Microblading is becoming one of the most sought-after services in the beauty industry, with more and more people choosing this procedure to enhance their appearance. Although the profession appears creative and dynamic, it requires serious accounting management.
Without proper accounting registration and compliance with tax and social security requirements, microblading specialists risk facing legal and financial difficulties. This article will help you understand the key requirements and rules related to accounting for microblading specialists and salons.
Brief Overview of Microblading
Microblading is a cosmetic procedure in which pigments are inserted into the skin using a small tool with microscopic blades to create fine lines. The primary application of this technique is eyebrow design. In Bulgaria, this service has been gaining popularity, especially in recent years, and interest in it continues to grow.
What Are the Registration Options?
One of the first steps every microblading specialist faces is choosing a legal form for their business. There are several options, each with advantages and disadvantages.
- Sole Proprietor (ET): This form is easier and cheaper to register but carries a higher personal risk. In case of financial issues, the owner’s personal assets may be subject to claims.
- Sole Limited Liability Company (EOOD): A more secure option in terms of protecting personal assets. Suitable for specialists with greater ambitions for expanding their business.
- Freelancer: This is the easiest form to start with. Administrative costs are lower, but this form does not allow hiring staff, which may limit business expansion potential. Additionally, if you choose to start as a freelancer, you will be subject to a patent tax. More about the patent tax can be found in the blog article Patent Tax – Obligated Persons, Amount, and Payment.
Free 30-minute consultation for new clients.
When Should You Register as a Company and When as a Freelancer?
The choice between registering as a company or a freelancer depends on the scale of your activity. If you expect a higher workload, plan to hire staff, or open your own studio, registering a company is a suitable step.
On the other hand, freelancing might be a more convenient option if you work independently with a small number of clients.
Ways to Conduct Business
Working in Your Own Studio
If you plan to open your own studio, you must comply with legal requirements for licensing and accounting. This includes issuing receipts and maintaining accounting records.
Renting Space in a Salon
If you rent a space in a beauty salon, you must sign a lease agreement and adhere to the agreed terms.
Providing Services at Clients’ Homes
If you offer services at various locations, you will need to carefully document each client transaction and issue invoices for your earnings.
Conducting Microblading Training
Besides offering microblading as a service, you can also conduct training sessions, which can generate additional revenue for your business.
It is important to distinguish between income from services and income from training. VAT registration becomes mandatory when a revenue threshold is reached.
- Licenses and Certifications: If you plan to train others in microblading, you must obtain the necessary licenses and certifications to be recognized as an instructor.
- Accounting for Expenses: Expenses for microblading materials and training-related costs are accounted for differently, so it is essential to maintain accurate documentation.
Cash Register and Issuing Receipts
One frequently asked question is whether microblading specialists are required to have a cash register. If you work as a freelancer, you may not need a cash register. However, you will still be required to issue invoices or other documents for each service provided. If you own a registered company, a cash register is mandatory.
Taxes and Social Security Contributions
Depending on the legal form of your business, your tax and social security obligations will vary:
- Sole Proprietor (ET): As a sole proprietor, you must pay social security contributions and taxes on your profits. Social security contributions are paid in the same manner as for self-employed individuals. Profit tax is calculated based on taxable income after deducting expenses.
- EOOD (Sole-Owned Limited Liability Company): As the owner of an EOOD, you can choose to insure yourself as a self-employed person or receive a salary, which is recognized as a company expense. This offers some flexibility in terms of social security contributions and income management. Additionally, corporate tax must be paid on profits.
- Freelancer: If you operate as a freelancer, you are subject to a patent tax, which is fixed and final. This simplifies and makes taxation more predictable. It is important to note that if your revenue exceeds BGN 166,000 over 12 months, you must register under the Value Added Tax Act (VAT). Social security contributions are paid similarly to self-employed individuals.
Conclusion
Accounting is a crucial aspect of any successful business, including microblading and beauty professionals in general. Do not underestimate the importance of proper income and expense management to avoid issues with tax authorities and ensure sustainable business growth.
Consulting an accountant will help you choose the most suitable business structure and optimize your expenses and tax liabilities.
Author
