A Step-by-Step Guide To Your Business Success

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For many of us, becoming a hair industry professional is very exciting and personally rewarding. As a former hairstylist and salon owner, turned CPA to hairstylists and salon owners, I can comfortably say that the people I meet in the hair industry love what they do. In addition to the love they have for the industry, the earning potential for hairstylists can be quite attractive. Most people dream of having a job they love with the added benefit of an attractive earning potential.

The one unfortunate thing about our journey to becoming hairstylists is that cosmetology school teaches us absolutely nothing about running a business. There are a significant number of hair stylists that work independently as either booth renters, salon suite owners, or mobile stylists. Because of this, we must have a basic understanding of what it takes to start and run a business.

Some independent stylists who work as either booth renters or Mobile stylists don’t regard themselves as business owners. I always say that if the IRS or the state treats you like a business, that means you are a business, and therefore, you should conduct what you do as a business.

You haven’t started this road map.  Include the benefits of starting the Map!

Pick Your Legal Business Structure

Have you ever wondered what type of business legal structure you should choose for your business?  When you decide to start a business, one of the most important decisions you have to make is choosing a legal structure for your business. The type of legal structure you choose holds the key to how you will ultimately run your business according to government requirements.   Your entity type will determine the type and number of tax return(s) you are required to file, how you are required to pay yourself and your workers, the type(s) of forms, and data the government and other third-parties will request from you in the event that you have to provide financial data. It also determines how you handle your bookkeeping and the way you communicate with the IRS.

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How To Set Up Your LLC

As an independent stylist, it’s important to think about your business structure when starting your business.  Being an independent stylist does not mean that you should settle on being or remaining a sole proprietor.  
Many business owners set up LLC’s because of the liability protection an LLC provides.  LLC’s are much more flexible than corporations and they have much fewer ongoing reporting requirements. 
The first step to setting up your LLC is to file paperwork with the state your business is located.  Keep in mind that every state has its own rules and procedures for setting up an LLC, however, there are several steps that are necessary no matter what state your business in. 

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Apply And Receive Your Federal Employment Identification Number

The IRS and the state identifies a business by their Employer Identification Number, also known as an EIN, or your social security.  If you are a sole proprietor, you can use your social security number, or you can apply for and use an EIN.  I advise my clients to apply and use an EIN even if they are not required to because given the option when filling out business forms, it’s safer to use an EIN than your Social Security number.

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Open A Business Bank Account

LLC’s and corporations are required to maintain a business account separate from their personal account and not to commingle business and personal funds.  While it is not required for a sole proprietor to maintain a business account separate from their personal account, mixing business and personal funds in the same account can cause recordkeeping to become unnecessarily difficult and confusing. 

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Setting up And Paying Your Quarterly Estimated Taxes

The federal income tax is a pay-as-you-go tax system which means we must pay our taxes as we earn income during the year.  With that said, there are two ways to pay as we go; either through employer withholdings, if you are an employee at a salon, or by paying quarterly estimated payments if you are self-employed.

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Setting Up Your QuickBooks Online Account

I have decided to use QuickBooks online as the bookkeeping system for our membership site.  Everyone should have or will receive a list of items I need from you to set up your account.   Every member will receive a free QuickBooks online account with their membership.   Look out for additional instructions from me regarding setting up your QuickBooks Online account

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