Regardless of the business structure , the statement of equity is an essential tool for monitoring the spa ’ s financial health .
MAINTAINING A STRONG EQUITY POSITION brings peace of mind to business shareholders . Understanding and managing equity helps spa owners make strategic decisions that not only enhance their financial stability but also empower them to invest in new treatments , expand their offerings and continue providing outstanding care .
WHAT IS EQUITY ? Equity is like the spa-goer ’ s sense of relaxation , calm and balance after experiencing treatments . Reflecting the portion of the spa ’ s value that belongs to the owner ( s ) after settling all obligations , it is a key indicator of financial stability and tranquility .
For U . S . -based spas , the most common business structure is the limited liability company ( LLC ), treated as an S Corp for federal tax purposes . The LLC model is popular because it offers liability protection for owners ( members ) and allows for flexible management structures . LLCs promote pass-through taxation , wherein profits and losses flow through to the owners ’ personal tax returns . This structure is ideal for small businesses in the spa industry , balancing operational simplicity with important legal protections .
Depending on how the LLC is structured and the elections it makes with the IRS , a spa LLC may be treated as a corporation , partnership or “ disregarded entity .” If taxed as a partnership , the LLC ’ s income and expenses flow through to the members , appearing on their personal tax returns . If taxed as a corporation , the LLC is treated as a separate legal entity with its own tax obligations . For a disregarded entity , the LLC ’ s income and expenses are reported directly on the owner ’ s tax return , simplifying the tax process while still providing legal protections .
Regardless of the business structure , the statement of equity is an essential tool for monitoring the spa ’ s financial health . Below , we ’ ll dive deeper into the key elements that make up this important statement .
ELEMENTS OF THE STATEMENT OF EQUITY l Beginning equity balance : This is the ending balance of total equity from the previous period ( e . g ., the previous month or year ). l Paid or contributed capital : This includes money and / or physical resources the owners have invested in the spa . l Distributions : For an LLC spa taxed as a corporation , distributions are the funds or other assets distributed to members or shareholders during a specified period .
Regardless of the business structure , the statement of equity is an essential tool for monitoring the spa ’ s financial health .
DECEMBER 2024 / JANUARY 2025 n PULSE 17