I would recommend requiring them to carry their own PLI policies. As for the business licenses, that depends on your state regulations. Some states require renters to have facility licenses, business licenses, tax licenses, etc–but those are location-specific, so you’ll have to do your own research on that.

You can’t require them to work a schedule, but it’s normal and legal to set facility hours at the time of contract signing, promising that the building will be open and available to them between certain hours on the operating days you establish. However, once you set those hours, you are obligated to ensure the building is accessible. Failure to do so could constitute a breach of contract.

No insurance will keep a client or renter from suing you, but you need to have general liability insurance (GLI) to cover any incidents that occur on your property (slips and falls, etc.). You can also carry a professional liability insurance policy (PLI) to cover malpractice, but you aren’t legally obligated to and it really isn’t even necessary, since the renters are not your employees and you have no right to dictate their practices or oversee their work.

Good! I never personally attend proceedings. A good deal of my consulting clients are salon owners (and attorneys who represent salon owners) who unintentionally misclassified and/or committed wage theft in other forms, so I work with them to hopefully ensure they never end up in court or in any kind of disciplinary hearings in the first place by helping them apply for various forms of amnesty (whether that’s through the VCSP or mediation with the affected employees). Usually, we’re able to handle things proactively–before the IRS, DOL, or state labor authorities have even become aware that violations were occurring.

The ones who are in crisis, dealing with enforcement actions–there’s very little that I or anyone else can do for them other than work with their attorneys to restructure their employment practices and compensation to ensure they have a profitable business to go back to when the dust settles. Once they’re caught, it’s very much out of everyone’s hands. :/

She’s trying to have her cake and eat it too. Unfortunately, this puts you in a dangerous legal position, and puts her in the position to gain the most from the arrangement. She needs to make a choice: she’s either an employee or a self-employed booth renter. She cannot have it both ways, and there’s no scenario where it’s advisable or beneficial for you to allow her to function as both simultaneously.

You should read this post about the differences between booth renters and employees.
Read this post about why booth rental salons SUCK.
Read this post about the 20 factors the IRS uses to determine whether a worker is truly self-employed.
Print this article out and make her read it so she understands how ridiculous her demands are.

And then hit the search bar and type in “booth renter” to get more information on how to manage a booth rental salon without a.) going insane or b.) breaking the law.

If the previous owner permitted that kind of behavior, it’s not surprising to me at all that the salon was failing.