How can a consignment shop protect itself from liability for consigned items?

Start with a clear, written consignment agreement. It should spell out who owns the items, how long they stay, pricing and markdowns, commission, when payment is made, what happens to unsold items, and who bears the risk of loss, theft, or damage while items are in the shop. Have a local attorney review your agreement, since consignment and property laws vary by state.

Insurance is the second piece. Talk with a commercial agent about coverage for property in your care, sometimes called bailee coverage, in addition to general liability and coverage for your own inventory. Understand the limits and exclusions.

Good records tie it together. Log each item with a description, photos, and condition at intake, and have consignors sign off. Use a consistent system for tracking sales and payouts. When questions come up later, accurate records protect both you and your consignors.