Before you can even think about getting a barbershop establishment license, you have to create a legal business entity. This is the foundational layer of your entire operation, and the part that feels the most confusing to new founders. Where do you even start? What’s an EIN? Do you need an LLC?
The good news is that it’s not as complicated as it sounds. Getting your business legally established is a logical, three-step process. Think of it as building the foundation for your house. You can’t put up walls until the concrete is poured. These steps are that concrete.
Step 1: Choose Your Liability Shield (Sole Proprietorship vs. LLC)
This is your first and most critical decision. The choice between a sole proprietorship vs llc determines how much risk your personal assets (your house, your car, your savings) are exposed to.
- Sole Proprietorship: This is the default structure. If you simply start doing business as yourself, you are a sole proprietor.
- Pros: It’s easy and free. There’s no setup required.
- Cons: There is no legal separation between you and the business. If the business is sued or incurs debt, your personal assets are on the line. For a physical business with public foot traffic, this is a massive, unacceptable risk.
- Limited Liability Company (LLC): This is a formal business structure you create with the state.
- Pros: It creates a legal “shield” between your business and your personal finances. If the LLC is sued, your personal assets are generally protected. It provides the liability protection of a corporation with the simplicity of a sole proprietorship.
- Cons: It costs money to set up (typically $50-$500 depending on your state) and requires a bit more paperwork.
The Verdict: For virtually every new barbershop owner, forming an LLC is the correct and necessary choice. The cost is a minor, essential investment in protecting your personal financial future.
Step 2: Get Your Federal Tax ID (Getting an EIN)
An Employer Identification Number (EIN) is like a Social Security Number for your business. It’s a unique nine-digit number issued by the IRS for tax purposes.
- Do You Need One? Yes. While a sole proprietor with no employees isn’t strictly required to have one, you will need an EIN to open a business bank account, and you absolutely must have one if you plan to hire any employees (which you will in a commission-based shop).
- How to Get It: Getting an EIN is free and takes about five minutes. You apply directly on the official IRS website. Do not pay a third-party service to do this for you.
Step 3: Make it Official with the State (Business Registration)
Once you have your EIN, you need to complete your barbershop business registration with your state, which also secures your state business license. This is typically done through your state’s Secretary of State office.
- If you’re forming an LLC: This is the step where you file your “Articles of Organization.” Once the state approves this document, your LLC is officially created.
- If you’re a Sole Proprietor: If you plan to operate under a name that isn’t your own legal name (e.g., “Main Street Barbers”), you will need to file for a “Doing Business As” (DBA) name.
By completing these three foundational steps, you have created a legitimate business entity. You are now ready to tackle the more specific industry and local licenses required to legally open your doors.