What are the costs to start and maintain a beauty salon?

Starting a beauty salon has a reasonably high upfront cost. It is recommended you allocate a minimum of $60,000 for the opening of your salon, divided accordingly: Necessary equipment: $30,000 Licensing cost: $100–$2000 Advertising cost: Up to $15,000 The rest of the budget will go toward employee salaries, building costs, and supplies. Visit our How to Start a Beauty Salon guide to learn more about the costs of starting and maintaining this business.

What are the ongoing expenses of running a beauty salon?

Salon owners can expect to pay for the following expenses: Salaries Supplies Advertising Equipment replacement (wear and tear on chairs, dryers, etc.) Building costs (e.g., utilities, permits, upgrades) Learn more about running a beauty salon.

Should I Start an LLC for My Beauty Salon?

Starting a limited liability company (LLC) for your beauty salon can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a beauty salon, lawsuits can arise from things like damaging a client’s hair or making a slanderous remark about a competitor business.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your beauty salon seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

Do I Need an LLC for a Beauty Salon?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Beauty Salon

By starting an LLC for your beauty salon, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Beauty salons will benefit from liability protection because of the risk of being sued for personal injuries and trademark infringement.

Example 1: An employee at your beauty salon is driving carelessly in the company car park when he crashes into the vehicle of a customer, who sues for this property damage. If your business is found liable to pay compensation, your personal assets will remain protected.

Example 2: While cutting a customer’s hair, an employee at your beauty salon jokingly remarks about another salon in the nearby area. The owner of the salon hears of this and feels that the reputation of his business has been severely negatively affected, suing your business for slander as a result. Limited liability would prevent any damages you must pay from being imposed on your personal assets.

Example 3: In an effort to kickstart your new beauty salon, your business takes on a substantial loan. However, a more popular salon soon opens up in the nearby area, leading your business to decline and eventually go under. The lender of this business loan thus decides to sue your business for defaulting on this loan. In this instance, the liability to compensate the lender will be limited to the business’s assets alone.

Example 4: A competing salon sends you a letter in the mail claiming that your new logo is too similar to theirs. They decide to sue you.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Beauty Salon

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a beauty salon owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Beauty salons rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a professional LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

It is a must for all businesses to own insurance, even ones with limited liability protection like LLCs. Your beauty salon must buy insurance in order to protect its assets (i.e., expensive equipment, furniture, storefront, etc.).

Note that insurance protects your business assets from liabilities, whereas the LLC structure protects your personal assets.

Common Situations Business Insurance May Cover for a Beauty Salon

Example 1: One of your stylists accidentally trips and cuts a client with a pair of shears. The client is understandably upset and demands that your business pay for her medical treatment. Your general liability insurance would likely cover this cost.

Example 2: A competing salon sends you a letter in the mail claiming that your new logo is too similar to theirs. They decide to sue you. Fortunately, your general liability insurance will pay for the cost of your legal defense as well as for a settlement if one is necessary.

Example 3: An employee fails to slow down when rounding a corner and runs into a salon customer. The customer is knocked to the ground and breaks her wrist. She sues your business for damages. Your general liability insurance policy will pay for your legal expenses, including the cost of hiring an attorney and the cost of any payouts or settlements that may be required.

Other Types of Coverage Beauty Salons Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all beauty salons should obtain.

Professional Liability Insurance

Professional liability insurance provides coverage against negligence claims due to mistakes or failure to perform. As a professional, there is always the risk that one of your clients will decide that your services have caused them harm. If a client sues your business, your professional liability insurance policy will pay for your legal expenses. It will pay for the cost of getting an attorney and the cost of a settlement if you settle out of court.

Commercial Property Insurance

It took considerable investment on your part to acquire all the supplies and equipment you use to operate your salon. If you were to lose most or all of your property in an unexpected event, like a fire, you might struggle to replace it so you can get back to business. But with a commercial property policy, if your property is destroyed by a covered event, you can file a claim and get help from your insurer.

Product Liability Insurance

Product liability insurance protects your business from lawsuits over the products you sell. It will pay for your legal fees if you are sued by a customer who claims your products caused them harm.

Workers’ Compensation Insurance

Workers’ compensation insurance is required by most states for employers. With workers’ comp, when an employee is injured performing work-related tasks, they can get their medical treatment paid for through the insurance policy. The policy will also help pay for lost wages while the employee recovers from his or her injuries.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance, commercial property insurance, professional liability insurance, and workers’ compensation insurance.

Starting a beauty salon has a reasonably high upfront cost. It is recommended you allocate a minimum of $60,000 for the opening of your salon, divided accordingly:

Necessary equipment: $30,000
Licensing cost: $100–$2000
Advertising cost: Up to $15,000

The rest of the budget will go toward employee salaries, building costs, and supplies.

Visit our How to Start a Beauty Salon guide to learn more about the costs of starting and maintaining this business.

Salon owners can expect to pay for the following expenses:

Salaries
Supplies
Advertising
Equipment replacement (wear and tear on chairs, dryers, etc.)
Building costs (e.g., utilities, permits, upgrades)

Learn more about running a beauty salon.

Beauty salons make money by charging customers for cosmetic services such as hair care, nail care, skin care, and makeovers.

Learn more about starting a beauty salon.

A beauty salon’s profits depend on its volume of customers, how much it charges per customer, and its overhead costs. The beauty industry generated $62.46 billion in 2016. Moreover, revenue from beauty salons has been increasing for the past 13 years.

Learn more about starting a beauty salon.