How to Start a Salon in India? A Beginner’s Guide

A beauty salon is a wonderful way to help other people look their best & make your business fortune at the same time. It is a potent business provided you keep your basics right. You need to have trained & skilled staff. You also need to apply and obtain the required licenses and permits.

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Requirements to start a salon

When you are setting up a new business, for instance, starting a salon, there are several arrangements and formalities that are required to comply with the regulating laws.

Along with the training and skill development for establishing and running the business, you have to apply and obtain the required licenses and permits.

The basic requirements are rent/lease agreement or sale deed for the area for the physical setup of the salon, licenses and registration to carry on the business, and mandatory audit and tax compliances.

In this article, we shall discuss how to obtain the required documents.

Rent or Buy Premises for the Salon

Before you start a salon, you need to finalize a place. If you already have a place, then you need to take permission from the authorities to use it for commercial purposes, in case it is a residential property.

Depending on your plan and budget, you can buy a shop area or take it on rent or lease. Here, we will discuss the procedures:

  • Buying a Shop: Many prefer to buy a place for the shop when they feel that the location will add value to their business, or for any other reason. A sale deed is typed on a stamp paper of value depending on the total value of the property. The registration of the sale deed is done at the registrar’s office. Both the buyer and seller have to sign, along with two witnesses.
  • Renting a Shop: If you are taking the property on rent, make sure you register the rental agreement for future purposes. The rental agreement is printed on stamp paper. The stamp duty varies as per state. It is signed by the owner, tenant, and witnesses. The agreement must specify the period, rent paid, and the liabilities involved regarding maintenance and other necessary formalities.
  • Using Residential Property for Commercial Purposes: If you want to set up your shop in a residential area, maybe out of a part of your own house, you still need to seek permission from the local municipality/town planning authority/corporation. However, not all residential areas can be used for commercial purposes, it is dependent on the policy of the local authorities.

Licenses and Registration to Start a Salon

Registering the Business

For any business, the first step is to register it as a partnership firm, private limited company, limited liability, or sole proprietorship.

After choosing the form of business, if it is a company or LLP, obtain the registration from the registrar. If it is a partnership firm, the registration is done from the sub registrar’s office. However, if it is a sole proprietorship, it doesn’t need to follow much of the formalities.

Registering under the Shops and Establishment Act

Within 30 days of opening the business, one must obtain a license under this act. For running any shop or establishment to carry on a business and employing people, one has to get registered under the Shops and Establishment Act. This act lists the norms that the employer is required to follow regarding opening and closing time, working hours, overtime policy, leaves and allocation of work, display of notices etc.

PAN and TAN Registration

Every business requires a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) registration in the name of the business. However, in the case of a sole proprietorship, both the PAN and the TAN can be obtained in the owner’s name.

Both are issued by the Income Tax Department – two ten-digit alphanumeric unique numbers. For making payments of Rs. 50,000 or more, it is necessary to have a PAN and – so as to deduct TDS – TAN is necessary.

GSTIN Registration

If the turnover is Rs. 10 lakhs for the North Eastern and special category states, and Rs. 20 lakhs for other states, the business is liable to pay GST. If the turnover of the boutique fulfils this condition, your business needs a GSTIN registration.

Trade License

Before commencing the business, it is necessary to get a trade license from the local authority. This license is issued only after knowing that the trade is not harmful to the public and not against public policy. With the trade license application these documents are attached - company/firm registration paper, property tax document, Fire NOC, ID proof, and address proof etc.

Professional Tax Registration

Professional tax is levied by the local authority – municipality or corporation. This tax varies from state to state. Depending on the laws regulating in your state, you have to get yourself registered for professional tax registration.

Fire NOC

When you are starting a boutique, depending on the area and the kind of business (online/offline) and work being carried on, you have to obtain a no-objection certificate (NOC) from the Chief Fire Officer. Taking an example, if you are conducting an offline business, where the customers will be visiting your shop and workers are to be employed for carrying on the business, you need to take the fire NOC.

This is necessary to ensure the safety of your customers and employees of your boutique, as well as your own self.

For obtaining the NOC, along with the application, there are other documents to be shared too: the building plan, the model of the building, a certificate from the architect, list of electrical appliances being used, etc.

Labour Law Registration

If you are appointing 20 or more employees on a salary basis, then registration with Employees State Insurance (ESI) is mandatory. All the employees earning less than Rs. 21,000 per month are entitled to get benefits under this scheme.

Permission from Pollution Control Board

If you are dyeing the clothes in your boutique and treating dress materials with chemicals and other substances, it falls under the category industry as per the Pollution Control Board (PCB). After verifying the documents submitted and, if required, conducting an on-premises inspection of your facilities, the PCB will issue you a license.

Audit and Tax Compliance

Depending on the kind of services one is taking, the GST rate is applicable to the salon services. The salon registered under GST rules is liable to file GST return as prescribed by the act. Also, the salon owners have to get annual and regulatory audits accomplished following the regulating laws.

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