Top 9 mistakes in your salon business that could lead you to lawyers

June 24, 20210

Several things are involved in opening a salon business. One of them is money since investing in your dream salon has its benefits. But there could be additional risks like legal issues that might lead to you needing a lawyer.

It’s vital for any salon entrepreneur to know how to avoid these issues. And not leave themselves deeply vulnerable like an open target for unscrupulous people taking advantage of those legal mistakes that can lead to needing legal help.

To save you from this misery of going through legal complications beforehand, we have put together a list of 9 common legal issues entrepreneurs make in the salon business.

So, without wasting any more time let’s get started with today’s blog.

9 mistakes that lead to legal issues are:
1. Not having legal registration and licensing

Any beauty salon needs a business license to open, and this also means building code compliance certification and health inspection certification hung prominently where customers can see it.

All the salon’s cosmetologists must have their cosmetologist licenses on hand at all times. Keep in mind, some cosmetology licenses are specialized to cover hair, skin or nails, so each employee must be certain to have the proper certification displayed prominently.

Entrepreneurs not having these licenses lead to severe fine and penalty through regulations and law.

Some licenses and permits you need to open a salon are:

  1. State Cosmetology or Beautician’s License
  2. Salon Retail Seller Permit
  3. Salon Business Operation License
  4. Federal Employer Identification Number (EIN)
  5. Certificate of Occupancy
2. Not having sanitation and hazardous chemicals compliance in place

Hundreds of people visit beauty salons every day to have their hair and skin catered to, which means properly cleaning and storing equipment and supplies is an absolute priority. All salon employees must disinfect all tools between every client.

Many salons go-to legal procedures just because some customer got infected by any machinery or untidiness environment in the salon which led to suing the business in court for a big lawsuit.

The sanitation standard in your salon should be :

  1. Brushes and combs must be stored in disinfectant
  2. Fresh towels must be used for every client, as well.
  3. A beauty salon must have a readily available first aid kit and will be asked to show where it is when inspected
  4. Keep flammable products in a separate storage space that is cool and dry
  5. All supplies must be kept capped or closed between uses or this could lead to big legal issues
3. Not Starting the Business as a Corporation or LLC

This one of the very common legal issues in the salon business. The owners while starting their business don’t consult the lawyer about what legal form to operate the business.

This results in incurring often start businesses without consulting lawyers, they incur higher taxes and become subject to significant liabilities that could have been avoided if they had structured the business as a corporation or a limited liability company (“LLC”).

The types of business forms that are generally available to a startup business are as follows:
1. Sole Proprietorship

This type of business is the simplest and least complicated of all types of business. It is said to be the easiest way for a person to operate their own enterprise. In this type of business, the person who owns it owns 100% of it by themselves.

Sole Proprietorship is a person-based entity, similarly like a sole proprietor and not a separate legal entity, similar to a partnership. As a result, all the assets of the business belong to the sole proprietor and are not owned by the business itself. For this reason, it is considered to be very easy for someone who owns himself or herself to also own their own business and carry on with its management.

2. General Partnership

In a general partnership, each partner or member is typically personally liable for the actions of the partnership. Each partner is not only an equal stakeholder but also has an active role in the operation of the business. The partners as well as their personal assets are at risk if a partner commits fraud or otherwise misbehaves. There is some disincentive to overreach because each individual’s personal assets are at risk in any given case.

3. LLC

These are formed under state law, are a hybrid form of corporation and limited partnership, and have certain tax advantages over C corporations. They provide limited liability protection to the owners, in keeping with the corporate form, but they also provide for flow-through taxation to the members (as with an S Corporation). If you plan on bringing in venture capital investors at some point, it is best to avoid starting the company as an LLC (which generally can’t invest in pass-through entities).
4. Having Company Name with Trademark Issues and Domain Name Problems

While choosing the name for your salon, it is important to do research to help you avoid trademark infringement or domain name problems and to ensure that the name you choose is actually available to use.

Many times entrepreneurs face big lawsuits because the name of their company matches with the competitor

You may be infringing on someone’s trademark if your use of a mark is likely to cause confusion among customers as to the source of the goods or services.

To avoid this:

  1. Google Search about the domain
  2. Reach federal trademark registrations on your proposed name.
  3. You might consider having your intellectual property lawyer do a professional trademark search. Our company salon shark can help you with the necessary contact to initiate your legal procedures. visit us to know more.
5. Not following business tax laws

You might not think that it’s possible to get into trouble for not following all the tax laws. But if you’re an entrepreneur or business owner, you could be the target of a costly audit. You might also have to face penalties and fines if you don’t follow certain business tax laws.

If you’re an entrepreneur or business owner, you might think that following all the tax laws is a good idea. You should realize that federal and state tax laws are complex and you need to be especially careful. If you don’t pay your taxes, you might get into trouble with the authorities.

Is your business subject to sales/VAT taxes? When must you file your business income tax returns? Do you need to make quarterly payments? Tax law is complicated no matter where our business is located. You need to obtain the services of a good business accountant or, at the very least, have accounting software that keeps your records and files your taxes when required.

We at salonshark can help you get some law experts around you so you can structure your business well. Visit us to learn more about it.
6. Inappropriate contracts with vendors

When you use the services or purchase raw materials from someone outside of our business, you need iron-clad contracts. When you are either an owner or a tenant of your premises, you need legal documents that establish the “rules” for occupancy. Never enter into an agreement with an “outsider” without a legally binding agreement. A good attorney can draft those contract templates for you – don’t rely on free Internet sites.
7. Not consulting attorneys

When starting a new salon business, one of the first things that should be done is to consult with an attorney to make sure all areas where the salon will operate are up to code. This is because some towns and municipalities have specific laws that govern whether or not a business like your salon can operate, as well as what sort of licenses are necessary. Without consulting an attorney on these legal matters, you may end up being penalized for something you didn’t know about in advance.

Attorneys may charge you money but it saves you millions by saving you from being sued for millions. So, don’t fall for the trap of “that legal issues will only arise as they scale, and they can always bring in an attorney later one” 

This is a huge mistake and one that can cost you your company, if not buckets of money.
8. Disobeying privacy laws.

Many salons these days are struggling with staying afloat because people are more focused on their privacy than ever before. If someone is taking their hard-earned money and giving it to you, they want to feel that their privacy will be protected, especially if they’re doing something as intimate as getting a haircut.

If you have a policy in place that protects the client’s privacy, they are more likely to trust you with their information and spend their money in your salon.

This is a matter of law now. Any business that markets its wares must have a privacy policy that explains what customer information it does and does not share.
9. Having poor corporate and HR documentation

As a salon business, it is important to maintain and document everything from your corporate policies and procedures to the actions of your HR department However, this can be a daunting task, especially for smaller businesses.

It can be difficult to know which systems you have in place and which documents are necessary for each area of the company. Putting together this documentation is essential if you want to have any hope of running a successful business.

Mishandling of this can become problematic when the company pursues financings, is involved in an M&A activity or is involved in claims or litigation with an employee or regulatory agency.

Salon shark provides the service “Human Resource Solution” which will help you with this kind of challenges.


We hope you like our approach to today’s blog. Laws and regulation is typically a less read topic over the internet. But for entrepreneurs, it’s very important to sit with a professional attorney and talk about all the legal aspects of your business.

These were lists of nine mistakes entrepreneurs generally make with legal issues, you will probably make some yourself as you will grow in the market. However, one key takeaway that we would like you to take from this blog will be to study this blog carefully and invest some money on the legal side to keep your salon protected.

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Our locationsWhere to find us?
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Taking seamless key performance indicators offline to maximise the long tail.