How self-employed barbers and hair stylists pay themselves pt. 1 of 2

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If you’re a self-employed barber or hair stylist, you’re likely either working from a home salon, booth renting inside a hair salon/barbershop, or leasing small individual salon suite. The overwhelming majority of these hair professionals are sole proprietors or single member LLCs taxed as sole proprietors. This means, as the business owner, you’re only allowed to pay yourself by taking withdrawals from your business bank account.  When you’re required to do this, keep these 3 things in mind when paying yourself:

1. Make sure all business income is in a separate bank account from your personal funds.
2. Keep track of all your business income and expenses.
3. Save 20-25% of what you take home for taxes.

Another thing I want to point out, is that when you’re working for yourself and not as an independent contractor, you won’t receive a 1099 or W-2 at the end of the year. You may have received these documents at the end of the year when you were working for someone else, but that’s no longer the case. That’s why keeping track of your business income and expenses is so important because the you, the business owner, is responsible for telling the IRS how much money you made.

This is also the reason why you want to save 20-25% of what you take home for quarterly taxes that are paid to the IRS. Depending on your situation, the percentage could be lower, but saving at least 20% is a good start if you’ve never done this before and not sure how much you should put to the side. Saving this money throughout the year and paying these taxes quarterly will help you avoid a large tax bill at the end of the year.

I realize no one LIKES to pay taxes, but it’s a sign of a healthy business. More importantly, paying your Self-Employment tax ensures you’re paying into Social Security and Medicare for when you’re old and looking for your social security check or health insurance. I’m sure you don’t want to be in your late sixties standing behind the chair because you don’t have retirement income.

If this is all new to you , don’t worry feel bad if you’ve never done it before, just start now and make the 3 steps I outlined above a regular habit.

Whenever I mention this to self-employed barbers or hair stylists, I get 3 typical responses:

Response #1 – Yep, I knew this already

Response #2 – I kinda remember hearing something like this before

Response #3 – Huh? What the heck are you talking about!

Want to know which one you are? Take our quiz and find out just how savvy you are with money: moneysavvybarberstylist.com/quiz