How to Get Rid of Lularoe Inventory and Manage Business Records

Selling Lularoe inventory can be challenging, especially if you’re exiting the business or freeing up space. Whether dealing with a small surplus or a large stockpile, efficiently offloading items while maintaining accurate financial records is essential. Without a clear strategy, unsold products and tax implications can become problematic.

Calculating Remaining Value

Assessing the current worth of unsold Lularoe inventory is crucial for pricing, managing potential losses, and tax reporting. Start by determining the original purchase cost, including wholesale price, shipping fees, and any related expenses. This establishes a baseline before factoring in depreciation or market conditions.

Market demand significantly affects resale value. If interest in Lularoe products has declined, resale prices may be lower than the original cost. Checking recent sales on eBay, Poshmark, and Facebook Marketplace provides a realistic estimate of what buyers are willing to pay. If items consistently sell below cost, adjusting inventory value may be necessary.

Carrying costs such as storage fees and insurance should also be considered. If these expenses exceed potential resale value, liquidating at a lower price may be more beneficial than holding onto stock. Damaged or outdated inventory may qualify for an impairment adjustment under IRS guidelines, potentially allowing for a tax deduction.

Accounting for Donations

Donating unsold inventory can clear excess stock while offering a tax benefit, but proper documentation is required for IRS compliance. The fair market value of donated goods must reflect secondhand market prices rather than their original purchase price.

Organizations such as Goodwill, the Salvation Army, and local shelters often accept clothing donations, but it’s important to confirm they provide receipts for tax purposes. For donations exceeding $250, the IRS requires a written acknowledgment from the receiving organization, including the donation date, a description of the items, and confirmation that no goods or services were received in return.

If donated inventory exceeds $500, filing Form 8283 is required. Donations over $5,000 may need a formal appraisal. Keeping detailed records, including photographs and notes on item condition, can help substantiate valuation in case of an audit.

Bulk Liquidation Sales

Selling Lularoe inventory in bulk is an efficient way to offload large quantities quickly while recovering some of the initial investment. Instead of selling individual pieces, bulk liquidation involves offering entire lots to discount retailers, independent boutique owners, or liquidation wholesalers. These buyers typically seek deeply discounted pricing, often purchasing inventory at a fraction of its original cost. While profit margins are lower, the faster turnaround reduces storage expenses.

To attract bulk buyers, pricing should incentivize larger purchases. Tiered discounting, where the price per unit decreases as the order size increases, encourages buyers to take more inventory at once. For example, selling 50 pieces at $5 each but reducing the price to $4 per piece for orders of 100 or more makes the offer more appealing. Transparency about product mix, sizing, and any defects is essential.

Platforms such as B-Stock, Liquidation.com, and private Facebook groups for boutique owners can help connect with buyers. Direct outreach to small business owners who sell similar products may also be effective. Some businesses specialize in purchasing excess inventory from former consultants, providing another liquidation option.

Online Resell Platforms

Selling Lularoe inventory individually through online platforms can yield higher returns than bulk liquidation but requires strategic pricing, quality listings, and an understanding of platform-specific fees and policies. Different marketplaces attract different buyers. Poshmark appeals to fashion-conscious shoppers willing to pay more for trendy pieces, while eBay’s auction and fixed-price options provide flexibility. Facebook Marketplace and Mercari attract bargain hunters looking for local and nationwide shipping options, often leading to quicker sales for well-priced items.

Optimizing listings improves sales. High-quality images in natural lighting, clear descriptions detailing size, fabric, and condition, and competitive pricing based on recent sold listings help attract buyers. Some platforms, like Poshmark, reward frequent activity, meaning sellers who engage with buyers and share listings regularly see increased exposure. Shipping costs should also be factored into pricing, as some platforms allow sellers to offer discounted or free shipping to entice buyers, which can be offset by slightly increasing the asking price.

Recording Potential Write-Downs

If inventory is unlikely to sell at a profitable price, recording a write-down helps reflect the financial impact on business records. A write-down adjusts inventory value to its lower market price, ensuring financial statements accurately represent assets. This is particularly relevant for tax reporting, as the IRS allows businesses to deduct losses on devalued inventory if proper documentation is maintained.

To determine the write-down amount, compare the original purchase price to the current estimated selling price. If the fair market value is lower than the recorded cost, the difference can be written off as an expense. Under Generally Accepted Accounting Principles (GAAP), businesses must use the lower of cost or market (LCM) rule, meaning inventory should be valued at the lower of its original cost or current market price. Businesses using the accrual method can deduct inventory write-downs under IRS rules, provided they follow consistent accounting practices. Keeping records of sales trends, market comparisons, and attempts to sell at higher prices can help substantiate the write-down in case of an audit.

Finalizing Business Records

Once inventory has been sold, donated, or written down, updating business records ensures accurate financial reporting and tax compliance. Proper documentation of sales receipts, donation acknowledgments, and write-down calculations helps maintain transparency and prevents discrepancies during tax filing. If closing the business, finalizing records is essential for filing a final tax return and settling any outstanding obligations.

For tax reporting, businesses must reconcile inventory changes with financial statements. The IRS requires businesses to report inventory adjustments on Schedule C for sole proprietors or the appropriate tax form for other structures. Write-downs or donations should be reflected in the cost of goods sold (COGS) or as charitable deductions, depending on the transaction. Retaining records for at least three to seven years, as recommended by the IRS, ensures compliance in case of future audits.