Wednesday, 16 December 2020 10:00

The Aesthetician’s Guide to Creation of a Legal Business Entity

Written by   Courtney Sykes

Aestheticians come into the industry to produce amazing results for their clients and truly make a difference for those they serve. Aesthetics practitioners have a goal of perfecting their technical craft on a consistent basis and are always seeking to learn the most up-to-date, amazing techniques possible. Many providers around the country learn these technical skills and have the ability to continue their education in meaningful ways; however, the one lost art (or art that never was) in aesthetics education is business acumen. The most successful aestheticians in the industry are those that understand the business strategies and step-by-step methods of becoming a successful solo provider or employer in the spa industry. 

These step-by-step actions are required, in this specific order, to ensure a business entity obtains the proper credentials and statuses with government agencies, in order to be legally compliant and also ensure payment of taxes on the federal, state, and local level.

LEGAL COMPLIANCY

Make sure to register your spa business as an LLC, not a sole proprietorship. Specifically, an S-Corporation is a great option for even small business startups, as it gives the owners the ability to grow and add investors. LLCs are able to hire employees and grow the business, in addition to not holding the individual owner’s assets liable for most business matters. Therefore, the question one may ask is,What is the difference between a corporation and an LLC? The answer is simple. Both protect owners, so they are not personally on the hook for business liabilities or debts. The key difference, however, includes how the businesses are owned and maintained.

LLCs have one or more individual owners, and corporations may have shareholders. Corporations generally have more formal record-keeping and reporting requirements. Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations. 

LICENSURES

Go to your state’s Department of Revenue website to obtain a state tax withholding number. This number acts as the identifying number for the state the business is operating within and is the state tax identifier. 

Register with the Secretary of State within the state the spa business is operating from. This is available through their website for online filings of items such as business entities, Uniform Commercial Code filings, charities, trademark filings, and more. Registering your business with the Secretary of State assists the business in receiving a Certificate of Existence. This document is required, at times, to move forward and receive a business bank account through an FDIC-insured bank, among other moments in which you may be asked to present this document. 

Register with the county (not the city) you are working in to request a county business license. The business must be registered through the County Business Office and renewed annually. The business license must be on display for any county official to see when they arrive on site at the spa’s location.

BANKING & ACCOUNTING

Open a business bank account with an FDIC insured bank and place $1,000 to $5,000 (or more) in the account to begin purchasing items for the spa company and not spending money from your personal bank account for business expenses. This initial deposit will be titled Owner's Investment in your Quickbooks or accounting ledger.

Hire an accountant and open a Quickbooks Online account to organize your spa business expenses and income for tax purposes. There are, of course, other accounting softwares available for small business owners. 

Research accountants before hiring one. If you are unable to hire a full-time Accountant or chief financial officer (which should be a goal as you grown your company within three to five years), look into the clients utilizing the accounting companies or independent accountants for monthly bank reconciliations, business accounting advice, and annual reporting of wages to the IRS. Not all accountants are the same and can often overlook certain details or give advice not applicable to the spa’s long-term goals. This is the unfortunate side of an accountant that covers business accounting for many accounts. Simply put, be sure to do your homework here.

INSURANCE

Take out a liability insurance policy and property insurance policy. Shop around to find the best pricing. Liability insurance covers the cost of services performed on clients; whereas, property insurance covers the cost of all contents within the building pertaining to supplies, equipment, furnishings, and information technology. Both are exceptionally important for aesthetician business owners and should be reviewed and updated annually. 

Always purchase more insurance coverage for property insurance per year. As the spa grows, your equipment list will too. Ensure you are able to cover all costs (and more) if the spa building were to burn to the ground or flood. Ensure there is proper insurance in place to cover all sources of catastrophe. 

TAXES

Set yourself up as a W2 employee of your own company through payroll services and pay yourself either weekly or bi-weekly. You will enter your withholdings and begin allowing the payroll company to pay the taxes. This is very important, as you do not want to owe taxes at the year’s end. You want to collect a W2 and a tax return at the beginning of the year. You can link your personal bank account to this system to receive direct deposits. You can additionally set up future employees this way as well. 

REGISTRATION & BOOKING

Register a salon license or a booth renterlicense through the state’s Board of Cosmetology. Shop around for appointment booking systems,likeMindBodyVagaro, Booker, Square, and more. Shop for merchant services options to ensure you are receiving the BEST merchant services fees. Credit card processing should not be more than 1.90% of your monthly credit card transactions for clients. You will link your merchant services to your business bank account, to begin receiving income to pay business expenses, make payroll for the week, and so on

Successful aestheticians will self-reflect prior to opening any business venture and understand the business acumen required as an owner. By setting yourself up for success from the start and prior to opening the doors, aestheticians can ensure compliance in all areas of legal business structure. Ensuring profitability and compliance from the beginning is a great way to begin a fantastic career in consumer skin health.

 

Courtney Sykes 2019

 

Courtney Sykes is the Chief Administrative Officer of Southeastern Esthetics Institute and licensed aesthetics instructor in South Carolina. Sykes also is the creator of Courtney Sykes Molecular Anit-Aging, a clinical skin care line for consumers and professionals. Her passion lies in creating real change in the aesthetics industry, assisting her students to obtain gainful employment, and make a difference in the lives of their clients. Sykes specializes in a science-based approach to skin health and education. Her primary focus is chemical peels, laser treatments, eyelash extensions, micropigmentation, and cosmetic lasers. Her background in medical spa management has led her to nationally-accredit the largest, licensed aesthetics school in South Carolina – Southeastern Esthetics Institute. 

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