Career Start Report – Page 21

Company Organization, Licenses and Permits

Before you apply for permits and licenses determine the initial form of your company organization. Here are the most common formats:

Sole-proprietor. The business is owner by an individual, as opposed to a partnership or corporation. Most self-employed groomers are sole-proprietors.

Corporation. The business is an organization formed with state governmental approval to act as an artificial person to conduct business. One or more individuals or other organizations may have ownership of a corporation. There are several different forms of corporations. The most popular with pet groomers are “S” corporations but some are “C” corporations. It is very important that you discuss the form appropriate for you with a qualified business attorney or Certified Public Accountant.

Limited-Liability Company. Often termed LLC’s these are companies who owners and managers enjoy limited liability and some tax benefits, but avoid some restrictions associated with “S” corporations. Once again there are different types of LLC’s and you should secure professional assistance before forming one.

It is common for individual groomers operating as one-person businesses to either be a sole-proprietorship or “S” corporation. You can always start as a sole-proprietor and later take another company form.

Two of the most popular reasons for forming company organizations are asset protection and tax planning. The sole-proprietor and his or her personal assets are the obvious targets should litigation arise as a result of perhaps a pet injured or killed under their care.

If the grooming business is a corporation or limited liability company the primary target is the company organization. As a result there is an extra layer of protection for the personal assets owned by the company owner(s) when litigation is filed against a company organization.

It’s not perfect protection. Where negligence is marked it is possible for a court to break the “corporate veil” and expose the personal assets of the company owner(s) to judgments. As you can imagine there is plenty to learn about company organizations before you become self-employed.

We have another recommendation that is vitally important. Before you form a company with an attorney, review your plan with a Certified Public Accountant with a great local reputation for small business.

Your business attorney clearly understands contracts and relationships, but rarely the taxable consequences of the plans timing and organizational format. Therefore, form an action plan with the attorney and then run to the CPA and say, “What are the taxable consequences of this plan?”

You would be amazed the responses our clients have shared. One time the groomer said their accountant advised them to wait 30 days and form the company in January instead of December. Thereby the groomer saved $2,000 which would have been required had the company formed and operated in December. That’s a very simple example but there have been many more.

Sometimes when we form companies we go back and forth between the accountant and the attorney like a restless dog pacing to get out of a cage. However, it’s always worked out to our benefit. We’ve also had great experiences using the services of a professional who is both an attorney and a CPA. Now that’s convenient.
Once you know the form of your company you must register it with local, state and federal government. If you will have even one employee there are additional registrations to act as an “employer” such as acquiring an Employer Identification Number “EIN” with the IRS Dept. of Treasure (U.S. groomers).

License & Permits

Career seekers often confuse vocational licenses with business licenses and permits. Use the term “vocational licensing” when you talk about groomers required to pass mandatory education and testing and meet additional standards applied to their profession. That’s still in the future as no U.S. has yet to legislate vocational licensing for groomers. Unlike groomers, hairstylists for people are vocationally licensed. If they own a business, the business must also have a business license to operate. The latter simply means a permit to operate as a business in a specific jurisdiction issuing the license.

A business license doesn’t endorse them as being vocationally licensed. The latter indicates that the hairstylist has taken and passed required education and tests and met specified standards of service performance. We don’t mean to be redundant but the confusion among groomers is very prevalent.

Pet grooming business owners must apply for business licenses and/or permits in order to operate a business where required. If you are going to open a home, mobile, commercial salon or shop, or your own business leasing space from another business, you probably have to apply for some licenses and permits. They commonly fall into these categories:

  • Local government
  • State government
  • Federal government

It’s very important for you to remember that the laws of your local government are different from those of groomers doing business in a neighboring town or an adjacent county. Business regulations vary by state, county, cities and towns. Asking other groomers outside your area what you need to do to secure licenses and permits could very well work against you if you rely on their information. Certainly you may share similarities and differences, but don’t refer to them for your requirements when they are outside your local jurisdiction. Also, requirements may be different depending upon the form of your company organization. Unfortunately we have seen groomers on the GroomerTALK Message Board ask other groomers far and away from them what to do to register a business. It’s fine to share and compare, but not use others as a reference when it comes to your legal registrations and business organization!

Networking with other grooming business owners is heartily encouraged but it never replaces your responsibility to contact the local and state government for the area in which your business will reside. Request business startup packages from them. Ask for similar information from the local Chamber of Commerce, Small Business Administration and their related Small Business Development Centers, SCORE (retired executives) and other local programs for business owners.

Accountants generally require that businesses they represent provide them with evidence of current conformation with required business licenses and permits. If you are using the services of a Certified Public Accountant specializing in business, ask them for additional sources of information.

Local government will almost certainly require that you inform them of your new business by applying for licenses and permits. There may be some exceptions for unincorporated areas. Visit your “City Hall” and/or “County Clerk” representing the area where your business will be established. Ask for assistance in opening a new business. They will inform you of local government licensing and permit requirements. Once again, it won’t be a vocational license or permit to be a pet groomer, but one to operate a pet grooming business. Make sure you understand that difference.

When you operate a business in a name other than your legal personal name, such as the ABC Pet Salon, you will be required to file a “fictitious name statement” or DBA ”doing business as” application unless your state level company organization filing circumvents the local requirement.

Research local and state records to ensure you do not use a name reserved by someone else. You may even need to check for federal protections as well that could prevent you from using the name anywhere in the U.S.
Before you invest in your business make sure you can operate a grooming business in the desired location. There may be restrictions. In fact, restrictions on home businesses continue to grow. In California metro areas it is increasingly becoming more difficult to operate a home grooming business. Even housing associations may limit access to members with commercial vehicles (mobile grooming vans) when the vehicle is not parked inside a garage.

Few home garages can hold mobile vehicles. Mobile grooming vehicles parked on streets or in driveways may be considered a “visual nuisance” or “traffic nuisance.” The list goes on and on. Generally the more rural your area, the better your odds for home grooming business and commercial vehicle parking.

DBA – Doing Business as Fun allows you to see the fun names of thousands of U.S. Grooming Businesses. Check out the FUN category of this web site.

Mobile groomers often operate in multiple jurisdictions, such as cities and counties. They may need a separate business license for each jurisdiction. For example, Happy Mobile resides in Clark County but also grooms pets in Adam and Harris counties. Not only must the mobile groomer secure a business license in Clark County, but also Adam and Harris counties. It’s very important for mobile groomers to verify the license requirements for all areas in which they intend to groom.

What is the moral of the story? Go to your local government offices and be honest in describing the business you want to open. Ask them for a list of all legal requirements to open the stated business. Don’t disobey or ignore any requirement as you don’t want someone to take recourse against your business down the road.

As a new business owner you should introduce yourself to a local general or business attorney and explain your dream of opening a local business. It’s great to have professional services available on call to assist you. Don’t be embarrassed! They started a new business at one time and know what it is to open a new business. In fact you should be proud. Professionals know you need working relationships with other professionals offering business services. Remember, you are no longer an employee. You are no longer “just a groomer.” You are also a business owner, and all business need occasional professional services. We recommended you read about working with professionals in our From Problems to Profits book. Keep in mind that some of these professionals may actually refer business to you. Most will help you; they want you to succeed. It’s great to have other businesspeople on your side. Enjoy walking into a new arena with new responsibilities and respect for working with professionals in your area.

State government does get involved with your business. If you plan to sell retail pet products, even one, you need a resale permit to collect state and local sales tax. It becomes your responsibility to transfer sales tax monies collected to your state and/or local government. They take your handling of their money very seriously. Based on our experience you must be accurate “to the penny” when collecting and transferring sales tax monies. Keep detailed sales records for retail items separate of sales of services like grooming. Your records may be audited. There are some areas where pet grooming services are taxable whereas only retail products are taxable in other areas. Check with your state government to ensure the correct status of sales tax collection for both services and retail goods.

You may be responsible for additional state taxes on businesses, business owners and your employees. Be sure to talk to your state level taxation agencies to understand what records, policies and procedures, and filings you must follow and complete. Every state has publications for this purpose, but once again, your CPA is certain to know the requirements too.

Some local and state governments require pet groomers to get special permit or license to operate a grooming business. These are very specific permits related to the operation of pet care or the handling of materials and supplies. It’s not uncommon for permits issued by the U.S. Department of Agriculture to be required. Recently Homeland Security filing requirements have even appeared in some states. You may be required to have a permit when you store chemicals such as flea dips and pesticides. If you store anything flammable you may need a permit from the local Fire Department. Ask! Professionals such as your bookkeeper, Certified Public Accountant and lawyer will be invaluable in determining all of the required licenses and permits.

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