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Almost everyone who loves to eat, drink or cook has probably entertained thoughts about opening a restaurant, bar, bakery or other business in the food services and hospitality industry. What many people don't realize is that businesses operating in the food and hospitality industry are among the most-highly regulated. Many of these laws exist because failure to follow proper food-handling procedures can potentially lead to sickness or death.

Licensing and Permitting

Licenses and permits (the terms are often used interchangeably) are government-issued documents that give the people and businesses the right to do certain things. For example, a driver's license gives you the right to operate a motor vehicle, and a driver's permit gives you the right to operate a motor vehicle under the direct supervision of a responsible, licensed adult.

Some permits and licenses require nothing more than the payment of a fee. Others may require extensive documentation, testing and inspections. Exact requirements will vary depending on the area in which your business is located, but you may be required to obtain some or all of the following permits and licenses:

• Business permit: This may be issued by the town, county or state (in some jurisdictions you may need local and state business permits), and is required of all businesses operating within an area.
• Food license: Required of any business that's selling food, regardless of whether it's sold directly to the public or to a middleman, prepared by the business or prepared offsite. The food permit may be issued by the local, county or state department of health, and regular inspections are often required to keep the license in good standing.
• Fire safety permit: This is typically issued by your local fire department, which will inspect the premises to ensure that there are no dangerous fire hazards and that people would be able to easily evacuate in the event of a fire. The fire department may also issue an occupancy permit, which governs how many people can simultaneously occupy a room, business or building.
• Sales tax permit: Most states require any business that sells taxable goods or services to have a valid sales tax permit. This permit is often issued by the state comptroller or department of revenue.
• Liquor license: A liquor license gives your business the legal right to sell alcohol at your establishment. Rules will vary from jurisdiction to jurisdiction. In some areas, different licenses may be required to sell beer and wine, and to sell hard alcohol. The governing body may only issue a limited number of permits, and to acquire one you might have to purchase it from an existing business. Your state liquor control board can advise you on the process of obtaining a liquor license.
• Permits for signs, sidewalk cafes and businesses publicly playing copyrighted music or broadcasting TV shows: Each jurisdiction will have its own specific rules that govern places of business. The mayor's office or your local county administrative body should help guide you through the necessary permitting process. If there's a local chamber of commerce or a regional Small Business Administration office, they will also be able to make you aware of licenses and permits that might otherwise be overlooked.

Employees

Many food and hospitality businesses operate on thin profit margins, and, as a business owner, you may regularly be on the lookout for ways to save money and cut costs. In particular, many in the restaurant business are tempted to hire some employees who might otherwise be ineligible for employment or to pay them in cash to avoid expenses such as payroll taxes and workers' compensation insurance (often known as hiring someone under the table).

Trying to circumvent tax laws and minimum wage laws is illegal. Keep in mind that you'll have a costly problem on your hands if one upset former employee reports you to the Internal Revenue Service or Citizenship and Immigration Services.

Location

As you look for a site from which to operate your business, check the local zoning laws to ensure that you can legally operate a food or hospitality business in that location. You'll also want to check for any restrictive ordinances that hurt your ability to operate the business. For example, some areas--particularly ones close to residential neighborhoods--have laws that limit the hours that businesses may operate, or times at which deliveries can arrive.

Questions for Your Attorney

An attorney who has previously represented clients in the food service or hospitality industry can help guide you through the maze of legal issues that you'll have to navigate before opening your doors for business. Among the questions to consider asking your attorney:

• Are you familiar with the legal and licensing requirements to open a food services business or hospitality business?
• What permits are required in my jurisdiction, how long will it take to acquire them and how much will the permits cost?
• What other legal issues should I be aware of?

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