"WHY IS BOOTH RENTAL SO POPULAR?"

In our last article we took a stroll down memory lane looking at how our industry arrived at where it is today in the business world.

Now, let’s look at why all business practices within the beauty and barbering industry lack three very important factors to be successful. They are, very simply, the lack of a legal structure, the lack of a profitable structure and the lack of a management structure. Lacking any one of these structures is enough to keep a business from being as successful
(profitable) as it has the legal right to be. Worse case scenario, you go out of business.

The methods we use to conduct business we call “working options”. When it comes to paying taxes there are three working options or categories from which we must choose - employee/employer, booth renter and independent contractor. Over 60% of workers in our industry have placed themselves, or their business, in the wrong tax classification and, in so doing, generated serious consequences.

The employee/employer relationship is salary based, hourly based, commission based or some combination thereof. Most businesses understand the tax responsibilities in this category but lack the protection to insure their success legally, financially or from a management structure. Contact us for more information on these issues.

The same thing is true when it comes to booth renting, with one exception - most owners/landlords and the booth renters themselves, do not know their tax responsibilities. Or, if they do, they don’t practice them and lack the legal structure necessary to protect their businesses. That is why 99% of all practicing this concept of booth renting could not pass an audit today by their own state, the IRS or a judge.

The last working option category is contract labor. This is a completely different category tax-wise, and the IRS says only 0.5 % of all people practicing within the beauty and barbering industry qualifies for this classification. Therefore, pretty much all those practicing within our industry fall into only 2 tax categories - employee or booth renter, period.

In future articles, we will be covering all three of these working options from the legal, profitable and management points of view. We’ll provide guidance and direction to help you become more successful. The trend towards combinations of business practices looks to be a lasting part of our industry, especially if you, as an owner, want to continue to grow your businesses.

For now, let’s examine the independent contractor classification. Why is it that 99.5 % of all beauty and barbering industry related personnel do not qualify for this tax category according to the IRS? Look at the ground rules for being in this classification. To qualify -

 The worker must be completely independent from any other business. That means that they work at no particular place of business. They work at more than one location, usually many. They do not work on any regular days of a week or month. They do not work on any regular hours of a day or week. There is only one exception to this rule, up to this point, and that would be renting a private suite with a separate entrance.

 An Independent Contractor Services Agreement/contract can be negotiated for any form of compensation such as a percentage of services performed or a flat dollar amount on services performed.

 A tax form 1099-Miscellaneous would be issued to the independent contractor on any dollar amount over $600.00 paid to that individual during that calendar year. This is totally the opposite from the way a booth rental business is run and the biggest reason why the IRS says that few individuals in the beauty and barbering industry qualify as an independent contractor.

In our next article, we will explore the reality of setting up and running a business for booth renting. Whether you are a salon, spa or a barbering business owner/landlord or a booth renter, or just considering the possibility of joining the ranks, this article is for you.

Kassidy’s Salon Management Consulting Company is dedicated to helping you meet your goal by providing you with a series of articles on booth renting and having employees. For example, whether you are a salon, spa or barbering business owner who is currently doing booth rental, or you’re a prospective booth rental owner/landlord, we highly recommend seminar # 2 titled “How To Set Up and Run A Business for Booth Renting.” This seminar will provide all the IRS and your own State guidelines regarding the legal and profitable side of owning this kind of a business. Remember 99% of all practicing this business could not pass an audit today. There must be a good reason.

If you are the booth renter/mini-salon owner, you will want to pay particular interest to seminar # 4 “So Now Your a Business Owner/Booth Renter.” This will explain why a salon owner/landlord will give you a contract to sign, what is in that contract, how that contract will protect you and your business and why you want to sign that contract. If you already have a signed contract, it will immediately tell you whether you have the kind of protection that you need and/or what kind of business owner/landlord you’re involved with.

To learn more about Kassidy’s Salon Management Consulting Company or upcoming appearances contact Ken Cassidy directly at kassidy122@earthlink.net.

Submitted By
BeautySalonSecrets.com
Our Sample Booth Rental Agreement has a clear definition of who the "Lessee" (or Booth Renter) is and who the Landlord (or Salon Owner) is. It is available to purchase and download here.