Sole Proprietor, Partnership or Corporation.

Setting your business goals

A vision statement is a long-term view of what the business will become and what the business will look like once it gets there.

A mission statement is a description of the key strategic influences and decisions of the business, such as the market it will serve, the kinds of services it will offer, and the quality of those services.

Goals are a set of benchmarks that, once achieved, help you realize your mission and your vision. You can set short-term goals and long-term goals for your business.

Business Timeline

Initially your concern will be to get the business off the ground:

1. First year; complete all the legal requirements and the resto of the aspects that are needed to start and operate the salon.
2. Years two to five; the focus is on growing the business and the clientele, as well as paying attention to your employees so the business is expanding and becomes profitable.

At this point, once the business is established, your timeline should contain:

1. Years five to ten: At this time, once the business is established you can start expanding, perhaps adding other different services, such as a spa, or building a larger space or adding one or more additional locations
2. Years ten to twenty: This would be a good time to focus on being a manager, and perhaps leave the cosmetology work to your employees. You also need to start thinking about retirement, research your options and start planning on what your preferred path will be.
3. Twenty years on: Depending on your research and plans, this would be a good time to take on a partner, if this was your decision, and train her or him to manage the business’ day to day operations while maintaining control, or perhaps your plans were to sell it and completely retire from the business.

Types of Ownership

One of the first and most important decisions when starting your own salon is which type of ownership works best for you. These are the three most common, keep in mind that it is always advisable to consult an attorney to better understand these choices and what would be best for you:

• Individual Ownership. This is best if you want to make your own rules, and are responsible enough to meet all the obligations and duties of running a salon business. As a sole proprietor you would:
  • Determine all policies and have the last word in decision making
  • Receive all profits and bear all losses, since you would assume all expenses
  • You would be responsible get all permits and manage the business which includes taking care of local, state, and federal regulations and taxes.
• Partnership. A partnership has the potential to be a great success, or a disaster. You need to be very careful in selecting a partner, who should be trustworthy, and hardworking. Both of you need to be aware of the possibility of having to incur losses or debts, and be willing to face them together. Although partners share ownership, the decision on whether to be equal partners or a partner with a minor ownership is up to you and must be considered carefully, and preferably all in consultation with an attorney. In a partnership:
  • You can have more capital since you are both making an investment.
  • You have help managing and running the salon operation.
  • You and your partner(s) have skills and talents that you can pool, so you can share some of the responsibilities, assigning specific ones to each partner, you can share the work and decision making.
  • Within the partnership, partners share and assume liabilities incurred as debt to open and operate the business.
• Corporation: A corporation is legally a separate and distinct entity from its owners. Corporations possess many of the same legal rights and responsibilities as individuals. An important element of a corporation is limited liability, which means that its shareholders are not personally responsible for the company’s debts. A corporation may be created by an individual or a group of people with a shared goal. A corporation:
  • Raises capital by issuing stock certificates or shares.
  • Stockholders own the company. You can be a sole stockholder, you could have another stockholder, or there could be many stockholders, depending on your decision to start the business.
  • A corporation is required to hold stockholders meetings at least once per fiscal year.
  • A corporation has some advantages, but it is more expensive to set up than a partnership or LLC (Limited Liability Company) and the initial cost is higher due to formation fees, filing fees etc.
  • If you decide to draw a salary, you will pay income taxes on this salary, and the corporation will have to pay Social Security and Medicare taxes on it.
  • The corporation will pay taxes on its profits, if any.