After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related: How to write a business plan

Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a makeup line, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC
 

It may be possible to store inventory in a spare room in your home initially, but as a makeup line grows, it will be time to rent commercial space. A climate-controlled space is a must for most makeup products. Rent costs will vary depending on the size, location, and amenities.

Related: Choosing a business location

Specifically, for a makeup line, Food & Drug Administration (FDA) understanding regulations may be required. Be sure to check out check out the FDA’s information for startups and home-based cosmetic businesses.

The Beauty Business Journal states that a line will need to ensure that its products adhere to national and local labeling guidelines. A business owner will need to work with the county, national, and local regulatory bodies to identify any applicable cosmetics licenses. These licenses will vary depending on location, as well as if the business follows a direct-to-consumer model.

Last, there are general local, state, and federal business registrations, such as a local business license, sales tax permit and Employer Identification Number, among others.

Related: Common business licenses, permits, and registrations by state

While there are many formulas that you can source online or through a private label manufacturer, it is worth coming up with a unique formula of your own; otherwise, there is nothing really unique about what you are selling.

If you don’t have the background, working with an experienced chemist is key, plus they can help with sourcing reputable and reliable suppliers for ingredients and manufacturing.

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a makeup line is another. Unless you have considerable experience in the industry and the high startup cost, it won’t be easy to get sufficient bank funding. In order to get a loan, the borrower(s) will need to have good credit and be able to personally invest 25% towards the total start-up costs.

Related: Finding the money to start a business

Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Marketing is an essential element of developing and releasing a makeup business. Creating your makeup brand is important and would include the logo, colors, and feeling behind your products. Then developing a strategy to let potential customers know about your business may include marketing techniques such as promoting on social media platforms (Facebook, Instagram, Pinterest), online advertising (Etsy, Amazon), print advertising, direct mail, and more.

The makeup industry is highly competitive, and a new line will be going up against well-established major beauty brands. When planning out your line, look for something you can do differently to stand out from the competition. This might be organically sourced ingredients, makeup designed to work with specific health conditions, or a unique approach to makeup that hasn’t been explored yet.

Related: Low-cost ideas to market a new business

There are several types of insurance to consider when starting a makeup line. A few of these include:
– General liability insurance protects the business against medical bills and other fees that could result if a customer is ever injured by the makeup.
– Commercial property insurance can help protect the business if its inventory, equipment, or building are ever damaged in an event like a fire.
– Worker’s compensation insurance covers expenses like medical bills that the business might face if an employee were ever injured while working.

The cost to insure a makeup line will vary based on factors like the value of a business’ equipment and inventory will also affect cost. To get the most accurate idea of potential insurance costs, request quotes from multiple providers. When comparing those quotes, consider not only how the premiums differ but also how the deductibles, policy exclusions, and coverage limits compare.

Related: Common types of insurance a business may need.

Depending on a makeup line’s business model, it may be necessary to hire some employees. According to Zippia, a cosmetic chemist makes an average of $62,202 per year, though salaries can range from $46,000 to $83,000. Zippia reports that business assistants, who could help with everything from securing accounts to shipping products, earn an average of $42,000 per year. A business may also need to hire branding consultants and website developers, though this is often done on a freelance or consultant basis.

In addition to staff salaries, a business will need to budget for other costs that come with hiring employees. These expenses may include workman’s comp insurance, unemployment insurance, and paid time off.

Related: Hiring your first employee

Setting up an accounting system for your makeup line is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up accounting for your business