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The restaurant industry is booming. In 2023, there was a 10% increase in restaurant launches, with more than 10,000 new food establishments opening their doors. Plus, according to the 2024 Square Future of Restaurants report, restaurant owners are more optimistic than they were 12 months ago. Ninety-one percent of restaurant leaders plan to significantly expand their operations this year.
Opening a new restaurant is a thrilling journey, but it doesn’t happen overnight. Starting a restaurant takes a lot of hard work, hustle, and paperwork. You’ll need several permits and licenses to safely and legally operate your restaurant, starting with a business license.
Securing a business license is an important first step to bringing your restaurant to life. The process can take time and money, but completing it helps you avoid penalties, build trust within your community, and, ultimately, open your doors faster.
6 steps for getting a business license
A business license is an official permit from your local government. It signals that you are approved to start and run a business in a particular jurisdiction.
Each state has different requirements, and some don’t require you to obtain a business license. But operating without a license in many states is illegal, and it can result in fines or force you to close down. Here are some steps you can generally expect to follow to get your business license:
1. Register your business. Several states require you to register your business. The state will keep a database of business names, so you can check that you’ve chosen a unique name for your restaurant before you register it. Some states may require separate registration even if you are opening a new location of an existing restaurant.
2. Pick a business structure. When you register, it’s also a good time to choose your business structure. A sole proprietorship or simple partnership is the most straightforward but offers the least protection for individual assets. LLCs are popular choices for restaurants — a higher-risk industry — because they separate personal and business assets. However, they are more complicated to set up and pay taxes for.
3. Gather your documents. You’ll need to have a lot of paperwork in order to submit your business license application. Among other things, be prepared to provide:
- Your tax identification number (TIN) or employer identification number (EIN), depending on your business structure
- Proof that you own or are leasing the space where the restaurant is located
- Proof that the property complies with all local zoning regulations for being used as a restaurant
- A certificate of liability insurance
- A comprehensive business plan for your restaurant
4. Check for additional local requirements. Cities and counties may have their own requirements for new businesses beyond state regulations. You might also need to register with a county clerk, for example. Keep this in mind, too, if you’re planning to open in multiple locations across cities or counties.
5. Submit the application, including fees. Depending on what your state agency offers — and what’s most convenient — there are a few ways you can submit your completed application and documentation. Some applications are only accepted online, or you may be able to mail in the required forms or drop them at a local government office, like a treasury department or health office. Fees for a business license can range widely based on where you live, but you may need to pay anywhere from $50 to more than $500 with your application.
6. Display the license. You should apply for a license as early as you can, ideally at least six months before you plan to open. One reason is that, while some applications are processed quickly, it can occasionally take more than a month or two to receive your license after applying. Once the license arrives, most local guidelines require you to have it on display in your restaurant.
Keep your license updated.
Business licenses need to be renewed periodically, usually every year or two. When you apply, double-check how long the license is valid. Know when yours expires, and allow enough time for the renewal process. Remember: local regulations might have changed or been added since you first got your license. Review the application carefully to see if you’re still in good standing with all the rules. And, if your restaurant has had any audits or health inspection violations, make sure those are fixed and reflected in your renewal.
Beyond a business license: Other licenses your restaurant may need
After establishing your restaurant as a business, you’ll need other important permits before you can actually open and operate. These might include:
- Health and safety permits. Local health departments will require you to have a food service license, food safety training, and a kitchen inspection. You may also need menu approval or special certification to dispose of grease or other types of waste.
- A liquor license if your restaurant will sell alcohol
- A permit to display a sign for your business
- An events and entertainment license if you plan to host any live performances in your restaurant
- Patio or outdoor seating permits to make sure these areas are safe, accessible, and quiet
It’s an exciting time for restaurants — but still a challenging one, as 45% of restaurant operators expect more intense competition in 2024. Making sure that your establishment is fully and accurately licensed as a business not only boosts your restaurant’s credibility, but it also allows you to spend more time on things like marketing in the local community or crafting a unique menu that will set your business apart in a crowded field.
