Tips For Keeping Your Home-Based Business Legal - Wholesale Supplies Plus
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Tips For Keeping Your Home-Based Business Legal

Keeping up with the many legalities that come with selling handmade products can be a full-time role in its own right —even when your operations are based out of your home. Here are some of the important regulations all handmade business owners should be aware of to ensure that product labels are compliant with the latest regulations, and to protect your business from potential legal action. 

Confirm That You Understand Your Category:

The U.S. Food & Drug Administration (FDA) is tasked with ensuring that cosmetics are safe for consumers, properly labeled, and tested before being brought to market. While it’s important to ensure that you correctly interpret what “rules” apply to your handmade business—it can be challenging to understand what category your products technically fall into, based on the FDA’s definition of them.
  • Cosmetics products: Under the FDA definition, cosmetics may be makeup, moisturizer, hair products, perfume and nail care.
  • Personal care: Some soaps, supplements and aromatherapy products are considered part of the personal care category by the FDA—but could be classified as drugs, based on the intended use of the item, and how you present the product ingredients and benefits in product labels, and marketing materials.
For example, a handmade soap made with an essential oil that claims to address a condition like acne or rosacea could be considered a drug, and is subject to the FDA regulations for them. Confirm that you’re selling the type of the products you intend based on FDA regulations, before you start selling them. 

Stay Current on Labeling Guidelines 

The FDA publishes all of the current labeling requirements and details in the Fair Packaging and Labeling Act online; check in with them frequently to ensure that your products are compliant with the latest standards. 

While there are many nuances to the Act, there are some basic product labeling rules every handmade business owners should know, including:
  • Principal display panel (PDP) standards: The FDA requires that a PDP be large enough to accommodate all required label information “with clarity and conspicuousness.” For a rectangular package, the PDP must take up an entire side; for cylindrical packages the PDP must be 40% of height x circumference.
  • Basic labeling guidelines: Familiarize yourself with minimum font standards for labels, when abbreviations and bold face fonts can and cannot be used, and guidelines for appropriate background contrast and “breathing room” for other design elements in the packaging. 
If you outsource product or label design to freelancers, consultants, or package design agencies, ensure that you partner with those who have proven expertise in the cosmetic and drug industry, and are familiar with the latest FDA guidelines for labels and packages for the types of products you sell. 

Be Proactive About Trademarks, Patents and Trade Secrets

It may not seem necessary to secure legal intellectual property protections in the form of trademarks, trade secrets, or in some cases, formulation patents, when you’re just developing a customer base-- but you can’t predict how well-received your products will be by consumers—or competitors. Secure the advice of a patent or trademark attorney who has experience in the handmade industry to make sure you’ve secured intellectual property ownership for your assets, before you release your great ideas to the masses. 

Secure Adequate Insurance 

Even the smallest home-based businesses need additional business insurance protections—regardless of whether you host clients, or have employees. Some homeowners insurance policies may offer limited coverage on business equipment—but most exclude business activities and products from the policy. 
  • If you are a one-person operation and don’t bring clients, employees or vendors to your home-based business: An additional rider to your homeowner or renter’s policy may be adequate, and is typically inexpensive.
  • If you want more comprehensive coverage, host clients, or have employees: Consider a business owner’s policy (BOP). It covers many tangible and intangible aspects of running a home-based business, including coverage for business equipment, protections for business interruption, and against malpractice or professional liability claims.
  • If you sell your products at festivals and pop-up events. Secure a separate business auto policy to ensure you’re properly covered if you get into an accident while driving to and from business-related events. 

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