How to Start a Salon Suite Business in Tennessee

Who licenses salon suites in Tennessee

Nobody, as suites. Tennessee has no salon suite license, no suite operator permit and no booth renter license in the Board of Cosmetology and Barber Examiners' rules, and the Board of Cosmetology and Barber Examiners licenses exactly two things: people, and shops. A suite building is therefore not a licensed category at all. It is a stack of ordinary Tennessee licenses arranged in one building: every practitioner holds a personal license, every premises that functions as a shop holds a shop license in the right category, and every shop files a designated manager with the Board. A suite operator who understands that stack can build a compliant building. One who sells renters the idea that his landlord license covers them is selling a problem, because Tennessee issues landlords no such license.

The suite question in Tennessee is therefore a structuring question, and it has two honest answers. In the first, the operator is a pure landlord: he rents rooms, provides no beauty services, holds no shop license for the renters' rooms, and each renter licenses her own unit as her own shop. In the second, the operator runs one licensed shop and rents chairs or rooms inside it, keeping the shop license, the manager filing and the compliance responsibility on his own business. Both structures are used across the state. What does not exist is a third structure where unlicensed premises host licensed work under someone else's paperwork.

Tennessee salon suite at a glance

The licenses your renters must hold

Every person working on clients in a Tennessee suite holds the practitioner license for the services she sells: cosmetologist at 1,500 hours, master barber at 1,500, aesthetician at 750, manicurist at 600, eyelash specialist or natural hair stylist at 300, each at $60 to issue and $60 to renew every two years under the Board's fee rules. The suite operator's screening job is to match the license on the wall to the menu on the renter's booking page, because the scope rules do not bend for independent businesses: a manicurist's suite cannot quietly add facials, and an eyelash specialist cannot add tinting. A registered braider working under the $30 registration in the braiding guide is the one worker in the building who is lawfully unlicensed, and her posted notice has to say so.

Renters also carry their own business layer. Each independent renter is a separate business for tax purposes, with her own entity or sole proprietorship, her own EIN if she forms one, her own business tax license from the county clerk and her own sales tax registration for retail product. A suite operator who collects all payments through the house account and pays renters a share is drifting toward the second structure, one licensed shop with workers inside it, and should license and staff the building that way instead.

Licensing the suite premises: the two structures

In the landlord structure, each unit is its own shop. A renter opening a one chair studio in a suite files her own shop license application in her category, cosmetology, manicure, skin care, natural hair styling or eyelash services, at $100 plus the $50 inspection fee, renews at $75 every two years, and files herself or her senior licensee as designated manager. A unit spanning two fields, a stylist who also does nails at the same station, prices the dual shop license at $150 instead. The building's common areas are not licensed premises; the units are. The operator's own compliance duties are the landlord's duties: zoning, building and fire code, and honest leases that never promise licensing cover he cannot provide.

In the operator shop structure, the operator holds one shop license for the whole premises at the same $100 plus $50 inspection figures, or $150 as a dual shop, files the designated manager, displays the license, and answers for the shop's compliance while on duty, including the work of the renters inside it. Renters still hold personal licenses and their own business registrations, but the premises layer is the operator's. Choose deliberately, and put the choice in every lease: who holds the shop license, who is the designated manager, who carries the insurance, and what happens to a renter's clients and bookings if a license lapses. If your model mixes massage or tattooing into a cosmetology building, the sanitary rules add a floor plan requirement, a separate room with hard walls, and the massage side needs its own Department of Health establishment license as well. Because suite models vary, get the Board's answer for your floor plan in writing before the buildout, while changes are still cheap.

Forming your business entity

Most Tennessee salon suite businesses form as an LLC, and Tennessee prices the filing by the head. The Articles of Organization, Form SS-4270, cost $50 for each member in existence on the filing date, with a minimum fee of $300 and a maximum of $3,000. A one member LLC pays the $300 minimum. A four member LLC pays the same $300, because four members at $50 each is $200 and the minimum controls. Only at seven members does the per member math pass the floor. You file online through the Secretary of State's Tennessee Charity and Business filing system, or by mail or in person in Nashville, and the form asks for your fiscal year ending month, whether the LLC is member managed or manager managed, and the number of members at filing.

The same math comes back every year. The LLC annual report is due on or before the first day of the fourth month after your fiscal year closes, which is April 1 for a December year end, and the Secretary of State charges the annual report on the same per member structure: a $300 minimum up to a $3,000 maximum, increasing $50 per member for every member over six. Budget the $300 as a fixed annual cost of the Tennessee LLC form, not a one time fee. A corporation is the alternative entity, and its charter filing fee is a flat $100, but a corporation carries its own governance formalities and the same franchise and excise tax filing described below.

Two smaller filings round out the entity layer. If you want to reserve a name before you are ready to file, a name reservation on Form SS-9425 costs $20. If an LLC is administratively dissolved for a missed annual report, reinstatement on Form SS-9410 costs $70 on top of the reports and fees owed. None of these filings replaces the licenses above: the Secretary of State registers your entity, and the licensing board licenses your people and your premises, and the two systems do not talk to each other.

Business names and assumed name registration

Tennessee splits assumed name filings by filer type. A registered entity, meaning a corporation, an LLC or a limited partnership, registers an assumed name with the Secretary of State on Form SS-4402 for $20. The registration runs five years and renews on Form SS-4481 for another $20, and a change is filed on Form SS-4403 for $20. A sole proprietor or a general partnership does not file an assumed name with the Secretary of State at all: the trade name a sole proprietor works under runs through the county business tax license instead, which is one more reason the county clerk visit in the local section matters.

An assumed name registration is a public notice filing, not a trademark and not a license. It does not stop anyone else from using a similar name, and it does not need to match your entity name, but the name on your shop license application, your business tax license and your signage should tell one consistent story, because clients, inspectors and your bank all read them side by side. If you later change the name on a cosmetology board shop license only, the Board charges a $10 name change fee under its fee rule.

Federal tax ID and business banking

Apply for an Employer Identification Number on IRS.gov. It is free, it issues online in one session, and any site charging you for an EIN is selling you a form you can file yourself. You need the EIN to open the business bank account, to run payroll once you hire, and to register the employer accounts described below. A single member LLC can technically operate on the owner's Social Security number for some purposes, but banks, payment processors and the Department of Labor employer registration all run more cleanly on an EIN, and handing your personal number to every vendor is a habit worth avoiding from day one.

Open the business bank account as soon as the entity and EIN exist, and run every license fee, product order and rent payment through it. Tennessee's franchise and excise tax and the gross receipts business tax both reward clean books, because both are computed from records you keep rather than from anything the state can see on its own.

Business tax, sales tax and franchise and excise tax

Tennessee has three state tax layers for a salon suite business, and they are easy to confuse because two of them have similar names. The first is the business tax, a privilege tax on gross receipts administered by the Department of Revenue. Service businesses file under Classification 3, and the state retailer rate for Classification 3 is 3/16 of 1 percent, or 0.1875 percent, of gross receipts, with a $22 minimum tax per location. Cities may levy the business tax as well at their own adopted rates, so many Tennessee businesses file a state return and a city return on the same receipts. The return is due annually on the 15th day of the fourth month after your fiscal year ends. Classification follows your dominant business activity, one classification per location.

The business tax license is separate from the return, and it is issued locally. You register for the tax through TNTAP, the Department of Revenue's online system, and you pay a $15 business license registration fee to the county clerk, and to the municipal clerk as well if your city levies the tax, for each new business. A location with gross receipts over $3,000 and under $100,000 holds a minimal activity license. At $100,000 or more you need a standard business license. The Department is blunt about the order of operations: a business may not operate until the required license is obtained and posted.

The second layer is sales tax, and for beauty services it mostly does not apply. Tennessee taxes retail sales of tangible personal property and a short list of services the statute names, and beauty services are not on that list, so you do not collect sales tax on service receipts. Product is different: shampoo, retail cosmetics and anything else you sell off the shelf is taxable at the 7 percent state rate plus your local option rate, which runs as high as 2.75 percent, for a combined rate as high as 9.75 percent. You register for sales tax through the same TNTAP account. The third layer reaches entities only: an LLC or corporation files an annual franchise and excise tax return, Form FAE 170, where the franchise tax runs 0.25 percent of Tennessee net worth with a $100 minimum and the excise tax runs 6.5 percent of Tennessee taxable income. Sole proprietors and general partnerships do not file that return, which is a real, if modest, point in favor of the simpler forms for a solo operator.

Booth rent and chair rental in Tennessee

Tennessee has no booth renter license and no chair rental permit in the Board's fee rules, which makes the structure of the premises do all the work. A renter must hold her own practitioner license, and the room she works in must sit inside a premises that holds the right shop license. If you hold the shop license and rent chairs inside it, your license covers the premises, your name stays on the manager filing described above, and you remain responsible for the compliance of the shop while you are on duty, including work done by renters. If a renter wants to operate as her own business with her own clients, branding and checkout, the cleaner structure is her own shop license for her own premises, with her own designated manager filing if she employs anyone.

Either way, every separate business in the building needs its own business tax license from the county clerk and its own tax registrations, and a written rental agreement should say who holds the shop license, who is the designated manager, who carries insurance and what happens to the arrangement if a license lapses. Do not let a renter work under your shop license while presenting herself to the state as an unrelated business at your address: the Board licenses premises and people, the Department of Revenue licenses businesses, and a mismatch between the two records is what turns a routine inspection into a file.

Hiring employees in Tennessee

Your first hire registers you as an employer with the Department of Labor and Workforce Development for unemployment insurance, and you file wage reports quarterly after that. New employer premium rates are set by industry, and the Department states the new employer premium rate for all other industries is 2.7 percent of taxable wages. Your rate becomes experience rated after your account has been chargeable with benefits for 36 consecutive months ending on a December 31. The taxable wage base is set by statute in tiers tied to the unemployment trust fund balance, so confirm the current figure in your employer account when you register rather than budgeting from a number in a guide.

The rest of the Tennessee payroll picture is unusually light. Tennessee has no state income tax on wages, so there is no state withholding to set up, and Tennessee has no state minimum wage law, so the federal $7.25 an hour applies, with the federal tip credit rules for tipped staff. Light does not mean optional: worker classification is where Tennessee beauty businesses get hurt, because calling a stylist an independent contractor does not make her one for unemployment premium purposes if you control her schedule, her prices and her clients. The hiring decision and the booth rent decision in the previous section are the same decision seen from two sides, and the Department of Labor only cares about the substance of the arrangement.

County, city and local rules

The local layer starts at the county clerk's office, where your business tax license is issued for the $15 registration fee described in the tax section, and at city hall if your city levies its own business tax, which the larger cities, including Nashville, Memphis, Knoxville and Chattanooga, do through their own clerks. Beyond the license itself, your premises pass through local zoning, a building or occupancy permit for the buildout, and fire and life safety inspection, none of which the state board handles. A change of location is also a state event, not just a new lease: a relocated shop needs a new inspection and a new shop license application with the Board before you work at the new address.

Local rules are also where signage, home occupation limits and parking requirements live, and they differ enough between a Memphis storefront, a Knoxville strip center and a home based studio in a small county that no state guide can price them for you. Get the clerk's business license, the zoning answer and the inspection schedule in writing before you sign the lease, because every state license in this guide is issued for a specific address and a move restarts parts of the stack.

Insurance for a Tennessee salon suite business

The Board's rules do not publish a required insurance amount for a Tennessee salon suite business, so treat insurance as a risk decision and a lease decision rather than a licensing line item. In practice, a landlord will name the coverage he expects in the lease, and a business working on hair, skin or bodies should carry professional liability for the services themselves, general liability for the premises, and property coverage for equipment and retail stock. If you rent chairs or rooms to other licensees, your policy and theirs should both name the arrangement, because the designated manager structure means an incident in a renter's chair can still land on the shop license holder's desk first.

Your Tennessee renewal calendar

Official sources

• Rule 0440-01-.13: cosmetology fee schedule, licenses, shops and dual shops
• Tenn. Code Ann. section 62-4-102: definitions and scopes of practice
• Tenn. Code Ann. section 62-4-118: shop licenses and the designated manager
• Board of Cosmetology and Barber Examiners: renewal, reciprocity, minimum hours and license types
• Rule 0440-02-.06: sanitary rules, including the separate room with hard walls for massage and tattooing
• Form SS-4270: Articles of Organization, $50 per member, $300 minimum, $3,000 maximum
• Secretary of State: business forms and filing fees, including SS-4270, SS-4402 and SS-9410
• Department of Revenue: business tax registration and the county and city business license
• Department of Revenue: sales and use tax, 7 percent state rate plus local option
• Department of Revenue: franchise and excise tax rates and due dates
• Department of Labor and Workforce Development: how the employer premium rate is set

Tennessee salon suite FAQ