I have an extra treatment room in my office that I would like to put to use.  I have been a clinically based Aesthetician for 5 years now.  I am already very busy and have recently purchased an IPL machine that will increase business even more.  I would like to bring in a new grad to mentor and help take up the extra clients that I may not have time to see.  My dilemma is this - should I lease the space and pay commission on retail or just pay commission across the board?  I am providing everything, retail, backbar, equipment, linens and advertising.  I know in the long run commission is better for me in regards to increased revenue, but leasing is much less work for me.  My view is, if they are paying a lease then they may be more motivated to see and bring in new clients.  Whereas with commission they could become complacent since they don't have to worry about making rent.  Please, I need help making a decision!

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Here's the thing...

You would like her to work for you as an employee by seeing clients you already have.

BUT

If you have her lease the room she is an independant business owner NOT an employee.

I should have clarified that this would be an Independent Contractor position only.  I am not interested in hiring anyone as an employee even if I supply everything for them.  My understanding is that an Independent Contractor can lease a space or get paid commission (thus providing them with a 1099).    So ultimately, is it worth the headache of paperwork and paying commission or just keep it simple and have someone lease.  I do understand the limitations with having someone independent vs. an employee.

It would be hard to come in as a IC 1099 if you are supplying everything.  What will they write off for their income???  The wouldn't be able to write off very much overhead and end up paying more taxes in the end. 

Excellent point.  I had not thought of it that way.  But, it could be good way for a new Aesthetician to get started and not have to come up with so much money up front.  I am even thinking of it as a way to get someone started until they feel ready to go out on their own.  The schools in my area seem to focus on getting their students to pass the state boards, rather than being ready to start their own business.  Most spa's (which aren't many) work on a commission only basis here - no employee's.  Thanks for that view on it Beth - very helpful!

From the IRS-

"If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. See Internal Revenue Code section 3509 for more information."

Setting hours, training, requiring things to be done a certain way, supplying products - these are all things that suggest an employee. You MAY have a commissioned employee but you are still liable for employment taxes and witholding.

Of course tons of people ignore this - and you can too if you want, but you are setting yourself up to a lot of liability with the IRS - especially if a disgruntled employee decides to stir things up.

Thanks for the info Cindy!  I definitely want to do the right thing for all parties involved.  I will look into the IRS guidelines.  I like to follow the rules:-)

Also, if the owner provides everything then what do I write off on my income tax? If I.C r relationship exists between us, should I be able to set my own price, and buy my own liability insurance, and be able to do mobile business on my own time? Also she doesn't even know if she will be providing insurance or it will be on me :/
Cindy, I just got back from my job interview. The owner said she will pay me under 1099. she would get 60% and I get 40%. She provides everything including clienteles but doesn't tell me what to do during application ( the position is eyelash extension technician). She will also provide a fews hours of training before I can start on actual clients. She sets the price and also asked for my work schedule. However, she doesnt tell me whether she is hiring me as a independent contractor or employee. Recall from the interview, it sound that she likes to hire me as a I.C employee. I am new to this and done research on the topic but the more I read the more confuse I would get. I need help asps befoe Monday!

Hi Vi, i am in the same situation right now, howd this work out for you?

What state?  I know in my state, booth rentals as they are called are not legal for estheticians. 

I live in Oregon.  Unfortunately, working as an employee as an Aesthetician is few and far between.  The only places that "hire" Aesthetician's are medi-spa's and derm offices.  Everything else is lease or commission but they are always independent contractors.  Even some of the bigger spas (not medi-spas) hire on a commission basis and they provide everything.  But just because they do that does not mean it is correct or legal.  If only all of this were easier!

You are so right!

I have worked for several places as an "independent contractor" - only ONE place handled it appropriately and paid me as a "commissioned employee".

Currently I work solo in a room rental situation - so don't have the worries that you do right now.  I like to do things legally too and always try my best - it gets VERY complicated though.

If you go the independent contractor route - make sure you have a written contract and that everything is spelled out. 

The way my friend did it was NOT on a commission basis - she charged the IC a "rental" fee for each hour her IC used the room.  Overall she was paying just a bit more than 60% - she had the IC's supply product and laundry (or she supplied laundry for a fee), and charged a small fee if the client paid by credit card.

Good luck!

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