The Legal Side of Owning a Bar
This excerpt is part of Entrepreneur.com's Second-Quarter Startup Kit which explores the fundamentals of starting up in a wide range of industries.
In the book Start Your Own Bar and Club, the staff at Entrepreneur Press and writer Liane Cassavoy explain how you can launch a profitable bar or club, whether you want to start a nightclub, neighborhood pub, wine bar or more. In this edited excerpt, the authors reveal what permits and licenses you'll need for your new bar.
Mountains of paperwork and lists of laws and regulations go along with opening a bar, including those concerning licenses, taxes, worker safety, liability, sexual harassment, and insurance.
As a business owner, you'll need some standard business licenses and permits. You should also find out from your accountant which tax forms you need to fill out.
Before you do anything else, obtain an Employer Identification Number (EIN) from the IRS. This number will be required for many of your licenses and permits, and all your tax documents. Go to www.irs.gov to obtain an EIN online.
As a bar owner, the two most important agencies you'll be dealing with are the Alcohol and Tobacco Tax and Trade Bureau (TTB) and your local Department of Alcoholic Beverage Control (ABC agency). Let's start at the local level.
Bars face different requirements depending on where they're located. Some states, counties and cities have very complex laws and regulations, while others are fairly simple. However, all states require a liquor license to sell any kind of alcoholic beverage.
Your license won't only determine the type of alcohol you can sell (beer, wine, distilled spirits) but will also tell you the times and days you can be open for business. Many licenses also regulate renovations, entertainment, advertising and personnel. Your lawyer can help you fully understand all the liquor laws in your state well before you're ready to open for business.
The first place to start at the state level is your Alcoholic Beverage Control (ABC) agency. Some states issue liquor licenses at the state level, while others issue them at the county or city level. Either way, the state ABC agency must approve the issuance of the liquor licenses and can send you information to get you on the right path from the beginning. Once you've filed your application for a new liquor license or for a transfer, you can expect an ABC investigation to take 45 to 60 days. If you're approved, you may have to wait an additional 30 days or longer to actually receive the license.
If you plan to serve food in your bar, you'll need a license to do so. Generally, these licenses are issued for a year and must be renewed. Depending on the size of your bar, the type of equipment you have and how extensive your menu is, the cost of this license starts at about $50 and goes up from there. The state public health department oversees the licenses and permits, but some allow local or county departments to issue them and conduct inspections.
A week or two before you open your doors, you should schedule an inspection with the health department to make sure you're in compliance with all applicable laws and regulations. You can also expect to have periodic inspections by the health department throughout the operation of your business.
While most of the licenses and permits for your bar are issued on the state or local level, you'll also need to deal with the federal government, specifically the TTB, with whom you need to register before you begin selling any alcohol, and again if you make any change to your business (such as a change of address or name). You can contact the TTB's National Revenue Center at (877) 882-3277 or visit ttb.gov/nrc.
Bar owners must keep detailed records of all liquor, wine and beer received from suppliers that include the date and quantity of everything you receive and the name of your supplier. You can either use a record book or keep all the invoices and bills for the distilled spirits, wine and beer you receive. If you're inspected by a federal officer and don't have these records, you may be subject to fines of up to $10,000 and imprisonment for up to five years.
Some state and local laws also require a permit from the fire department before you can open. Some of the other things the fire department will verify are:
- Fire extinguishers. You need to have a certain type and number, based on the size of your bar, with proper placement.
- Exits. You must have an adequate number of exits that aren't obstructed by equipment or furnishings. They must also have lighted exit signs above the doors.
- Smoke detectors and fire suppression devices. You must have smoke detectors to warn of a fire. Some states also require other equipment to put out the fire, such as sprinklers or dry chemical dispensers. If you have a sprinkler system, you're not allowed to block or cover it in any way.
It's the fire department that tells you how many patrons you can have in your bar without causing a safety hazard. It bases the number on state and local fire codes and the square footage of your establishment.
Depending on what kind of bar you'll have, where it's located, and whether or not you're doing any construction, you may also need the following permits:
- Sign permit. Some communities have a specific agency that regulates signage and requires sign permits. Other areas have restrictions on size, lighting and placement.
- Building permit. If you're building a bar from the ground up, check with your local zoning board and city planning board before you put any money into it. Any kind of remodeling or construction generally requires a building permit.
- Seller's permit. If you'll be collecting sales tax on any goods or services you sell, you may be required to obtain a permit. Check with state and local authorities.
- Health permit. Some locations require a permit from the Board of Health if you're selling food or beverages.
- Historical commission permit. If your location is in a designated historical building, you may not be able to make certain renovations. Check with the historical commission before you start drawing up plans.