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Get a lawyer and draft a business agreement that covers all the bases, just as if you were two strangers. She should have rights to manage the salon as you both see fit, but answering to you as far as covering loan and operating costs, and there should be clear terms for ending and modifying the agreement.
Frankly, if you don't do this, all the advice in the world is useless. And if you do this, the process won't leave a lot of room for casual advice.
So, what say you? First, is there a better forum to pose this question to?
Since she is a Hair Stylist, i am purchasing it with her in mind, as she has expressed an interest in purchasing it.
She doesn't have the credit history that i do, so i couldn't add her name to the loan.
I figured that since i am the one taking out the loan, that it is my Salon, and she will be running it.
Won't it still be *my* business until she pays the loan off?
You will not own a salon. You will have a deed to ownership in property. The person that owns the salon "business" owns just the right to do hair, not the property in which the business is in. I presume she will be paying you rent. You are a landlord of a property and she is a tenant of the property with her business. If the business fails, you still have to pay the mortgage as the property owner - so you likely have a "business" of your own as a property owner and manager.
Once the loan is paid off, you would have to transfer ownership rights to the property to her.
Get a lawyer and draft a business agreement that covers all the bases, just as if you were two strangers. She should have rights to manage the salon as you both see fit, but answering to you as far as covering loan and operating costs, and there should be clear terms for ending and modifying the agreement.
Frankly, if you don't do this, all the advice in the world is useless. And if you do this, the process won't leave a lot of room for casual advice.
You need an business attorney. Maybe a CPA.
First write down very briefly what you want to do so when you talk to the attorney he knows what you want.
Question are you buying the business - existing supplies, furniture and fixtures, customer base etc or just a physical space where a salon business was run from?
In your state do you need a license to operate a salon - probably yes - who has the license?
From what you say you are borrowing cash. Will use the cash to buy the salon. Thus you own the business and will continue to own the business when the loan is paid off.
She will be your (the business) employee. Is the business going to be an LLP, Corp, S Corp, Sole proprietorship etc.?
If you want to sell her the business you could enter into an agreement for her to buy it for the amount of the loan and to pay you monthly the same amount as the loan payment and she would own the business after she made all the payments.
Is the business going to be security for your loan?
You will form a corporation or partnership of some sort. Your First step must be to decide the details with her and visit a lawyers office to draw up an agreement to start and end the operation.
Begin here: https://www.bizfilings.com/toolkit/r...-company-types
I was in a business with a non-family friend. We formed a Subchapter S Corp. There should be at least five members with voting authority. If there can be a tie vote you have to have an agreement to appoint three arbitrators to decide contentious issues.
You should also both have wills outlining disposal of the shares of the business. Of course a partnership agreement is essential. Few small businesses survive three years, be sure to provide for disposition of the business assets.
An alternative is for you to buy an existing business and hire her to run it with an agreement on her buying it from you later. In either case the bank will want to see a five year business plan.
Most businesses like you have outlined fail from thievery by employees or co-operators. "How do I know? I just do."
My dad set up my half sister three times. All were failures.
Does your daughter already have customers that will follow her?
Are there existing stylists at this salon that will stay? Will they be paying monthly rent to you for their space?
You need to discuss with your daughter about all the finances so there aren't any surprises along the way. Who is paying utilities, advertising, maintenance, etc? Do you need to pay for a manager or is that a separate license in your state? What happens if sales aren't high enough - at what point do you close and sell?
One of my friends discovered she made more money as a stylist than when she owned the salon.
Also, you mention getting a loan to buy the business. Let us know how that goes.
Sounds like she is buying the business and not the building in which the business is located. Unless your daughter has a business background and is familiar with how to run a business (i.e. tax laws, record keeping, break even point etc.) she is doomed to failure. She could be a great stylist, but, if she has no business background with regard to payroll, insurance, and the costs associated with running a business - she will be way in over her head.
Have her take a few business courses at a local college on setting up and running a small business before she jumps into owning a small business. Does she even know how to read a profit and loss statement?
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