A Guide to Business Structures for Barbers
follow for updates

The art of barbering lets you showcase your talent and creativity while making a positive impact in the lives of your clients, one cut at a time. But if you want to turn your passion into a successful career, you’ll need to master the business of barbering, too.

When starting your business, one of the first important decisions is choosing the right business structure. This isn't just about ticking a box on a form—it's a move that dictates everything from your tax obligations to your level of personal liability. 

The potential stakes are huge. Running your business without the right structure (or none at all!) can get you tangled in legal and tax headaches. But, get the setup right, and you’ll lay a solid foundation that enables your barbershop to flourish and grow. 

Choosing the Right Business Structure—A Make-or-Break Decision 

Many small business owners enter the world of entrepreneurship out of a love for their craft, not because they love business. As a result, learning about business structures can present a bit of a learning curve. However, choosing the right legal and tax structure is more than worth it in the long run as it can impact:

  • Getting funding 
  • Tax incentives
  • Legal protections

Before we get into the nitty gritty of various business structures, let’s take a moment to define two key terms central to this topic: 

  1. Ownership – Legal control of the operations and functions of a business. 
  2. Liability – Legal financial debts or obligations.

Keep these definitions in your back pocket as we dive into the main business structures you need to know. 

Sole Proprietorship: One Chair, One King 

This type of business structure refers to someone who owns an unincorporated business alone. It’s a good option for independent barbers just starting out who don’t plan on hiring any employees. 

This is the simplest and most straightforward structure your business can have because instead of keeping track of multiple people, you’re independently responsible for the money you make and spend. 

If your goal is to be your own boss and maintain full control over your barbering operations, this might be the optimal choice for you.

However, keep in mind that while a sole proprietorship is a good, low-risk option for many entry-level businesses, it doesn’t offer many tax benefits and you’ll need to pay self-employment tax. 

Partnerships: Shared Chairs, Shared Stakes

In a partnership business, two or more people work together and share the profits and losses of the business. A partnership can be a good way to bring in a more experienced business partner to handle the behind-the-scenes work while you focus on the barbering.

The two types of partnerships are:

  • General partnerships – Everything is shared equally between the individuals who split ownership. 
  • Limited partnerships – One person oversees and runs the business while the other partner(s) merely invests and is not responsible for any debts beyond the initial amount they contributed. 

In this type of structure, you’re along for the ride with your partner for better or worse. If they win, you win, but if they suffer losses, you’ll also be accountable for those decisions. Thus, it’s best to go into a partnership business with someone you trust. 

Tax-wise, partnerships are responsible for filing their own returns, as well as supplying forms to any involved partners.

Corporation: Scaling Your Barber Business

These business entities exist separate from their owners in a legal sense. Corporations are good for barbers looking to create more complex operations, including multiple storefronts. The independent legal rights of a corporation include the ability to:

  • Sue or be sued
  • Own and sell property
  • Sell stocks

Within the larger umbrella of corporations, there are several specific subsets. Some examples include: 

  • C Corporations
  • S Corporations
  • B Corporations

S corporations are most relevant for barbers because they’re specifically designed for small businesses. With this structure, known as a pass-through, meaning your businesses’ revenue and expenses are reported on your personal tax returns. This can save you from having to pay federal taxes at an entity level.

Limited Liability Company (LLC): The Goldilocks of Business Structures

This business structure offers a middle ground between partnerships and larger corporations. It can be a smart choice for independent barbers and shop owners alike because of the benefits available to you as a business owner. 

The hybrid setup of these companies allows business owners to enjoy the best of both worlds because this structure provides:

  • The flexibility perks of a partnership
  • The asset protection of a corporation 

In an LLC, your personal finances are protected because your company is considered an entity separate from you. This means your personal assets can’t legally be used to satisfy any debts of your LLC.

With an LLC, you also get the benefit of choosing between pass-through taxation and S Corp taxation. Essentially, you’re free to make the decision that’s most lucrative for you.

Shared Scissors and Visions: The Co-Op Appeal

If you’re feeling democratic and want to empower your employees, you might consider a cooperative, or co-op business. An employee-owned co-op is owned and operated by its own employees, with each participating employee having a vote when it comes to operational decisions. 

Instead of prioritizing profit alone like most other business models, this structure is focused on bringing value to members of a community through democracy and equality. 

While almost any organization can be structured as a co-op, including service-based businesses like barbering, they’re more commonly associated with industries such as agriculture, groceries, and housing, where members can pool resources to boost their collective purchasing power.

Cutting Your Path to Success: What’s the Best Business Structure For Barbers?

The ideal legal and tax structure for your barbering brand will depend on your unique barber services, your long-term business goals, and where you’re setting up shop. 

Because no two businesses are the same, it’s always best to consult with a financial professional to get personalized advice for your situation. 

However, it’s worth noting that many indie barbers choose to opt for LLC or S-Corp structures instead of sole proprietorships. This is because, although sole proprietorships are easier to start, their simplicity comes with one big drawback: no liability protection.

Be a Cut Above the Rest with SQUIRE

No matter what type of business structure you end up choosing, managing a powerhouse barbershop is hard work. Free up more time to do what you do best by utilizing SQUIRE: an intuitive, all-in-one barbershop management platform that can revolutionize the way you work by unifying your booking, scheduling, point-of-sale, retail inventory, financial reporting, and much more. 

Whether you’re an indie barber just starting out of barber school or you’ve got multiple shops in your name, reach out to learn more about how you can take your business to the next level with SQUIRE today.

READY TO TRY SQUIRE?