I Just Opened a Yoga Studio: Now What?
You are a Yogi. You have the heart, soul and mind to encourage peace and tranquility, strength and endurance, love and patience in all that you do. You just opened up your own Yoga Studio so you can do exactly that for others!
Your mind is busy setting up your new space just right, with the right kind of feel to relax and impress your customers right when they walk in the door; you are cranking out your advertising and flexing your marketing skills; you are practicing and creating daily classes and writing down all your exciting ideas.
Oh I forgot something…you’re excitedly setting up your POS System, registering as an official business, connecting your accounting software to the POS. Ok, so that might not be the most exciting part about opening up your very own studio, but it is an essential piece of the puzzle to fill in before officially completing your first class.
So, let’s get down to the part of business nobody wants to talk about. Let’s get these tasks checked off our list and we can feel secure in knowing we are setup correctly and ready to begin classes with no hickups!
4 Initial Steps When Opening Your First Yoga Studio
1. Decide on your Entity Formation
You have a few options to get started:
Sole Prop: The cheapest and quickest option. You may register the business to get an FEIN, but no other paperwork or cost is involved. HOWEVER, even though it’s an option, I wouldn’t recommend this to any Yoga Studio. You are bringing in customers to your building/classroom and once they step inside you can be liable for anything that happens. As a sole prop, if you get sued you could lose your personal belongings to pay the fine. Your assets aren’t protected. To put it simply: there is no separation between business and personal.
LLC: This is generally the suggested route for most first-time business owners. This gives you the freedom of the sole prop, but with the benefit of protecting your personal assets. With an LLC, your business becomes its own entity, apart from yourself and your personal belongings.
Limited Partnership: You will be the “General Partner” and your investors are “Limited Partners.” Limited Partners, while they have stake in the business, have no control and very little say on how the business is run. While that brings a lot of flexibility and freedom to you, with the added benefit of having the help of multiple partners on board, this set up is still risky. Although you can allow the partners to make business decisions or be responsible for certain aspects of how things are run…they’re not liable for any debts if they make a severely wrong move or decision that effects the business.
Deciding on the business formation that fits your yoga studio and your goals best can be a daunting task. It would be best to talk out your questions and concerns with a CPA to figure out which way is best for your situation.
2. Decide How to Accept Money
Will you accept cash and credit? How will you handle the cash transactions? Will they get a receipt? Will it be purely online sales? Let’s dive in a little bit on how to setup your business so you’re always ready to accept money, whichever way it comes!
There are plenty of POS options, but to keep it simple let’s just compare the two most popular for Yoga Studios:
Square is extremely versatile, and yet simple to learn and use. You can purchase their whole setup with the computer, credit card reader and receipt printer; or you can simply startout with your own Ipad and download the software to that.
In order to accept credit cards with just the Ipad (and not have to physically type in their card number), you can have two options. One is the Card Reader Magstripe…this just plugs right into your Ipad or phone and you can swipe their card. The newer option actually lets you use the chip functionality as well as the contactless payers who have their payment system setup on their phone.
The Magstripe is free…the Chip reader is currently $49.
Regarding cash, you can simply record a cash sale on square (so everything gets tracked and your bookkeeper will love you) and put the cash in your secure bank envelope.
This software was specifically designed for fitness studios, salons/spas. So, in regard to your management software, this will be fantastic. And their POS system is fantastic as well. Their POS is comparable to Square as well. You can set it up on your desktop, laptop, IPad or your phone. They also have a chip credit card reader.
And if this customer has just signed up for a 6-month membership with recurring payments, you can set that up right away with the first sale as well. Easy Peasy.
I would definitely recommend checking both of these out and comparing to see which one would fit best with your business and budget. Get this setup before your first class and you will be accepting payments, setting up recurring payments and feeling like the pro you are on your first day.
3. Decide on Your Accounting Software
Just when you thought this post was getting fun…let’s talk accounting software! 😉
I'd like to provide you with a couple different options, but really Quickbooks Online is the way to go. It’s simple to setup and easy to navigate after you get the hang of it or watch a couple tutorials. There are cheaper options, but they won’t deliver nearly as well, you will end up just getting frustrated and ultimately moving to QBO anyways. So, I would suggest starting there.
You can connect your POS, whether it’s Square, MindBody or something else. The sales can be directly synced into QBO, or a report can easily be uploaded into QBO from your POS.
Once you have your POS integrated, it’s a good idea to get your business bank accounts, credit cards, paypal, etc. synced onto QBO’s bank feed. This will make your life much, much easier. You will be able to learn how to automate bookkeeping on your own, and when you decide to hire a bookkeeper, they will thank you immensely for completing this step.
How to handle your bookkeeping the next day after getting your accounting software is a whole other topic. And trust me, we will get there! There is also a QBO Course in the works for new business owners who want to do their own bookkeeping but have no idea where to start. So stay tuned for that!
4. Decide How to Hire Your Teachers
Many Yoga Studio owners give in to the temptation of setting up their teachers on a 1099 contract. However, this can be a dangerous game to play…one that will end up costing you hundreds or thousands when you get audited.
These teachers are using your studio, you are the one most likely setting the schedule on a regular basis, they probably don’t work for another studio…these are all hints of an employee. And the IRS will see it that way and want you to pay employer AND employee taxes for their whole time of employment. Major hit to your bank account if this happens.
Even though I don’t think I’ve met a business owner who enjoys paying payroll taxes, it’s a dirty deed that needs to be done. Audits happen, and you never know when. It could be years before an audit happens, but that just means you’ll have to pay that much more in backdated payroll taxes (yuck).
If you want to stick to your guns and set them up as Independent Contractors, this is what you should make sure of:
- Don’t set their schedules – let them tell you when they will come in to lead a workshop or class
- They need to setup an LLC, and you can pay the LLC rather than the individual
- Encourage them to get Worker’s Comp insurance
These 3 points will help you stay above hot water, but there are no guarantees. I would check with your CPA/Bookkeeper for further details about the relationship between you and your teachers and whether you are playing it safe or not.