up a wholesale account.
Step 4: Apply for a Sales Tax Permit
If you're selling t-shirts — physical products — you're required to collect sales tax in most states. A sales tax permit (also called a seller's permit or sales tax license) authorizes you to charge customers sales tax and remit it to your state.
How to do it: Apply through your state's Department of Revenue or Comptroller's office. Most states have online applications. Search "[your state] sales tax permit application."
Cost: Free in most states. A few states charge a small fee ($0–$50) or require a security deposit based on estimated sales volume.
What you'll need: Your EIN (get this first), business name and address, business structure type, estimated monthly sales, bank account information, and your start date.
Timeline: Some states issue permits instantly online. Others take 5–10 business days. A few require in-person visits.
The Multi-State Sales Tax Problem
If you sell online, you need to understand economic nexus. Since the 2018 Supreme Court ruling in South Dakota v. Wayfair, states can require out-of-state sellers to collect sales tax once they hit certain thresholds — typically $100,000 in sales or 200 transactions in that state per year.
For a new t-shirt business, this likely won't apply immediately. But once you're selling across state lines through Shopify or Etsy, keep track of your sales by state. Shopify can automatically calculate and collect the correct sales tax for each state — but you're still responsible for registering, filing returns, and remitting the tax in each state where you have an obligation.
Practical tip: Don't panic about multi-state compliance on day one. Focus on your home state first. Once you're doing $50K+ in annual revenue, consider using a sales tax automation service like TaxJar or Avalara to manage multi-state obligations.
Filing Your Sales Tax Returns
Once you have a permit, you must file returns on schedule — typically monthly, quarterly, or annually depending on your sales volume and state. The critical rule: you must file even if you had zero sales. Missing a filing can result in penalties, interest, or revocation of your permit.
Set a calendar reminder for every filing deadline. Most states charge $50+ penalties for late filings, even for zero-return periods.
Step 5: Get a Resale Certificate
A resale certificate lets you purchase materials tax-free when those materials will be resold as part of your finished product. For a t-shirt business, this means you don't pay sales tax on blank t-shirts, heat transfer vinyl, DTF transfers, packaging materials, and other supplies that go into your finished shirts.
This saves real money. If your state's sales tax is 7% and you spend $500/month on blanks and vinyl, a resale certificate saves you $35/month — $420/year. That adds up fast.
How to do it: In many states, your sales tax permit serves as your resale certificate, or the certificate is issued automatically alongside it. In other states, you fill out a separate form. Check your state's Department of Revenue website or ask when you apply for your sales tax permit.
How it works in practice: When you open an account with a blank garment distributor (JiffyShirts, S&S Activewear, SanMar) or a vinyl supplier, they'll ask for your resale certificate. They keep it on file and don't charge you sales tax on qualifying purchases.
What qualifies: Only materials that become part of your finished product are tax-exempt. Blank shirts, vinyl, transfer tape, poly mailers — yes. Your heat press, Cricut machine, weeding tools, office supplies — no, those are business-use items and you pay sales tax on them.
Multi-state note: If you buy supplies from an out-of-state vendor, you may need to provide a resale certificate valid for their state or use the Multistate Tax Commission (MTC) Uniform Sales & Use Tax Resale Certificate, which is accepted by most (but not all) states. Ask your supplier which form they require.
Step 6: Open a Business Bank Account
Mixing personal and business money is one of the most common mistakes new sellers make — and one of the most dangerous. If you have an LLC, commingling funds can "pierce the corporate veil," which means a court could ignore your LLC's liability protection and hold you personally responsible for business debts.
Even if you're a sole proprietor, a separate business account makes tax time dramatically easier and looks professional to customers and suppliers.
What you'll need to bring to the bank:
- EIN confirmation letter (SS-4 or CP 575 from the IRS)
- Articles of Organization (for LLCs) or DBA certificate (for sole proprietors)
- Business license (if your city requires one)
- Government-issued photo ID
- An opening deposit (usually $25–$100)
Cost: Many banks offer free business checking for small businesses or low-volume accounts. Others charge $10–$25/month, sometimes waivable with a minimum balance. Credit unions often have the best deals for small businesses.
Recommendations for small t-shirt businesses: Look for accounts with no monthly fee, no minimum balance requirement, free online banking, and mobile check deposit. Chase, Bank of America, and most regional banks offer small business checking. Online-only options like Novo, Relay, or Mercury offer free business accounts with good digital tools.
Also get a business debit card or credit card. Use it for all business purchases — blanks, vinyl, equipment, shipping supplies, Shopify subscription. This creates a clean expense trail and makes it simple to calculate costs at tax time.
Step 7: Get Business Insurance
Insurance isn't legally required in most states (unless you have employees), but it's strongly recommended — especially once you start selling at events, to businesses, or in any volume.
General Liability Insurance
Covers claims of bodily injury or property damage. If someone trips over your booth at a craft fair, general liability covers their medical bills and your legal costs. Most event venues, craft fairs, and farmers markets require proof of general liability insurance to set up a booth.
Cost: $300–$600/year for a basic policy ($1 million per occurrence, $2 million aggregate). You can also find per-event coverage for $50–$75 if you only do a few events per year.
Product Liability Insurance
Covers claims related to your products causing harm. While custom t-shirts seem low-risk, potential issues include allergic reactions to vinyl or ink, a child's shirt with a design element that becomes a choking hazard, or skin irritation from chemicals in the production process. This coverage is often bundled into a general liability policy — confirm with your insurer.
Home Business Insurance
Standard homeowner's or renter's insurance typically does not cover business equipment or inventory. If your heat press, Cricut, vinyl inventory, or blank shirt stock is damaged in a fire or stolen, your personal insurance policy probably won't pay out. Options:
- Home business endorsement: An add-on to your existing homeowner's policy, typically $50–$200/year. Covers business equipment and inventory up to a certain limit.
- In-home business policy: A standalone policy for more comprehensive coverage, $200–$500/year.
Where to shop: Start with your existing homeowner's insurance provider — they often offer the cheapest add-on. For standalone policies, companies like Hiscox, Next Insurance, and Thimble specialize in small business and are popular with crafters and small apparel businesses.
Protecting Your Designs: Copyright and Trademark Basics
The t-shirt industry has more intellectual property lawsuits per capita than almost any other small business category. Big brands actively monitor Etsy, Amazon, and Shopify stores for trademark and copyright infringement. Getting hit with a cease-and-desist letter or an Etsy shop takedown is common — and avoidable.
What You Cannot Put on a T-Shirt
- Copyrighted artwork or photos you didn't create or license — including images found on Google, Pinterest, or free SVG sites that don't actually have proper licensing
- Trademarked names, logos, or slogans — team names (NFL, NBA, NCAA), brand names (Nike, Disney, Marvel), and popular phrases that have been trademarked (yes, people trademark phrases)
- Celebrity likenesses — even stylized or illustrated versions
- Fan art of copyrighted characters — even if you drew it yourself, the character is still protected
"But I see other people selling these on Etsy" is not a legal defense. Those sellers are either licensed or haven't been caught yet.
What You Should Do
- Create original designs or hire a designer who provides full commercial usage rights
- Search the USPTO trademark database (tmsearch.uspto.gov) before using any phrase, slogan, or logo on a shirt
- Buy SVGs and designs with commercial licenses from reputable marketplaces like Creative Fabrica, Design Bundles, or So Fontsy — and keep your license receipts
- Trademark your own brand name once you're established — this prevents others from using your business name on similar products. Federal trademark registration costs $250–$350 per class through the USPTO
Your First-Month Legal Timeline
Here's a realistic schedule to get everything done without overwhelming yourself:
Week 1: Choose your business structure (use our guide). File your LLC or DBA. Apply for your EIN on IRS.gov (15 minutes, instant approval).
Week 2: Apply for your sales tax permit. Request your resale certificate. While waiting for processing, research insurance options and get 2–3 quotes.
Week 3: Open your business bank account (bring your EIN, formation docs, and ID). Set up your business credit card or debit card. Start purchasing supplies tax-free with your resale certificate.
Week 4: Bind your insurance policy. Set calendar reminders for all recurring filings (annual report, sales tax returns). You're fully legal and ready to sell.
Frequently Asked Questions
Can I start selling t-shirts before completing all these steps?
Technically, many sellers start selling before everything is formalized — especially on platforms like Etsy that don't verify business registration. However, selling without a sales tax permit means you're not collecting tax you're legally required to collect, and you'll owe that tax out of pocket later. Get your EIN and sales tax permit before your first sale. The rest can follow within the first month.
Do I need all of this if I'm just selling to friends and family?
If you're making shirts as gifts or selling a few casually, you're unlikely to face enforcement. But the moment you're regularly selling for profit — even on Facebook Marketplace — you're operating a business in the eyes of the IRS and your state. The EIN is free, the sales tax permit is free in most states, and both take under an hour. There's no good reason to skip them.
How do I handle sales tax on Etsy and Shopify?
Both platforms can automatically calculate and collect sales tax from customers. Shopify uses Shopify Tax (built-in), and Etsy collects and remits sales tax on your behalf in most states. However, you still need a sales tax permit in your home state, and you're responsible for filing returns and remitting any tax that the platform didn't handle. Check your state's specific rules.
What's the difference between a sales tax permit and a resale certificate?
A sales tax permit authorizes you to collect sales tax from customers. A resale certificate allows you to purchase supplies tax-free from vendors. You need the sales tax permit first — the resale certificate is either included with it or requires the permit as a prerequisite. Both are essential: the permit lets you sell legally, the certificate saves you money on supplies.
How much does it actually cost to make a t-shirt business fully legal?
For a sole proprietorship: $0–$100 (DBA + EIN + sales tax permit). For an LLC: $100–$500 (formation filing + EIN + sales tax permit). Add $300–$600 for basic insurance. Total: roughly $100–$1,100 depending on your state and structure. This is a one-time investment (plus small annual renewals) that protects your personal assets and saves you money on supply purchases through tax-free buying.
