Renting a booth in a salon can be a cost-effective and efficient solution for both salon owner and workers. You can avoid paying employment taxes as an owner, and enjoy unlimited income potential as a worker. But you need a solid contract drawn up and a clear vision of how landlord and tenant will work together successfully.
Booth Rental Success
Rent out a booth instead of hiring employees to avoid the need for workers' compensation, liability insurance, and federal and state employment taxes. Salon workers may prefer a booth rental arrangement to control their own schedules and income potential. Regardless of why you want to rent a booth in a salon, write up a contract with a lawyer in advance.
Find a booth rental agreement online at such legal websites as Agreement Etc that help the average person create legal documents for guidance on how to set up a booth rental. The agreement is designed to conduct business between a landlord and a tenant. Look over the rules for late charges, if the space can only be used for work purposes only, and subletting rules. You can add on an amendment if you want to add rules about what the booth renter can sell or hours worked.
Include information on who is responsible for taxes. In a booth rental situation, the renter is responsible for paying rent and taxes directly to the state and IRS. Renters should pay quarterly taxes, and owners should double check that their tenants receive a 1099 form at the end of the year.
Discuss marketing and advertising needs of the booth rental. Decide whether the renter will be solely responsible for bringing in his or her own clients. Agree on whether or not the salon owner will expect the hairdresser to participate in any salon promotions or giveaways. Some booths are only designed strictly to collect rent and the landlord and salon workers do not work together.
Decide how you will increase your revenue as a salon owner renting out a booth. Salon renters can increase rates, expand their services, and work longer hours to increase their income. Salon owners are only collecting rent from their tenants. Consider selling products or splitting the commission on certain promotions with booth renters.
Get everything in writing from rent to rules. Ask a lawyer to look over your contract. Consider collecting rent by the week instead of the month. Spend time getting to know the landlord or tenant of a booth rental salon. Your philosophies on business may not be a good match.
Give your tenants an IRS checklist to ensure they understand the rules for filing taxes as an independent contractor.