What Permits and Licenses Are Needed to Open a Restaurant?
Opening a restaurant is a good way to share your passion for food with others, you can make a business and it can be something creative. However, it is necessary to go through the proper process for opening a restaurant and handle legalities. In the USA, this means obtaining the different permits and licenses necessary to ensure your restaurant complies with the governing legislation. You will also need a business license, food service license, and possibly a liquor license if you are going to serve alcohol.
You also must follow health and safety codes, be properly trained for handling food, and ensure your building is safe. Many of these measures may feel like a lot at first, but they are critical to running a successful restaurant.
The Licenses and Permits Needed to Start a Restaurant
Opening a restaurant is about learning various rules depending on where you are, such as the city or state. Some places have tighter rules, which impact what you must do. The restaurant type, the food you offer, and whether you sell liquor also shift the steps and licenses you’ll require. If you’re going to provide food delivery, that’s got its own process as well.
For example, California will have a higher number of rules compared to Wyoming. Some licenses take time and are very expensive to obtain. Therefore, it’s wise to prepare in advance and do things the correct way early enough in order to launch your restaurant smoothly. You should also keep in mind the essential licenses required for food businesses throughout the country.
Business Structure
In order to operate a business legally, it is necessary to register it at the local, state, and federal levels for liability and tax reasons. This process starts with choosing a business structure, as every structure has its own requirements and implications:
Sole Proprietorship
It is the most basic business structure and easiest to establish. It consists of a single owner who is personally liable for the assets, debts, and liabilities of the business. The business here is not a distinct legal entity from the owner, so personal and business liabilities are merged. Sole proprietorships do not need state registration.
Partnership
Created for companies that have two or more owners, partnerships are not very difficult to form. They are pass-through entities, so they are exempt from federal income taxes. Yet, they subject owners to liability. Partnerships need a signed partnership agreement to outline roles, responsibilities, and profit sharing.
Limited Liability Company (LLC)
This is generally the most common choice for restaurateurs because it keeps the liabilities of the company separate from the personal assets of the single owner. Limited Liability Companies (LLCs) must file an Operating Agreement and Articles of Organization to make official their structure.
Depending on the business structure you decide to pursue and the state in which you wish to operate, you might also be required to register your legal entity name and, in some cases, your “Doing Business As” (DBA) name. The process of registration is usually less than $300, and the forms required will depend on your chosen structure. Choosing the correct business structure is imperative, as it has a serious influence on taxes and liability.
Permits and Licenses to Open a Restaurant
Business License
In order to legally open and maintain a restaurant in the United States, it is an essential requirement to get a business license, which gives you the legal authorization to operate your business. Getting this license depends on the state and city that you reside in and the location of your restaurant’s address since local laws also contribute to deciding what is necessary. In other places, you might have to pay a percentage of your overall sales or a flat yearly fee in order to keep the license. If your restaurant will be selling alcohol, there’s more licensing to obtain, both federal and state business licenses, while if alcohol isn’t in the plans, a state business license could be enough.
Cost of a Business License
Its registration fee can go as low as $50 while the total fee for the license can range anywhere from $25 to up to $7,000 depending upon your business activity and its intended profit. To start the process, you can look up your state’s business license application process by typing your state name and “business license” into a search engine, which will lead you to your state government’s website where you can follow the steps offered. Remember that business licenses usually have to be renewed every year or paid for by certain deadlines to stay in force, so keeping current on renewal dates is critical to the continuous operation of your restaurant.
Employer Identification Number (EIN)
Similar to a business license, every business in the U.S. must possess an Employer Identification Number (EIN) to operate lawfully. The EIN is a special nine-digit tax identification number given by the Internal Revenue Service that works as a Social Security Number for businesses capable of correctly filing taxes. And since the IRS only issues one EIN per day and it takes a bit of time, the earlier you can apply for that, the better. If you have employees or are a corporation or partnership or required to file tax returns such as Employment, Excise, or Alcohol, Tobacco, and Firearms, or you are required to withhold non-wage income tax on payments to non-resident or you maintain a Keogh retirement plan, you will need an EIN.
How to Apply for an EIN
To get an EIN, the procedure is simple and free. You have the option of applying online at the IRS website or submitting an application in another way like through the mail, fax, or phone. The online application only has three easy steps: checking your eligibility, filling out the application, and sending it in. It would be beneficial for restaurant owners to get their EIN first in the process since it is an essential step to doing business legally.
Food Service License
When you want to open a restaurant in the U.S., you must obtain a food service license that confirms that your business meets the food safety and public health standards by complying with state and local regulations on food preparation, storage, and handling.
The license you need will depend on the restaurant’s type and location since states have different requirements, for example, food trucks typically need a food vendor’s license instead of food service, and a state-issued license; ensures that your restaurant is meeting food safety law, preventing foodborne illness, protecting your customers and maintaining the good standing of your restaurant.
However, if you do not comply you may be fined or shut down or have legal issues the fee can differ based on your restaurant’s size, type, and location and generally ranges from $100 to $1,000, with larger or more complicated operations likely to pay more, so check out the requirements and apply to either the USFDA or your state health department.
Food Handler License
A food handler’s license, which might be mandatory too, guarantees that your restaurant adheres to the food storage, sanitation, protection, and preparation standards of the health department, and in a few instances, you may be required to adopt the 7 principles of Hazard Analysis and Critical Control Points (HACCP), such as
- hazard analysis
- determining critical control points
- establishing limits
- monitoring practices
- corrective action
- verification procedures
- documentation
Renewal Of the Permit
This permit only needs to be renewed every 3–5 years.
Liquor License
A food service license does not include the sale of alcohol, so if you intend to sell alcohol at your restaurant, you will need to get a separate liquor license to prevent fines, penalties, or even permanent shutdown; because the process of getting licensed may take some time and there are various types of licenses depending on the type of alcohol you want to sell like beer and wine or a full bar and where you are located, it is best to begin early, and the process usually starts with the state’s Alcohol Beverage Control (ABC) Board, which oversees the sale of alcohol.
Certificate of Occupancy
Once your restaurant has passed the last building inspection, the city building or zoning office will provide you with a certificate of occupancy, which verifies that the building is built, maintained, safe, and correctly classified for commercial occupation; this crucial document verifies that the building complies with building codes, is safe according to guidelines, and is correctly classified for the intended use.
For instance, to legally run a restaurant, you cannot do so out of a home kitchen; getting this certificate, which generally costs about $100, varies with your location and building design, so start researching online by entering your state + certificate of occupancy on your search engine to locate the exact process on your local government website.
Sign Permit
Your restaurant signage is necessary to bring in customers, but most cities regulate the size, location, and illumination of signs; a sign permit guarantees your signage complies with local regulations, prevents safety hazards, and avoids legal issues, while demonstrating professionalism and assisting your restaurant to stand out and establish its brand effectively.
Requirement and Cost
It is generally required by the city government for restaurant signs. City regulations regarding size, location, and illumination differ. Ranges from $20 to $50. Obtain landlord permission when leasing or renting.
Dumpster Placement Permit
A dumpster placement permit enables your restaurant to put a dumpster outside the kitchen for disposal of food waste, costing from $10 to $100 a week based on the size, location, and regulations of your city, so look up your local government’s website by entering “your city” and “dumpster placement permit” to get the necessary forms and process.
Live Entertainment and Music Permit
Restaurants and bars must obtain a music license from groups such as BMI, ASCAP, or SESAC to play copyrighted material legally, with costs ranging from $250 to $500 for background music and up to $30,000 in fines for unlicensed use.
Moreover, you can apply with ASCAP in the U.S. or SOCAN in Canada, and smaller businesses can utilize services such as Spotify’s “Soundtrack Your Brand,” which offers pre-licensed music via a monthly subscription fee, although you should consult state laws to be sure you are fully compliant.
Resale Permit
A resale permit permits your restaurant to make some purchases that are not taxable, such as wholesale inventory of foodstuffs, so you do not double-collect the sales tax. However, the tax is not paid when purchasing these items but is collected on customers when selling meals; to obtain, check your state requirements by looking online for resale permits.
Cost of Resale Permit
The permit is generally around $0 to $50, with an application available online or in person.
Building Health Permit
Your building may require a health permit to operate a restaurant, in order to ensure it meets sanitation and safety standards, and particularly if you’re building the restaurant from scratch. This permit is usually obtained from the relevant department through the city or county health department when applying for a business license and may require routine checks for compliance. A building health permit is not required in all states, so it’s best to look up your state’s specific policies online.
Cost of Building Health Permit
This permit usually costs anywhere from $50 to $1,000 depending on where you live.
Employee health Permit
Aside from a building health permit, food and drink handlers are required to have an employee health permit, which requires taking a state-licensed food handler’s course. This course educates handlers on the good practices of sanitation, food storage, and food handling to avoid food-borne diseases.
Cost of Employee Health Permit
This permit can cost anywhere from $100 to $500, depending on the state. To determine your state’s requirements, go online and type in “employee health permit” and your state name.
Conclusion
Starting a restaurant in the United States is a fun way to share your love of food and create a business that can make money. But it also comes with important legal and safety rules that you need to follow for your restaurant to succeed. You will need to choose the right type of business, get a business license, and apply for permits for food service, alcohol, and signs.
Moreover, each of these permits and licenses is important for running your restaurant legally. It might seem hard at first, but if you plan ahead, do good research, and stay organized, you can avoid mistakes and delays. By getting the right licenses and permits, following health and safety rules, and knowing local laws, you will set up a strong base for a successful and safe dining experience for your customers.