Unless you enjoy paperwork and certification efforts, acquiring the restaurant licenses needed to bring your culinary creations to the rest of your neighborhood might not be the most exciting step in opening a new restaurant. However, licenses and permits are a necessary part of the process that every restaurateur must adhere to.
This guide to restaurant licenses has the information you need to open a restaurant.
Necessary License Overview
Most restaurants across U.S. neighborhoods will require the following licenses:
- Business License
- Employer Identification Number (EIN)
- Certificate of Occupancy
- Reseller’s and Seller’s Permits
- Food Service License
- Food Handling (or Employee Health) License
- Liquor License
- Sign Permit
- Music License
- Dumpster Placement
Depending on the type of food establishment you intend to open, your area may require additional restaurant licenses and permits, such as:
- Mobile Food Vendor Permit (for food trucks)
- Valet Permit
- Live Music Permit
Different permits may require annual renewals (and fees) in many cities and states.
City, County, and State Differences
Each state requires its own list of restaurant licenses and permits, though many are consistent nationwide. Some cities and counties require restaurants to acquire additional certifications or enforce stricter thresholds for approval.
While budding restaurateurs may have a rough idea of the ones they’ll need (e.g., food service, liquor license), some may be unexpected. Further, many departments across governmental levels will follow different processes when issuing their own.
This article will help you get started, but it may not cover every license and permit you’ll need to set up shop in your specific neighborhood—or the exact steps necessary to obtain them. Given the potential penalties, make sure you thoroughly check your area’s requirements before any public openings to ensure you won’t run afoul of them and jeopardize your success.
Beware Long License and Permit Processes
Some restaurant licenses and permits take a long time to acquire. To keep your opening efforts running smoothly, check to see how early you can begin each process.
While most of the information should be available on each license-issuing department’s site, take some time to contact them directly, clearing up any potential confusion and gathering insight on typical pitfalls.
Proper planning and a head start will help prevent hold-ups that add up by pushing your grand opening out further.
Getting Started: Business License, EIN, Reseller’s Permit, and Certificate of Occupancy
Thankfully, some of the licenses you’ll need to get started can be acquired right away and without physical premises or inspections.
Business License
Though applying for a business license is usually a simple process, you’ll have to make some decisions about your restaurant’s name and legal structure.
Registering a business license typically costs $50, but the license’s cost may vary by location.
Picking Your Restaurant’s Name Can Be Fun, But Make Sure it’s Available
Once you’ve brainstormed your favorite names, be sure to check their availability, including website domains and social media handles. Avoid using names already taken by other restaurants in your state and especially those that have been nationally trademarked, as such violations lead to lawsuits.
Sole Proprietorship, LLC, or Corporation?
In order to register your business and its name, you’ll also need to decide your restaurant’s legal structure. Different structures offer different advantages:
- Sole proprietorship – For solo owners without employees, sole proprietorships require the least amount of paperwork and registration, but do not differentiate between a business entity and a person, so you’ll be held responsible for all debts and obligations.
- LLC or Corporation – Most restaurateurs will need the legal protections afforded to limited liability companies (LLCs) and corporations that differentiate their restaurant (and it’s liabilities) from them as an individual.
DBA
Sole proprietorships or those wishing to use a different name from their paperwork need to consider establishing a DBA (i.e., “Doing Business As”) for protection against contract disputes and others using the same or too similar of a name.
Employer Identification Number (EIN)
An EIN is a nine-digit tax administration number issued by the IRS. The IRS processes EIN applications for free but limits the number of issuances to one per day per “responsible party” (i.e., the individual who “controls, manages, or directs the applicant entity and the disposition of its funds and assets”). The responsible party for your restaurant must be a real person, and any EIN application they file must include their social security number.
Additionally, responsible parties who have already obtained another EIN via the online application process must submit future requests by mail or fax, which suffer from longer processing turnarounds.
It’s critical to obtain an EIN early in your efforts to open a restaurant. Aside from a federal requirement for filing taxes, you must provide your EIN to financial institutions to open accounts in your business’s name.
Reseller’s (and Seller’s) Permit
If you’re operating in a state that charges a sales tax, a resale certificate seller’s permit will allow you to avoid double taxation. Since you plan on reselling those taxable items—for instance, the wholesale purchase of ingredients—the permit voids the sales tax on the initial purchase. It will then be later included with your patron’s receipt when those ingredients turn into your cafe’s famous blueberry muffins.
Some states, such as California, Florida, and Texas, also require a seller’s permit to authorize the collection of sales tax. Applying for a seller’s permit is one of the license processes that vary by location, as Floridians may apply online while Californians and Texans must do so in-person or by mail.
Certificate of Occupancy
You’ll need to address your certificate of occupancy once you’ve finished building or moving into your location. This declares that the property and restaurant food safety requirements are up-to-code as well as the maximum number of people allowed at one time. Certificates of occupancy are issued by your city or county government.
New certificates of occupancy are required for recently constructed or changed-use (e.g., converting a retail space to a restaurant) buildings. If another restaurant previously occupied the space, you may only need to file paperwork to update the certification. That process varies depending on where you intend to operate, however, as San Antonio does not require additional inspection, but Tacoma does.
Certificates of occupancy typically cost about $100.
Restaurant and Food Service-Specific Licenses and Permits
Aside from your startup licenses and permits, you’ll need to begin the round of restaurant-specific applications most people think of when it comes to food licenses.
Food Service License
Serving food in your restaurant requires a food service license. The city and county health departments typically issue these permits following an inspection of your preparation and storage areas.
The cost of a food service license varies by location, but check to see if certain types of restaurants require an additional license fee as part of the application process. For example, Food Service Establishment Permits for New York City’s restaurants cost $280 annually, plus another $25 if you “manufacture a frozen dessert.” Purchasing an operating restaurant may not transfer food service permits, as some cities, such as Seattle, require a new issuance.
Some restaurants may need to apply for a building health permit in addition to their food service license to prove their property’s sanitation meets city, county, or state standards for restaurants.
Food Handling (or Employee Health) License
In addition to the permit for serving food on your premises, restaurant employees must complete a food handling certificate or license to work in most U.S. neighborhoods. Yet again, check the specific requirements. For example, the California Food Handlers Card remains valid across the entire state for three years with the exceptions of Riverside, San Bernardino, and San Diego Counties, due to their preexisting certification programs.
Liquor License
The Alcohol Beverage Control (ABC) Board in each state handles liquor license applications and issuances. ABC processes vary—and some may take up to a year—but a liquor license is generally considered the hardest permit to obtain and easiest to lose.
Depending on your type of restaurant you may need different licenses or even multiple, in cases where beer and wine are handled separately from liquor. Some of the typical liquor licenses are:
- Restaurant License – Places a limit on the percentage of a restaurant’s overall sales that come from alcohol, typically 40%
- Beer and wine license – For restaurants that don’t intend to sell hard liquor
- Tavern license – For establishments that operate more as a bar, but still serve food
Restaurants may end up spending anywhere from $12,000-$400,000 for a liquor license. For example, New Mexico’s ABC enforces a hard cap on the number of statewide liquor licenses, which means most restaurateurs must purchase theirs from someone else.
Additional Restaurant Licenses and Permits
Some of the less expected licenses and permits that restaurants must have include:
- Sign Permit – Your city will specify restrictions on sign location, size, and lighting.
- Music License – A music license will let you play copyrighted music in your establishment.
- Dumpster Placement Permit – Placing a dumpster near your location for food and other waste requires a dumpster permit.
Get the Word Out Around Your Neighborhood
While acquiring all your licenses and permits, start promoting your restaurant around your neighborhood to get more customers and build up both excitement and the line for your unveiling on opening night. Setting up and posting on social media accounts will help build your internet presence, but Nextdoor Business Pages offer the best place to directly connect with your neighbors.
With a hyperlocal focus, Nextdoor is where neighborhoods happen. Your Business Page helps your restaurant become a trusted and valued part of a thriving community. Instantly reach and communicate with your restaurant’s most valued patrons—your neighbors—with Nextdoor.
Sources:
City of San Antonio. Certificate of Occupancy. https://www.sanantonio.gov/DSD/Business/CofO#148941367-no-change-of-use
County of Los Angeles Public Health. California Food Handler Card Guidelines. http://publichealth.lacounty.gov/eh/docs/CAFoodHandlerCardGuidelines.pdf
FreshBooks. Doing Business As (DBA): What Is It and Why Is It Needed? https://www.freshbooks.com/blog/doing-business-as
FSR Magazine. These Are the Permits and Licenses You’ll Need to Open a Restaurant. https://www.fsrmagazine.com/expert-takes/these-are-permits-and-licenses-youll-need-open-restaurant
Houston Chronicle. Do You Need A Seller’s Permit to Open a Restaurant? https://smallbusiness.chron.com/need-sellers-permit-open-restaurant-24988.html
IRS. Responsible Parties and Nominees. https://www.irs.gov/businesses/small-businesses-self-employed/responsible-parties-and-nominee
NYC Business. Food Service Establishment Permit. https://www1.nyc.gov/nycbusiness/description/food-service-establishment-permit
On the Line. 15 Licenses and Permits Needed to Open a Restaurant. https://pos.toasttab.com/blog/on-the-line/licenses-and-permits-required-open-new-restaurant
Tacoma Permits. Restaurants and Food Service. https://www.tacomapermits.org/tip-sheet-index/restaurants-and-food-service
The Tax Advisor. Issues With Employer Identification Numbers. https://www.thetaxadviser.com/issues/2014/apr/tpp-apr2014-story-04.html
Upserve. How to Get a Liquor License and How Much it Costs. https://upserve.com/restaurant-insider/liquor-license/
U.S. Small Business Administration. Choose a business structure. https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
WebstaurantStore. Restaurant Licenses and Permit. https://www.webstaurantstore.com/article/107/restaurant-permits-and-licenses.html
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