So you want to open your Salon, spa, suite, or beauty business but, you aren’t sure which platform or structure you should use. I’m here to tell you that the smartest thing you could do for your business would be to hire a consultant. A client once asked me if they should first set up their business as a corporation before getting the company off the ground. Well, there are a few factors that you should consider first. Ask yourself
- Do I have the start-up capital to open my business as a Corporation?
- Does it make sense for what I am trying to accomplish right now?
- Can I incorporate my business later on when my business is profitable?
- Does my business model require me to file as a Corporation?
There are several different structures to file your business under, and each one serves a purpose for whichever stage you’re in when starting your business. When I first opened my Salon, I began as a Sole Proprietorship since I was the only worker/owner. This structure gives you outright control of your business. With this structure, your transaction, as well as your asset and liabilities, are grouped. Here’s the exciting part; this means that if you are sued, the person suing you may place a lien on your personal and business assets. So think this one through when deciding on which structure to classify your business.
Then there is a Partnership. It’s where two or more people are looking to start a business together. It is probably the simplest structure for a business partnership. There are two types of Partnerships, one called Limited Partnership, where one of the partners have unlimited liability, and the other has limited liability. And in a Limited Liability Partnership, all owners are given the benefit of limited liability. I encourage you to research them both then decide which one is best for you.
The LLC structure is called a Limited Liability Company. I like to say that LLCs have the best of both worlds’ best because you get the benefits of a Partnership as well as a Corporation. This structure has it’s pros and cons just like the other formats, but I like this one because whatever profits and losses the business have it gets treated as personal income, so this would avoid you getting taxed as if you were a corporation. LLC’s would be suitable for someone who wants to protect their assets, like their kids. Just Kidding!! Kids are an asset, but no one can sue your business and take your kids, right? Who wants them, anyway? HA, HA!
Now, if you want to be bougie, structure your business as a Corporation. There are several different corporations: C Corp., B Corp., NonProfit Corp., and Close Corp. I can explain to you what each one does, but AIN’T NOBODY GOT TIME FOR THAT! I encourage you to research them, but if you’re opening a new business, you probably won’t be using any one outright. But if you were to use any one of the five, you might use the C Corp. I used this structure with my last business because it gave me the most reliable protection from personal liability. Just know it is a bit costly to set this one up.
So there is my short dissertation of what business structures are available to you to file your business. If you’re starting, I encourage you to research which format will fit your business model best. There’s no rush to incorporate your business. If you do not have the upfront money or capital to spend on incorporating your business, then take that money and use it elsewhere.
I wish you the best in structuring your business. If what you read was helpful, please like this blog if you have any business questions, feel free to email me.