Have you been thinking about opening your very own beauty salon? To turn that dream into reality, you need to take an essential first step – choosing the right business structure. This decision lays the foundation for whether your business will thrive in the future or present unexpected challenges.

Before rushing to pick out furniture or build your client list, let’s pause for a moment and understand why the business structure matters so much. Your choice influences everything – from how your accounting books are managed to whether you’ll need partners or employees as you grow. It also affects how much personal risk you’re taking on (such as losing personal assets) and the impression you make on lenders or business partners.

Which business structure should you choose and why?

In the United States, many small beauty salons start out as either sole proprietorships or limited liability companies (LLCs). Both options have their pros and cons. Read on below to see which fits best with your personal and business plans.

Sole Proprietorship

  • Easy to start: Registration is quick and paperwork is simpler than with an LLC.
  • Low start-up costs: No required initial capital or large investments needed.
  • Simple taxation: Income is taxed as personal earnings – less complexity, especially if you are providing services yourself without a team.
  • Full personal liability: Here’s the main catch – all business risks fall on you. If something goes wrong and the salon incurs debt, your personal assets and savings are on the line.
  • A small business reputation: If your dream is just to run a cozy salon for family and friends, a sole proprietorship may work perfectly. However, lenders and business partners often prefer working with LLCs over sole proprietorships.

Limited Liability Company (LLC)

  • Limited liability protection: Your personal assets are secure. If the salon faces financial trouble, losses are limited to business assets, not your home or savings.
  • Growth-friendly: An LLC makes sense if you’re thinking big — planning to hire employees, lease larger spaces, bring in partners, or apply for loans.
  • Greater transparency: Yes, you need proper bookkeeping and annual reports. While this adds responsibilities, it also enhances professionalism.
  • Business banking and branding: It’s easier to open a business bank account and build a solid brand with an LLC.
  • Capital requirements: You can officially form an LLC with little to no initial capital, though it’s smart not to indefinitely postpone funding it.

If this all feels overwhelming, don’t worry — it’s not as complicated as it seems. The key is to think about where you want your business to be in the next couple of years.

If you want a more detailed overview of the salon opening process and associated costs, be sure to check out the comprehensive guide on beauty salon startup costs on the SalonLife blog.

How to register your salon?

Once you’ve decided—sole proprietorship or LLC—the next steps are simple but important. You don’t need to make phone calls or wait in lines, as everything can be handled conveniently online through your state’s business registry!

What do you need before you start?

  1. Business name – Is it already taken? Check your state’s business name database.
  2. Business activity – Describe your services as precisely as possible (hair care, manicure, etc.).
  3. Address – Your home address or the location you plan to use for your salon.
  4. Operating agreement (LLC only) – You can find a template online; customize it if necessary.
  5. Application and information – Fill out the online forms and submit required documents as needed.

Decisions like these are often made within a few days — and if everything is done correctly, you’ll soon receive an email congratulating you on becoming a business owner!

What about finances after registration?

You’re officially a business owner, so taxes and reporting are inevitable! But don’t worry. For sole proprietors working solo or with a very small team, managing finances is simpler — you keep close tabs on income and expenses and file taxes annually. For LLCs, bookkeeping typically involves using modern software solutions or hiring an accountant right from the start.

Looking for the right software? Check out our guide to the best beauty salon accounting software options and comparisons on our blog.

Tips to avoid confusion:

  • Be sure to open a separate business bank account.
  • Ensure that all salon-related income and expenses flow only through this account (don’t mix personal and business finances).
  • Keep all receipts and invoices — this will make tax filing much easier.

Important: If your salon’s annual revenue exceeds $40,000, you will need to register for state sales tax. The same applies when you start hiring employees.

Is that all there is?

The legal side of entrepreneurship may seem intimidating at first, but it’s really just the doorway to something bigger. A strong start helps you avoid headaches later and gives you a solid foundation as a salon owner.

We recommend consulting with an accountant or an experienced business owner before making a final decision. Sometimes just a half-hour conversation with someone who has walked this path can clear up the confusion and give you clarity.

Once your business is successfully registered, it may seem like the hardest part is done — but the real adventure is just beginning!

Want to learn the next steps for opening your salon? Read on in our guide “How to Open a Beauty Clinic in Europe” to find out about licenses, permits, and space requirements that will help your salon get off to a proper start even before welcoming your first clients.

Make sure everything important gets done on time and start your salon business with a strong foundation!