JAIME: Welcome to Outgrowth: A Slice of Pro Beauty with your hosts Jaime Schrabeck.
ASHLEY: And Ashley Gregory Hackett. Like most ventures that generate revenue, any business related to beauty needs the appropriate government licenses to operate, but the process can be confusing.
JAIME: As we continue our business basics series, we provide a checklist of the types of licensing needed based on your location and business model. Let’s grow together.
ASHLEY: Well, Jaime, this is a topic that we see asked about all of the time, whether it be in person at classes or on social media. How do you open a salon and what exactly do you need paperwork-wise to do it?
JAIME: We see that usually in the form of do I need, and then insert the name of something. It might even be an acronym in the question. And that we see this repeatedly tells me that we have a lot of people interested in operating their own businesses, but they don’t necessarily know where to go to get the proper licensing and permits.
ASHLEY: And even the official information from the government can be really hard to sift through to get at the actual answer. So let’s have this episode serve as a guide to our listeners and our future listeners who may be interested in starting a beauty business, but they actually need to know what exactly they need to hang on the wall and what they need to get from their local government in order to be able to do so.
JAIME: We cannot emphasize enough the word local, because this is all about location. What you need is dependent on where your business is located.
ASHLEY: Exactly. And so get as granular and zoomed in as possible on this because obviously this information will vary based on where you’re located, based on what state or even what country you’re in, but it may even get down to what city you’re in, and it might even get so detailed that it might be what part of a city you’re in. So the number one overarching piece of advice I want to give about everything we’re going to talk about today is when you are Googling, make sure you’re looking for official government resources because these are very popular searches to make and there are lots of businesses out there that are preying on people who are in this new business ownership position. And they want to charge you to do a lot of these things which are free. So make sure you’re looking at .gov or you’re looking at .org websites because there are some really great free resources out there to help walk you through this process, and don’t get taken by something that you actually don’t really need to pay for.
JAIME: Speaking of paying, the only thing you need to pay is the actual fee to obtain the license or permit, not pay to have someone else do it for you.
ASHLEY: Exactly. And that’s a trap I see a lot of people fall into, especially, even just using this as a very outside example, but the posters that you’re required to post as an employer. Have you ever received the solicitation saying, oh, you can, get these for $99 or whatever in the mail. Those are something you can get for free.
JAIME: You can. I think that’s a whole separate episode.
ASHLEY: Yeah. Yeah. The scams. So let’s get right into it with what do we need if I want to open a brick and mortar salon with multiple chairs and I just want to start my own salon business.
JAIME: Some of these permits and licenses would apply regardless of what kind of business you open. It’s just, in general, if you are taking a dollar for selling a product or selling a service, you need to have these licenses to operate and then some of them are very specific to the beauty industry.
ASHLEY: Very true, and they can even be specific to the discipline in the beauty industry. So let’s start with the bridge between this episode and our last business basics episode, which was all about setting up your business entity. The next step is registering that business with either your state or your county and a lot of us are going to be operating under a business name, right? Nails by Ashley versus just Ashley Gregory Hackett on the outside of the building. So I need to register my business or my assumed name with my city, state, or county.
JAIME: Yes, and even what that’s called depends on the jurisdiction. So, for example, where I am, it’s called a fictitious business name statement, but again, it’s the same idea that the public has the right to know who’s operating the business and in order to do that, you would have had to establish the entity first. That’s why we had that episode preceding this one, and it may seem like a long time ago, but without the type of entity, you don’t even know how to fill out the form where it says name of business. You have to fill out that name and then also click a box or check a box that says what kind of entity it is.
ASHLEY: Right. Are you an LLC? Are you a sole proprietor? Are you DBA, doing business as? And so this form will take care of how the state should interact with you, and it really ties the name of the business to you or your entity. Where I am in Illinois, this form costs $50. Some places it may be free. Some places it may be more. So check out what you need to do to register your business with your state or your county. So let’s move on to the second item on our list which is thankfully free.
And it’s registering your business with the IRS to get your federal employer ID number. And this is something you only have to do once. It is free, thankfully, but you can only do It during Monday through Friday business hours, even though it’s online. Very strange.
JAIME: It does make me wonder. Some of these things you can do strictly from your keyboard or from your phone. Although, I can’t even imagine trying to fill out some of these forms on the small screen of a phone. I wouldn’t want to leave anything to chance. I don’t know about you, Ashley, but I’m grateful that so much of this is available to do online rather than to having to go in person to an office.
ASHLEY: In a past business entity, I have gone to the city of Chicago to do this, taking the number, and waiting for the person, and sitting at a cubicle, and having them ask me 500 questions I was not prepared for, and it was like a whole process. When you start to get into these forms, and these databases, and interacting with the state, they’re not necessarily very technologically advanced.
So read everything. It is a very sparse, at least in Illinois, the screen is like all this blue text, and all these boxes, and you have to click through everything, and it can be very overwhelming. So take your time. Don’t do this at 5:30 pm on Friday night. Give yourself some time to actually sit down, and go through this process, and make sure you’re understanding everything that you are clicking.
And if you’re running into some roadblocks, then you might actually want to go in person, and sit down with someone and ask, or use a resource like the small business association. I know the city of Chicago has a website that takes you through step-by-step. So don’t get overwhelmed. There are resources out there, but there are resources that you don’t have to pay for is my point.
JAIME: And you want to be accurate in doing this because if you were to make a mistake, say you record your address incorrectly. They’re not going to recognize that as a mistake. They’re going to have you do it again and perhaps pay a fee again.
ASHLEY: Yeah. Yeah. So once you have that, then you need to register your business with your state’s department of revenue. Here In Illinois, that’s free. Registering with IDOR. And this is going to set you up for all of the other things you’re going to be doing, like if you’re collecting sales tax through selling retail, or if any of your services are considered taxable. This is going to give you kind of the umbrella with your state and perhaps your city to allow you to do some of those things, as well as purchasing the items you’ll be selling with a resale certificate, which we’ll get into later. So this is an important step. Don’t skip it. You’ve talked to the IRS. That’s federal. Now you have to talk to your state.
JAIME: In the state of California, those are actually two separate agencies. The agency that collects revenue is different from the agency that awards you a reseller’s certificate or reseller’s permit.
JAIME: Again, making the point that it depends on where you’re located and your state is the primary source of all this. But then in those larger cities, like Chicago or Los Angeles in California, when they have those city-level things, you know, that’s where it gets really granular, but they also should have better resources because they’re used to dealing with their own constituents on a regular basis. And there’s a reason why they have those more local jurisdictions. It’s because they have such large populations.
ASHLEY: Exactly, and there’s a lot of fine print, a lot of things you need to know. So make sure when you’re speaking with your state and look at what you might need for your city as well. Next, you need to actually start getting certificates for the space. So in Illinois, I would apply for a salon certificate of registration. It does not require me to be licensed to get it, but if I’m going to be performing services in there, then I obviously need to be licensed. My license number and name will be listed on the certificate of registration. And that is a $40 fee that I’m paying to the Illinois Department of Professional Licensing.
JAIME: In California, that’s an establishment license and they want you to have already obtained a local business license before applying for the establishment license. And yet there are some jurisdictions within California that want you to have the establishment license before they’ll issue you a business license, so.
JAIME: Fun, right? But that, but the reason why we have to go to our state board is because if we are operating a business that’s regulated by the state board, offering those services that fall within our scope of practice, we have to have whatever our state board designates as a facilities license. So in some states it’s called facilities, a salon certificate in Illinois, correct? And then in California. it’s called an establishment, whatever that is. In California, it’s a general license. It does not matter what kind of services. There’s just only one establishment license.
ASHLEY: So then the establishment license, or the salon certificate of registration, or whatever it’s called in your state often gets confused with your general business license and they are two separate things. The salon certificate is attached to the place. So if you have multiple salons, they’re each going to have their own, but you as a business owner need to have a general business license for your business entity. Again, whatever it is. Here in Illinois, I would apply for a limited business license for a fee of $250 paid every two years. But if I were opening a massage establishment, I would have to pay for a massage establishment license instead of a limited business license and that fee is $550 every two years. So I don’t know what’s going on with massage in Illinois, but they really want you to pay 300 more dollars every two years to have that license. So your general business license, that’s something that is issued in most cases by your state.
JAIME: And in California, it’s by the more local jurisdiction. There is no statewide business license.
ASHLEY: I love the differences we’re finding out here. This is really interesting. Okay. So Jaime, not only do I want to make sure that I have a license for my place and for my business, but now if I want to sell anything out of my place like retail items or anything taxable, I need to make sure that I actually have some sort of sales permit, or sales tax permit, or in Illinois, it’s a certificate of resale wherein I show it to my distributor or wholesaler in order to purchase those items tax-free because the tax will be collected when I sell it to the end user.
JAIME: And that’s the primary reason most people would pursue that is because they think, well, this is my free pass to access things that are available for wholesale and not have to pay tax. And I will say that over the years, I’ve probably paid much more tax than I should have because I actually deal with it more on the opposite end which puts me on notice with my state that in fact, I do sell retail, and it allows me to collect that from consumers, and then turn around, and pay it back to the state on a quarterly basis.
ASHLEY: All right. So that’s one that can get a little funky and confusing. Definitely lean on your free resources for that to determine the name of these permits, or certificates, or whatever they are. They’re different state by state and sometimes locality by locality. So don’t fall into the trap. A lot of things I saw when I was Googling for this episode was like, ooh, an Illinois sales tax permit. We don’t have that. That’s not a thing. Oh, $29. We’ll help you get it. No, you won’t. It’s not real.
JAIME: Well, let me say this about, talk about something that’s very location specific. Even within a particular jurisdiction, you might have a difference of sales tax crossing the street if it happens to land you in a different jurisdiction. So sales tax is one of those things that how much you collect and then how much you then owe the state depends on what the sales tax is where your salon is located.
ASHLEY: Definitely. Lots to find out. Well, and then of course you have the things that every business should have, especially if you’re dealing with the public, which is just business insurance, your liability insurance, all of those other things. And then we open the whole can of worms which is if you’re going to employ people at your business, all of the things you need for that.
JAIME: That is at least one other completely separate episode when we’re talking about employment. And let me go back to what you said about business insurance and liability insurance. Even when it’s not required, it is absolutely best practice, but, you know, read the fine print. It may be required by the terms of your lease that you carry insurance and that you name your landlord as an additional insured.
ASHLEY: Definitely, so more fine print to read. I know paperwork’s not very fun, but these are some of the things that you really only have to do, and set up, and do the due diligence on once, and then just maintain them, right? So, okay. Now that’s for a brick and mortar salon where when you think of a hair salon or a skin aesthetics business, whatever, a nail salon, that’s what you think of. Now, obviously in our industry, there’s lots of other different ways that you can have a beauty business. So let’s talk about which of the items we’ve already mentioned you would need to booth rent inside of an existing site.
JAIME: I would say everything that you could possibly get on that list with the exception, in most cases, of the actual salon establishment license, because that’s held by the person who’s responsible for the salon itself.
ASHLEY: I think a lot of us think, oh, booth renting is just easy peasy. I’m on my own. But when it comes to actually filling out the forms and paying the fees, I think a lot of us might miss some of that. So you do still have to register your business. You do still have to get your federal employer ID number. You still have to register with your state. All of those things still have to happen. You still have to have a business license. You just don’t have to do the establishment license or the salon certificate because that’s held, like you said, by the person who is responsible for the roof and the doors. Now what about renting a suite? Since last week we just talked to someone from Sola salons, we are really in that suite frame of mind. What about renting a suite? That should be easier, right?
JAIME: It’s everything, right? It’s, it’s everything on that list because the only way you can avoid this is if you’re an employee. Everything on that list. You are your own salon within this larger building that just happens to be made up of all beauty businesses.
ASHLEY: Yeah. So you still have to have an establishment license, a salon registration certificate, whatever that is. Everything we listed under a freestanding brick and mortar salon you will need for a salon suite. Now, this may depend on your location, of course. as far as which ones of these things where we’ve mentioned you’ll need, but be prepared. I think these are a lot of fees and costs that people don’t necessarily think about when they’re starting a suite. You’re, you’re focused on, ooh, I have to pay this amount in rent, right? But not just that, you have all of these other startup costs that could be an upwards of a thousand dollars just to get started. So keep that in mind. Budget for it. Be prepared. Now the age old question: well, I can just get around all of this by working in my house. Right, Jaime?
JAIME: Hm, I’m laughing over here. While working at your house may seem like the obvious option to avoid all of this, the rent, any of the hassles, but if you’re generating income, you’re operating a business and there are more concerns actually about operating it from your house than there would be if you were in a traditional business in like a commercial building. Some of the things that you have to consider here, is it even legal to do that in your state as a beauty business? Is it legal to do in your jurisdiction, whether it be your county or your city. Is it legal to do in your neighborhood in terms of an HOA or what the terms of your relationship is with either your landlord, if you’re renting your home, or if you’ve purchased a home that is governed by some sort of HOA.
ASHLEY: Sure. Or even how was your building zoned? There’s so many things that if an in-home salon is something that is legal where you are based, there’s a lot of requirements, right? Most are requiring a separate entrance, a separate bathroom, separate plumbing, meaning, you know, at least a sink and that sort of thing. But then you’ve got a zoning commissioner will have to come out and look at the space once you’ve built it out. You have to get the permits to do that work. Most homes don’t have these separate things. My aunt who has an in-home salon in Wisconsin built it into her new house because she knew this is what she wanted. So it has a separate bathroom, two separate entrances, actually, and then all of the other things that you would expect in a hair salon. So it’s cool to see in practice, but I know that if you were to try to retrofit something, that would require just so much more work in figuring out, okay. For me being a home-based business, just being self-employed, the permits and licenses that I have basically say I can’t be customer facing, meaning I can’t sell anything out of my house, like you can’t come and pick up items from me. I can’t make any changes to the structure. I can’t let my business take up more than 10% of my living quarters and that includes storage areas. So there’s a lot of stuff to look into. So don’t just think, oh, this will just be easier. I’ll just work out of my house and not tell anybody. You’re putting your license in jeopardy. Getting a license to begin with is going to be a lot of rigmarole. So just make sure you’re prepared for that, not necessarily the easier option.
JAIME: Or if there’s that space in your backyard and you think, you know what? I can buy a shed
and put it up, and just have my clients meet me there to do their services. You know that’s another situation in which you are creating a place in which to do business and all of the regulations around building a building would now apply to you much less, all the things having to do with operating a business within that space.
ASHLEY: I don’t know a lot of she sheds that have plumbing, so, or bathrooms or anything. Lots to think about. So now for me, my weird circumstances working on location or mobile. It’s weird because mobile services, they kind of fall into these two buckets, right? You have the mobile services like I do where I bring my things and I go to my clients, or go to set, or whatever. And then you have mobile locations that are actual locations that move, right, like an RV, or a pod, or whatever they’re doing now for mobile locations. So they’re the same, but different, and they require different things. And this is another one where you need to check and make sure is legal in your state.
JAIME: Yes, confusing that concept of the salon on wheels versus someone who drives to meet their clients, or even to take it a step further, the idea of, you know, who’s responsible in that situation for dispatching that person. Are you doing that on your own or are you part of some sort of app that’s dispatching you?And that gets into labor law, so we won’t even go there. But let’s just say that the states are pretty clear on this. You just have to look for the information. So don’t assume that because you see other businesses advertising and providing these services that it’s necessarily legal in your state. You’ll want to follow up and make sure that’s the case. For example,in California, it’s not legal to provide services outside of a licensed establishment under normal circumstances, unless that person is incapacitated. And just the other day we heard in a board meeting that the personal service permit regulation that we have been waiting for for years to become law is likely to very soon. But even when that law passes, the board still has to put the process in place for you to apply for that permit. So even as the regulation becomes valid, or legit, or online, it doesn’t mean you can just rush right out and start doing that. You still would have to go through the process and apply for the permit, which will require LiveScan and a million dollar liability insurance policy.
ASHLEY: Well, that is exciting. Definitely progress on that front, but again, I feel like there’s this attitude in our industry that, oh, just doing it that way by being mobile or booth renting is somehow the easier route, and that there’s less paperwork involved, and less hoops to jump through. That’s incorrect. I think because this episode is really outlining the fact that that is not correct. Even as someone who works on location, I still have to have my business registered. I still have to have all of the EIN numbers and all of that, registering with the department of revenue, getting my business license, holding those insurance policies. So work through your options, think about what it is that you need to do, and just be prepared. It’s a process that can take a while, even though you can submit the forms online and get them submitted immediately, it may take a few weeks for you to get these documents that you need in order to open, or to start seeing clients, or whatever. So give yourself time, give yourself space, and give yourself the budget to be able to accomplish and complete these tasks when they need to be done.
JAIME: Thinking on that, Ashley, I don’t know of any jurisdiction that would allow you to start seeing clients or collecting revenue without having these licenses in place. So just making the application is not enough. You have to have actually obtained the license or permit to actually start doing business.
ASHLEY: Definitely. Lots to think about, lots to consider. We have resources and links for you in the show notes. And if you listen on a platform that doesn’t give you links that you can click, you can always come to outgrowthpodcast.com to the episode page to be able to look at all of the information we’re going to provide. This one’s going to have a ton of stuff for you to start this process. And if it’s something that maybe you need to go back and do from a couple of years ago, because you haven’t done it yet, this is your sign that it’s time to do it.
JAIME: Or if you’re rebranding or changing locations, you’re going to have to redo it anyway so better make it right the first time.
ASHLEY: Exactly. All right. Well, we’re looking forward to your feedback on this episode and further conversation on Instagram. Please come and visit us there at @outgrowthpodcast
JAIME: If you’re enjoying Outgrowth, please leave us a review on Apple Podcasts with one click, just visit bit.ly/outgrowthpodcast.
ASHLEY: Perfect. Okay. Well, so much to do, Jaime. I’m excited for our listeners to engage on this beautiful experience that is starting a business in the beauty industry.
JAIME: These basics seem complicated.
ASHLEY: Very much so. Okay, everybody, until next week, be smart.
JAIME: Be safe.