Salon Booth Rental Agreement Sample by dlh14854

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									 NAILS Mag Draw It Up




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                                         Reprinted by permission NAILS Magazine January 2001



                                                  Draw It Up
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                                                                by Vanessa Jezin

                                        One of the most important components
                                      between a booth renter and salon owner is
Contests !!!
Strut Your Stuff
                                      the contract. Deciding which one is right for
Nails Magazine                         the both of you is crucial in today’s mix of
More....                                    insurance audits and lawsuits.
Departments
NailTech                              As an independent contractor or salon owner, one of the first things you
CutingEdge                            will want to have is a contract. Why? Oftentimes either the nail tech or
                                      salon owner hasn’t made all of the provisions for a proper set-up,
SkinTech
                                      which can lead to a run-in with the IRS.
SalonTalk
HELP!!!                               As a booth renter, by paying a flat rent to the salon owner, you are
Networking                            essentially running your own business.
    Stay Informed..                   In the eyes of the IRS, a contract or written agreement must adhere to
    Subscribe to our                  state and federal statutory code. Although a contract doesn’t have to be
     FREE monthly                     overly complicated, it must clearly spell out each parties’ rights and
      newsletter.                     responsibilities. A written contract should specify the working
                                      relationship between the independent contractor and the salon owner.
Message Boards                        The most common resource for drawing up contracts is a consultant or
Mailing Lists                         lawyer. However, several salon owners and landlords choose to do it
Live Chat                             themselves.
Mentor Database
                                      Mary Metscaviz, owner of Awesome Nails in Grayslake, Ill., was a
Networking Events
                                      booth renter before she became a salon owner, which helped her when
Business Builders                     drawing up a contract for her booth renters.
HELP!!!
Resources                             "Lawyers really don’t know a whole lot about this industry," Metscaviz
                                      says. "I did send my contract to my tax lawyer. You want to be
                                      protected. He looked it over and he thought it was fine."
                                      Since common areas are often left out, which can result in failing an
                                      audit, Ken Cassidy, president of Kassidy Salon Management (Long
                                      Beach, Calif.), suggests using a consultant to draw up the contract.
                                      Cassidy consults with salons on booth renting and employee
                                      relationships and also markets booth rental contracts that show salon
                                      owners how to be more profitable above collecting base rent.
                                      "With 95% of all nail techs in the United States operating as booth
                                      renters, it is imperative that a business owner has a good valid contract
                                      between her and her booth renters," Cassidy says.

                                      The most common mistake made by someone drawing up her own


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Residents/Sponsors                   contract is that it may not be clear when it comes to employee and
Links                                employer relationship guidelines.
Articles
                                     The IRS doesn’t want to see any inclination that the booth renter is an
MMA Information                      employee. What they want to see is a lease that is similar to that of a
Booth Rental Info                    landlord/tenant lease.
Licensing Information
Show/Class Calendars                 "Most nail techs and their owners do not have a contract or lease, let
                                     alone one that is signed," Cassidy says. "That is why 90% of all people
FREE Salon Website
                                     operating under these guidelines could not pass an audit today by either
Salon Locator Listing                the IRS or their state."
Quizzes
IRS Info                             Having a contract that specifies that the nail tech is responsible for
Ebook's & Etutorials                 paying taxes and that she pays a flat amount of rent is not enough, says
Celebrity Q & A                      Cassidy.
Nail Art Gallery                     "Most salon owners and nail techs think that if an agreement says the
Salon Recipes                        nail tech is responsible for paying taxes and paying rent, the business
Translate                            owner is free and clear of responsibilities," says Cassidy. "Nothing
Privacy Policies                     could be farther from the truth."
HELP!!!
                                     The IRS and state are looking to see who is responsible for the payment
Shopping                             of taxes. This tax payment will be determined from who has control of
Links                                what as related to the two parties involved.
Shop Till You Drop
Networking Shoppe                    "The contract, or the lack of, will make a determination on issues that a
                                     large percentage of contracts do not cover and an owner or booth renter
Read All About It                    does not even know until after the fact," says Cassidy. "These are just
Booth Rental Info                    some of the items that need to be incorporated into a contract to protect
Ebook's & Etutorials                 both parties."
beautyEshop
Salon Posters                        For example, the contract needs to include a section that clearly
                                     outlines who the agreement is between. Often, Cassidy has seen
IRS Info
                                     contracts that only list the salon name and then list "booth renter" and
Salon Publications                   not the booth renter’s name.
Educational Videos
PDA Software                                                    Who’s Involved
Milady Publications
                                                                                            The first section should
Site Tools                                                                                  clearly state whom the
Recommend Site                                                                              rental agreement is
Search                                                                                      between. Basic
Contact Us                                                                                  information should
                                                                                            include the day, month,
Add BeautyTech to your                                                                      and year, the name of
     Bookmarks                                                                              the salon or landlord,
     or Favorites                                                                           and the name of the
      +      or AOL                                                                         renter. A predominant
                                                                                            issue that a government
Advertising                                                                                 agency would look at
Resident/Link/Banner                                                                        during a status
SalonMart                                                                                   classification audit is if
beautyEshop                                                                                 the contract describes a
Static Link Ads                                                                             landlord/tenant
Email Promotion                                                                             relationship. This sample
                                                                                            has a clear definition of
Web Site Design Mailing
                                                                                            who the "lessee" (or
List Sponsorship                                                                            booth renter) is and who
Web Site Hosting                                                                            the landlord (or salon
E-commerce                                                                                  owner) is.
FREE LISTING IN
LINKS AREA                                                                                          This
                                                                                                    sample
                                                                                                    lists the
                                                                                                    salon
                                                                                                    name and
                                                                                                    who the
                                                                                                    booth
                                                                                                    renter is.
                                                                                                    Instead of
          Search                                                                                    outlining
                                                                                                    the length
                                                                                                    of the



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                                                                                    contract,
                                                                                    Awesome
                                                                                    Nails’
                                                                                    contract
                                                                                    clearly
                                                                                    states that
                                                                                    the booth
                                                                                    renter is
                                                                                    solely
                                                                                    responsible
                                                                                    for any
                                                                                    and all
                                                                                    taxes due
                                                                                    to the
                                                                                    state and
                                                                                    IRS.

                                                                                    "The only
                                                                                    problem I
                                                                                    have with
                                                                                    booth
                                                                                    renters is
                                                                                    that they
                                                                                    want to
                                                                                    be booth
                                                                                    renters
                                                                                    for tax
                                                                                    purposes
                                                                                    but they
                                                                                    want to
                                                                                    be
                                                                                    employees
                                                                                    when it
                                                                                    comes to
                                                                                    advertising
                                                                                    and how
                                                                                    things are
                                                                                    run and
                                                                                    getting
                                                                                    new
                                                                                    business,"
                                                                                    Metscaviz
                                                                                    says.

                                                                                    As a
                                                                                    booth
                                                                                    renter,
                                                                                    you are
                                                                                    responsible
                                                                                    for
                                                                                    paying
                                                                                    estimated
                                                                                    quarterly
                                                                                    taxes.
                                                                                    Instead of
                                                                                    paying
                                                                                    your tax
                                                                                    debt by
                                                                                    April 15,
                                                                                    booth
                                                                                    renters
                                                                                    need to
                                                                                    make four
                                                                                    payments,
                                                                                    one for
                                                                                    each
                                                                                    quarter of
                                                                                    earnings.
                                                                                    "I make
                                                                                    sure that
                                                                                    all of my
                                                                                    renters


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                                                                                    give me a
                                                                                    Form
                                                                                    1099 at
                                                                                    the end of
                                                                                    the year,
                                                                                    which is
                                                                                    another
                                                                                    way to
                                                                                    prove that
                                                                                    even on
                                                                                    their
                                                                                    taxes,
                                                                                    they’re
                                                                                    agreeing
                                                                                    that
                                                                                    they’re
                                                                                    renting
                                                                                    space
                                                                                    from me,"
                                                                                    Metscaviz
                                                                                    says.

                                                                                    Coming
                                                                                       to
                                                                                     Terms
                                                                                      and
                                                                                    Compensation
                                                                                    The
                                                                                    compensation
                                                                                    section
                                                                                    should
                                                                                    include
                                                                                    the
                                                                                    amount of
                                                                                    rent that
                                                                                    is to be
                                                                                    paid each
                                                                                    month, or
                                                                                    as in
                                                                                    Awesome
                                                                                    Nails’
                                                                                    case, each
                                                                                    week.

                                                                                    One of
                                                                                    the most
                                                                                    important
                                                                                    sections
                                                                                    is the
                                                                                    terms of
                                                                                    the
                                                                                    contract.
                                                                                    The terms
                                                                                    should
                                                                                    clearly
                                                                                    outline
                                                                                    how long
                                                                                    the
                                                                                    contract
                                                                                    is for. It’s
                                                                                    advised to
                                                                                    secure
                                                                                    one for at
                                                                                    least six
                                                                                    months to
                                                                                    a year.

                                                                                    "I highly
                                                                                    recommend
                                                                                    that the
                                                                                    shortest



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                                                                                    period of
                                                                                    time in a
                                                                                    contract
                                                                                    be month
                                                                                    to month,
                                                                                    just like
                                                                                    renting an
                                                                                    apartment.
                                                                                    This
                                                                                    means
                                                                                    that the
                                                                                    rent
                                                                                    would be
                                                                                    paid
                                                                                    monthly
                                                                                    at the first
                                                                                    of the
                                                                                    month,"
                                                                                    Cassidy
                                                                                    says.
                                                                                    However,
                                                                                    the best
                                                                                    scenario
                                                                                    would be
                                                                                    to have a
                                                                                    lease for
                                                                                    at least a
                                                                                    one-year
                                                                                    period."
                                                                                    In order
                                                                                    to
                                                                                    distinguish
                                                                                    the
                                                                                    landlord
                                                                                    and booth
                                                                                    renter,
                                                                                    it’s
                                                                                    necessary
                                                                                    to list
                                                                                    how rent
                                                                                    is paid.
                                                                                    Both IRS
                                                                                    and state
                                                                                    agencies
                                                                                    consider
                                                                                    it crucial
                                                                                    how rent
                                                                                    is paid.
                                                                                    For
                                                                                    auditing
                                                                                    purposes,
                                                                                    the salon
                                                                                    cannot
                                                                                    accept the
                                                                                    booth
                                                                                    renter’s
                                                                                    client
                                                                                    checks as
                                                                                    rent
                                                                                    payment.
                                                                                    As
                                                                                    Awesome
                                                                                    Nails’
                                                                                    contract
                                                                                    states,
                                                                                    they will
                                                                                    only
                                                                                    collect
                                                                                    rent from
                                                                                    the booth
                                                                                    renter.


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                                                                                    Also,
                                                                                    booth
                                                                                    renters
                                                                                    have to
                                                                                    collect
                                                                                    their own
                                                                                    money
                                                                                    for
                                                                                    services
                                                                                    rendered.
                                                                                    To
                                                                                    comply
                                                                                    with both
                                                                                    state and
                                                                                    federal
                                                                                    guidelines,
                                                                                    every
                                                                                    booth
                                                                                    renter
                                                                                    must keep
                                                                                    a cash
                                                                                    bag and
                                                                                    enough
                                                                                    change on
                                                                                    hand to
                                                                                    accommodate
                                                                                    her
                                                                                    clients.

                                                                                    Insurance
                                                                                    Although
                                                                                    the
                                                                                    contract
                                                                                    you
                                                                                    choose is
                                                                                    at the
                                                                                    booth
                                                                                    renter and
                                                                                    salon
                                                                                    owner’s
                                                                                    own
                                                                                    discretion,
                                                                                    this will
                                                                                    be the
                                                                                    section
                                                                                    that the
                                                                                    IRS and
                                                                                    state
                                                                                    agencies
                                                                                    will look
                                                                                    at first.
                                                                                    You’ll
                                                                                    want to
                                                                                    have
                                                                                    clearly
                                                                                    defined
                                                                                    provisions
                                                                                    to protect
                                                                                    your
                                                                                    assets.

                                                                                    A booth
                                                                                    renter
                                                                                    will want
                                                                                    to have
                                                                                    her own
                                                                                    insurance
                                                                                    policy,
                                                                                    including
                                                                                    both
                                                                                    liability
                                                                                    and


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                                                                                    professional
                                                                                    coverage.
                                                                                    In case of
                                                                                    the
                                                                                    unforeseen,
                                                                                    a policy
                                                                                    will
                                                                                    protect
                                                                                    you. If
                                                                                    clients
                                                                                    injure
                                                                                    themselves
                                                                                    in the
                                                                                    salon,
                                                                                    both the
                                                                                    salon
                                                                                    owner
                                                                                    and booth
                                                                                    renter can
                                                                                    be held
                                                                                    responsible.
                                                                                    Awesome
                                                                                    Nails’
                                                                                    contract
                                                                                    clearly
                                                                                    states that
                                                                                    the booth
                                                                                    renter
                                                                                    needs to
                                                                                    supply a
                                                                                    copy of
                                                                                    her
                                                                                    liability
                                                                                    insurance
                                                                                    prior to
                                                                                    her first
                                                                                    day of
                                                                                    work and
                                                                                    that the
                                                                                    insurance
                                                                                    needs to
                                                                                    be active
                                                                                    throughout
                                                                                    the entire
                                                                                    rental
                                                                                    time.

                                                                                    A smart
                                                                                    option is
                                                                                    to state in
                                                                                    the
                                                                                    insurance
                                                                                    clause
                                                                                    that the
                                                                                    booth
                                                                                    renter, at
                                                                                    her
                                                                                    expense,
                                                                                    shall
                                                                                    maintain
                                                                                    public
                                                                                    liability
                                                                                    insurance
                                                                                    —
                                                                                    including
                                                                                    bodily
                                                                                    damage
                                                                                    and
                                                                                    property
                                                                                    damage.

                                                                                    Alternative


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                                                                                    Conditions
                                                                                     Tools
                                                                                      and
                                                                                    Supplies
                                                                                    In most
                                                                                    cases,
                                                                                    booth
                                                                                    renters
                                                                                    are
                                                                                    required
                                                                                    to supply
                                                                                    all of the
                                                                                    tools and
                                                                                    products
                                                                                    necessary
                                                                                    to
                                                                                    perform
                                                                                    services.
                                                                                    You can
                                                                                    incorporate
                                                                                    a clause
                                                                                    into the
                                                                                    contract
                                                                                    that states
                                                                                    this.
                                                                                    Booth
                                                                                    renters
                                                                                    are also
                                                                                    responsible
                                                                                    for
                                                                                    generating
                                                                                    new
                                                                                    clientele
                                                                                    and
                                                                                    advertising
                                                                                    their
                                                                                    services.
                                                                                    However,
                                                                                    booth
                                                                                    renters
                                                                                    and the
                                                                                    salon
                                                                                    owner
                                                                                    may
                                                                                    choose to
                                                                                    do this
                                                                                    together,
                                                                                    as in
                                                                                    Awesome
                                                                                    Nails’
                                                                                    case.

                                                                                    "If my
                                                                                    booth
                                                                                    renters
                                                                                    want to
                                                                                    run a
                                                                                    special,
                                                                                    they’ll get
                                                                                    together
                                                                                    and
                                                                                    decide
                                                                                    when it is
                                                                                    a good
                                                                                    time and
                                                                                    I’ll put
                                                                                    the ad
                                                                                    together,
                                                                                    they’ll
                                                                                    look it


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                                                                                    over and
                                                                                    agree,
                                                                                    and then
                                                                                    everybody
                                                                                    pays,"
                                                                                    says
                                                                                    Metscaviz.

                                                                                    Consider
                                                                                     Your
                                                                                    Options
                                                                                    Whether
                                                                                    you
                                                                                    choose to
                                                                                    write
                                                                                    your own
                                                                                    lease for
                                                                                    your
                                                                                    booth
                                                                                    renters or
                                                                                    have a
                                                                                    lawyer or
                                                                                    management
                                                                                    company
                                                                                    do it for
                                                                                    you,
                                                                                    remember
                                                                                    that there
                                                                                    have been
                                                                                    very few
                                                                                    cases
                                                                                    where a
                                                                                    contract
                                                                                    was taken
                                                                                    to court
                                                                                    simply
                                                                                    because
                                                                                    an issue
                                                                                    was left
                                                                                    out
                                                                                    In most
                                                                                    cases, an
                                                                                    audit will
                                                                                    come
                                                                                    from a
                                                                                    salon
                                                                                    owner
                                                                                    and booth
                                                                                    renter that
                                                                                    have no
                                                                                    contract
                                                                                    at all.
                                                                                    "In most
                                                                                    of these
                                                                                    cases,
                                                                                    usually
                                                                                    the salon
                                                                                    owners
                                                                                    will lose
                                                                                    because
                                                                                    the lack
                                                                                    of a valid
                                                                                    contract
                                                                                    usually
                                                                                    points in
                                                                                    the
                                                                                    direction
                                                                                    of the
                                                                                    booth
                                                                                    renter


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                                                                                                   being an
                                                                                                   employee
                                                                                                   of the
                                                                                                   salon
                                                                                                   owner,"
                                                                                                   says
                                                                                                   Cassidy.
                                                                                                   When it
                                                                                                   comes to
                                                                                                   a
                                                                                                   contract,
                                                                                                   be sure to
                                                                                                   have a
                                                                                                   consultant
                                                                                                   review it,
                                                                                                   whether it
                                                                                                   was just
                                                                                                   drawn up
                                                                                                   or it was
                                                                                                   an
                                                                                                   existing
                                                                                                   contract.
                                                                                                   Remember,
                                                                                                   a contract
                                                                                                   is the first
                                                                                                   thing that
                                                                                                   the IRS
                                                                                                   will want
                                                                                                   to review.




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