Just when you thought you knew where you wanted to set up your salon, what market you wanted to approach, who your product suppliers would be and where your staff was coming from then your lawyer asks you: "So how are you going to hold this business?"

"What do they mean? I'm not going to hold anything," you think.

The purpose of this article is to review the options available to you as a salon owner and discuss the logistics of setting them up. Each will also have its own tax effects and you should take specific advice on this too – unfortunately that would require another article in Accounting Today! What we will try to do is to dispel some of the myths that surround them.

Going it alone - a risky business

Many independent salons will be sole traders – this doesn’t mean that it is just one person all alone in the salon, but it does mean that there is one person who has to have broad shoulders. As a sole trader everything legally falls against you personally – the lease, the supplier contracts, the staff and of course the tax.

There are several reasons for remaining a sole trader, not least because you are not interested in joining with a third party and sharing your profits. You retain an element of freedom and privacy and you account only to your staff and clients (and the taxman, of course!). No one can access your records but this has its problems too – often investment is restricted to sole traders because of issues surrounding potential for fraud, capital backing and support.

However, the one considerable drawback is that you are seen as having empty pockets by the banks and landlords and there is no chance to limit your exposure. If you have any claims against you, then they will come against you personally and this in turn will risk your assets, possibly even your home.