The 8 legal requirements to open a bar
As an adult in America, you’re likely no stranger to licenses and permits. You need one to drive, one to travel internationally, and even one to get married. Generally speaking, these permits and licenses exist to help keep people safe.
Then, it should come as no surprise that you’ll also need several licenses, permits, and certificates to open a bar.
The stringent legal requirements to open a bar are undeniably practical. They can protect both customers and small business owners from any unforeseen circumstances.
So, what licenses do you need to open a bar? Read on to find out.
Must-have licenses, permits, and certifications
Due to the way liquor is regulated, there are numerous non-negotiable requirements for opening a bar and serving a variety of alcoholic beverage options. Here are the eight licenses and permits you’ll need.
#1. Employer Identification Number
While not a license, per se, an Employer Identification Number (EIN) is a must-have piece of the puzzle for any small business owner. This is because, as an employer, you’ll be in charge of filing employment tax returns, and you can’t do that without an EIN.
To request an EIN, you can visit the IRS website and submit an application. Alternatively, you can apply by:
- Fax
- Telephone
You’ll also need an EIN to apply for your federal business permit from the Alcohol and Tobacco Tax and Trade Bureau (TTB). As such, it’s wise to acquire this information as early in the process as possible. Fortunately, applying is free.
#2. State business license
Whether you open a trendy gastropub or a high-end wine bar, you’re opening a business. And to run a customer-facing business, you’ll need a license from your state.
The requirements and fees vary by state and are subject to change. Some authorities ask you to renew your license every year, while others give you two or three years. Your best bet is to visit your state’s website for business registration for up-to-date information to adhere to all requirements.
Some counties and cities also require a separate business license. Be sure to check in with your local government to confirm.
#3. State liquor license
While the TTB handles alcohol federally, each state and territory has a department regulating any alcohol sale. Commonly called alcohol beverage control boards—ABCs for short—these authorities ensure that alcohol retailers follow rules that keep the public safe.
In some states (such as Hawaii), liquor licenses are also controlled at the county or city level.
There are two ways to attain a liquor license:
-
Buy a new license directly from the issuing authority – In many cases, acquiring a liquor license is as easy as applying to your state’s ABC. The process can take a few months, and it can cost anywhere between $300 and $14,000, but it’s usually a painless endeavor.
- Buy an existing license from a business owner – If all your municipality’s permits are already claimed, you may have to wait for a nearby bar to close or sell and buy their license. Fortunately, you can easily connect with local business owners on Nextdoor to stay informed on who may be in the market to sell.
When purchasing a liquor license, keep in mind that there are usually multiple kinds. One type of license allows you to serve beer and wine only, while a separate permit lets you sell all varieties of alcoholic beverage options.
Though you’ll ideally secure a liquor license that works for your dream bar, you can always be creative with a different kind of license. The owners of Buddy in San Francisco had to do just that when they couldn’t land a full liquor license. The four all-star bartenders of this Bay Area hotspot turned a disadvantage into a quirky concept by coming up with a cocktail menu free of distilled spirits.
#4. Certificate of occupancy
Because your bar will occupy a physical space, the zoning or building department needs to ensure that the building is safe for the public. A certificate of occupancy tells customers that your business is properly zoned and up to code.
Whether your bar is a new build or is changing hands, you’ll need to apply for certification. To receive your certificate, you’ll likely undergo inspections of your:
- General building safety
- Electrical systems
- Plumbing
- Fire safety measures
You may have to pay a fee for each inspection or license application; check with your local authorities for updated costs.
#5. Workers’ compensation insurance
Most states require business owners to carry worker’s compensation insurance. Workers’ comp insurance covers your employees’ financial needs in the case of a workplace accident, including:
- Lost wages
- Medical expenses
- Physical or occupational therapy appointments
- Funeral costs
Usually, any business with one or more employees must have insurance. But in some parts of the country, the minimum number of employees varies. For example, in Georgia, the threshold is three employees; that number is five in Alabama.
Be sure to factor this insurance into how much it costs to open a bar. On average, you can expect worker’s compensation insurance to cost around $1 for every $100 you spend on payroll.
#6. Food service license
If you plan to cook food at your bar, you’ll typically need a food service license. Each state has its own food service code that lays out the standards bar and restaurant owners need to follow.
To earn your food service license the first time, you’ll have to apply to the state health department. Once you’ve provided the necessary details, a health inspector will come to your bar for inspection.
The health inspector may also visit from time to time to ensure you continue to meet the state’s standards. You may also need to apply to renew your license if your bar’s ownership or location changes. The cost of each license application and visit varies by location, but you can expect to pay less than $1,000 altogether.
#7. Food handler permit
Your food service license covers your business as a whole, but to safely and legally serve food and drinks, your staff may also need to obtain food handler certification. This certification provides the necessary knowledge of sanitation and proper food storage.
Each state has separate requirements for earning a food handler certificate. In most cases, you and your employees can take a test online. After passing your test, you can apply for the certificate.
#8. TTB permit
The sale of alcohol is regulated at the federal level by the Alcohol and Tobacco Tax and Trade Bureau (TTB). As such, any business hoping to sell beer, wine, or spirits must first register with the TTB.
To register, you have to file form TTB 5630.5d. Thanks to the online registration portal, the process is relatively fast and straightforward. Applying for a TTB permit is also free.
Once you’ve secured your TTB permit, you must:
- Retain a record of receipt for all alcohol products
- Retain a record of all wine sales over 20 gallons
Other recommended applications to fill out
Beyond the licenses and permits needed to open a bar, there are a few other steps that a bar owner should take. If you’re studying how to open a bar, the following licenses may be beneficial.
Music license
The right soundtrack can take your customers’ experience from fun to fantastic. But to play music in your bar, you’ll need to buy a license from a performing rights organization (PRO).
Three major organizations cover artist rights in the United States:
- ASCAP
- BMI
- SESAC
Because artists can sign up with any of these organizations, you’ll want a license from all three to ensure your entire playlist is covered.
Live entertainment licenses
The above organizations also monitor live performances and ensure artists are paid when they play. If you intend to have live music at your bar, you’ll need a different license from your chosen performing rights organization (PRO).
Additionally, some cities require a secondary performance license for all bars and restaurants hosting live events.
Signage permit
A well-designed street sign can attract countless customers. But in many areas, signage is restricted by the local government. If your signage will involve anything more than a painted display on the window, there’s a sizable chance that you’ll need to apply for a permit.
Signs that often require permits include:
- Electrified signage
- Sandwich boards
- Wall signs
- Banners
You should research any signage requirements before buying a building. And who knows—the restrictions may guide your creative choices. For example, when Carl and Gavin Evans opened Stein in Leavenworth, Washington, they had to play into the city’s Bavarian-style architecture. The result is a charmingly German brewpub with old wooden signage to match.
Commercial liability insurance
Although commercial insurance is not always a legal requirement, it’s worth the investment for most bar owners. When your customers start enjoying your signature cocktails a little too much, commercial liability insurance protects you from accidents.
Should a customer injure themselves or damage your bar, you can rest easy knowing your insurance will cover the costs.
Trademark registration
Coming up with a name for your bar involves plenty of brainstorming. Once you finally find the perfect name, you don’t want another business to come along and take it.
To protect your business name, you can submit a trademark application to the United States Patent and Trademark Office. The process can take several months, but it’s well worth it to keep the name of your bar original.
Find success as a newly-licensed bar with Nextdoor
With all of your licenses, permits, and insurance sorted out, you’re one step closer to opening your bar. And after spending all that time and energy acquiring your permits, you’ll no doubt want your business to succeed.
A new watering hole can find success through recommendations, word of mouth, and honest feedback—all of which you can find on Nextdoor. If you’re ready to connect your neighbors to your newly-licensed bar, claim your free Nextdoor Business Page today.
Sources:
TTB. Beverage Alcohol Retailers. https://www.ttb.gov/nrc/retail-beverage-alcohol-dealers
TTB. Alcohol Beverage Authorities in United States, Canada, and Puerto Rico. https://www.ttb.gov/wine/alcohol-beverage-control-boards
Nerdwallet. How to Get a Liquor License: The State-by-State Guide. https://www.nerdwallet.com/article/small-business/liquor-license
San Francisco Chronicle. The Bay Area’s best new bars in 2021. https://www.sfchronicle.com/food/wine/article/best-new-bars-sf-bay-area-2021-16704228.php
State Board of Workers’ Compensation. Workers' Compensation Insurance FAQs. https://sbwc.georgia.gov/frequently-asked-questions/workers-compensation-insurance-faqs
Alabama Department of Labor. Insurance Requirement Information. https://labor.alabama.gov/wc/insurance.aspx
Forbes. How Much Does Workers Compensation Insurance Cost? https://www.forbes.com/advisor/business-insurance/workers-compensation-insurance-cost/
FDA. State Retail and Food Service Codes and Regulations by State. https://www.fda.gov/food/fda-food-code/state-retail-and-food-service-codes-and-regulations-state
Upserve. How to Get Restaurant Licenses and Permits and What They Cost. https://upserve.com/restaurant-insider/restaurant-licenses-permits-need-start-restaurant/
IRS. How to Apply for an EIN. https://www.irs.gov/businesses/small-businesses-self-employed/how-to-apply-for-an-ein
