Incorporate Your Restuarant
The legal structure of your business will need to be decided before any other legal matters are handled. Each legal entity has its own benefits, and a CPA or lawyer will help you choose which legal structure is best suited for you as you start a restaurant.
The following legal entities are often used in the restaurant industry: Limited Liability Company (LLC), S Corp, and C Corp. An LLC provides the best tax benefits and offers many of the same liability benefits that a Corporation offers. An S Corp acts as a pass-through entity which provides tax benefits to owners while a C Corp is a separate legal entity where shareholders are not liable for debt or legal liabilities, but suffers from double taxation.
Restaurant owners will need to limit themselves to potential liabilities. An LLC or Corporation is usually formed to limit any liability claims that would be seen in a Partnership or Sole Proprietorship. Due to the high frequency of customers and the potential for employee injuries, personal liability is something to seriously think about when deciding on your legal entity.
Licenses, Permits, and Contracts You'll Need
After incorporating, you’ll need to obtain various licenses and draft contracts.
The first contract that you will want to draft is a Service Contract. A Service Contract is used by a restaurant to clearly explain the agreement of the service provided. This may be cleanup, storage, and equipment details for any catering done, or it can be an agreement made with every patron.
Licenses will also be needed. Licenses will be dependent on state and local laws and may include the following:
- Liquor license: This license allows for the sale of any liquor.
- Music license: This license is required to play pre-recorded or live music that is copyright of an artist or music label.
- Cabaret license: Licensing is required when live performers are present.
- Occupancy license: This license dictates the maximum occupancy allowed to meet fire safety regulations.
- Franchise license: If starting a restaurant franchise, a license will be required by the franchise owner.
- Handling and Safety: Health rules and regulations must be upheld at all times. These licenses will vary from state to state, or city to city in some cases. This may require staff licensing, training, and meeting certain food storage and handling standards.
These are just a few of the licenses that you will need to obtain. Always ask a lawyer about how to start a restaurant business and obtain all of the licenses needed to operate legally.
As your restaurant continues to grow, you will need to attain further licenses, form new contracts, and adhere to new laws and regulations. And as local laws continue to change, we can help you form the necessary contracts and ease the complications of owning a business so you can focus on other things, like making your grandmother’s secret recipe world famous.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.