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Corporate Partner, Eric Perlmutter-Gumbiner, Shares Legal Insights for Beauty, Fashion & Consumer Goods Roundtable

September 23, 2024Article
Los Angeles Times B2B Publishing

Corporate Partner, Eric Perlmutter-Gumbiner, shared his expertise on latest developments and trends in the business of beauty, fashion, and consumer goods with Los Angeles Times in their Beauty, Fashion & Consumer Goods Roundtable. Below are excerpts from the L.A. Times B2B Publishing feature:

Q: How would you describe the current outlook(s) for the beauty, fashion and consumer goods sectors in 2024?

The outlook is dynamic, adapting to evolving consumer preferences and building an omnichannel customer base. Brands that can create unique value propositions for their customers, stay ahead of trends and create a variety of exciting SKUs are likely to thrive. The beauty, fashion and consumer goods sectors are built on the resilience seen in consumer spending despite macroeconomic challenges. Both luxury and discount brands are likely to perform well, driven by continued consumer demand and a reduction in geopolitical and supply chain disruptions.

Q: Any new tax-related considerations that consumer goods companies should be aware of?

It has been around for a long time, but QSBS (Qualified Small Business Stock) tax planning is not talked about enough for early-stage consumer goods companies. If structured correctly, QSBS allows for up to 100% exclusion of federal capital gains on the sale of stock, up to $10 million or 10 times the adjusted basis (up to $500 million in excluded gains). To qualify, the company must be a C-corporation and meet certain requirements, including staying below $50 million in gross assets at the time the qualifying shares were issued. For beauty and fashion startups, early tax planning is key as there are structural moves your attorney and tax accountant can make to help founders and early investors shield as much money as possible from tax.

Q: What are the pros and cons of being based in Los Angeles or Southern California in 2024?

I think there is no better city or region in the world to base a fashion or beauty company than Los Angeles and Southern California. The “pros” include access to a vibrant creative community, including everything that Hollywood has to offer, a wealth of young talent from the region’s top tier universities, immediate exposure to the latest trends and a diverse home market to easily test products and innovations. The “cons” may include high costs of living and doing business and regulatory complexities (although any company that sells in California will be subject to a number of those).

Q: How important is labeling in the beauty and fashion world?

 Accurate, transparent labeling is crucial, especially as consumers become more knowledgeable about ingredients and sustainability. Labels need to convey product benefits clearly while meeting regulatory requirements. This is especially important for beauty companies in California where plaintiff’s attorneys are always lurking and looking to make claims against companies that are not in compliance with Proposition 65 or the California Department of Public Health’s labeling requirements. While a legal review of beauty products may not be top of mind, a quick review by counsel can save major headaches down the road.

Q: What do investors look for in a health, beauty or consumer goods company these days?

Focus on building a strong, unique brand and demonstrate scalability. Clearly articulate your value proposition and product market fit. When meeting with potential investors, you should have a clear vision of your business goals, your growth strategy and how that specific investor is the best fit to get you there, whether that is help with the supply chain, access to a specific retailer or assistance in building out the management. Most importantly, make sure that the investor’s expectations are aligned with your own on success and timing.

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