Opening a Restaurant: The Legal Checklist

Opening a restaurant means clearing a fairly fixed sequence of government approvals before your first customer sits down, then getting the employment rules right for as long as you operate — that second part is where restaurants most often get sued. The permits generally run: business formation, a health department permit and inspection, food handler and manager certification, a certificate of occupancy and build-out permits, a liquor license if you're serving alcohol, music licensing, and sales-tax registration for prepared food. Layered on top: the tip credit and tip-pooling rules under the Fair Labor Standards Act (FLSA) and your state's wage law, overtime, hour limits for minors, and Form I-9. Add dram-shop liability, allergen duties, and ADA accessibility for the dining room, and you have the real checklist.

The approval sequence, in the order it usually has to happen

Business formation and tax registration

Before any of the restaurant-specific steps, most owners choose a business structure and get a federal tax ID — that groundwork is covered in our guides on forming an LLC and getting an EIN, and it doesn't by itself license anything or change your food-safety or alcohol obligations. Those are separate approvals layered on top.

Health department permit and inspection

A restaurant essentially always needs a food-service permit before serving the public, but who issues it varies — in some places it's a city or county health department, in others a state agency, and in some both have a role. The permit generally requires a pre-opening inspection of the kitchen, equipment, and layout against the applicable health code. Most jurisdictions base their code on the FDA's model Food Code but adopt and enforce their own version, on their own inspection schedule. Confirm the permit process, plan-review requirements, and timeline with the agency that regulates your address early — plan review can take weeks and should happen before you finalize a build-out, not after.

Food handler and manager certification

Many states and cities require a certified food protection manager on-site, and some require every food handler to carry a card from an accredited training program. Which employees need which credential, and how often it renews, is set at the state or local level — check with your health department before scheduling staff training.

Certificate of occupancy and build-out permits

Building out, renovating, or changing a space's use (say, retail into a restaurant) typically requires building, electrical, plumbing, and mechanical permits from your local building and zoning department, plus a certificate of occupancy before you can legally open. Zoning is separate from building code — confirm the space is zoned for a restaurant, at your planned seating capacity and hours, before you sign a lease. Our guide to commercial leases covers what to negotiate before you commit, including who's responsible for the build-out.

Liquor license, if you'll serve alcohol

Alcohol sales require a license from your state's alcohol beverage control agency, often plus a separate local approval. Many states cap the number of licenses available in an area, and where they do, new licenses can be slow to issue or effectively unavailable — which is why an active secondary market exists in some states, where an existing license transfers from one holder to another for a negotiated price. What a license costs, how long approval takes, and whether transfers are even allowed vary enormously by state and license class, so there's no way to generalize a price or a timeline: budget generous lead time and check your state ABC agency directly. Discuss liquor liability (dram-shop) coverage with your insurance broker at the same time.

Music licensing

Playing recorded or live music, or broadcasting radio or TV, in a space open to the public is a "public performance" under federal copyright law and generally requires a license from the rights holders or a performing-rights organization — separate from any government permit and easy to overlook. Copyright law does contain a narrow exemption for smaller establishments using ordinary home-type equipment, but it is technical and turns on your space's square footage, the number and placement of speakers or screens, and what you're playing — so don't assume you're exempt. Copyright is its own topic on this site and copyright.gov is the official starting point.

Sales tax on prepared food

Most states tax sales of prepared, restaurant-style food, and the rate or rules can differ from how the same state taxes groceries — some states that exempt groceries still tax prepared food. Register with your state's tax agency before your first taxable sale and set up collection and remittance. Registration deadlines, filing frequency, and what counts as "prepared food" are all state-defined, so confirm with your state tax agency rather than assuming another state's rule carries over. (Seller's permits and sales-tax nexus generally are covered in our small-business tax basics guide — the restaurant wrinkle is that "prepared food" is often its own tax category.)

The employment layer is where restaurants get sued

Restaurants run on tipped, hourly, and often teenage labor, and the wage-and-hour rules for that combination are detailed, frequently litigated, and unforgiving of mistakes.

Tip pooling and the tip credit

Under the FLSA, an employer that pays tipped employees a lower direct cash wage may count a portion of tips toward the federal minimum-wage obligation — the "tip credit." Several states don't allow it at all and require the full state minimum wage before tips, and others attach stricter conditions than federal law. Which applies to you is entirely state-specific, so confirm with your state labor agency, not just dol.gov.

One rule holds regardless of state variation, because Congress wrote it into the statute itself: an employer may not keep tips received by its employees for any purpose, including allowing managers or supervisors to keep any portion of employees' tips — and that is true whether or not the employer takes a tip credit. A manager or supervisor may keep only what a customer gives them directly for service they personally and solely provided.

The murkier question is side work. The FLSA's "dual jobs" concept has long distinguished an employee working two occupations for the same employer — the classic example is someone employed part of the week as a maintenance worker and part as a server — from a tipped employee doing related tasks. How far that extends to time spent on non-tipped duties within a tipped job has been through repeated federal rulemaking and litigation, and a Department of Labor rule addressing it was struck down in court. This is exactly the kind of point where a confident older explanation — including one written by us — goes stale, so confirm the current DOL position at dol.gov and check your state's rule, which may be stricter, before you build a schedule around it.

Overtime and minors

Non-exempt staff are entitled to overtime under the FLSA once they work more than 40 hours in a workweek, figured on a workweek basis regardless of how shifts are scheduled. Federal and state child labor laws separately restrict how many hours and how late workers under 18 can work, with tighter limits for younger teens — exact limits vary by age and by state, and where federal and state rules differ the stricter one generally governs. Check the Department of Labor's youth employment rules and your state labor agency before scheduling a minor for a closing shift.

I-9 and worker classification

Every new hire — full time, part time, or seasonal — must complete Form I-9, with the employer's portion generally due within three business days of the start of work. This one is federal and applies the same way in every state. Waitstaff, drivers, and kitchen staff are almost always employees, not independent contractors, under the tests that actually control the question — calling someone a "1099 contractor" doesn't change that if you control their schedule, tools, and how the work gets done. Classification is a legal conclusion drawn from the real working relationship, not something a job title or a signed agreement settles, and some states apply stricter tests than the federal ones. Misclassifying restaurant staff creates back-tax and back-wage exposure on top of whatever the original dispute was about — and withheld payroll taxes are trust-fund money, which owners and other responsible people can be made personally liable for even behind an LLC.

Liability exposure specific to restaurants

Dram-shop liability

Most states impose some liability on a business that serves alcohol to a visibly intoxicated patron or to a minor who then causes injury — often called dram-shop liability. Whether it applies in your state, what must be proven, and what defenses (like responsible-service training) help are all matters of state law, so ask your state ABC agency or an attorney, and talk to your insurance broker about liquor liability coverage regardless.

Allergen duties

Federal law requires major food allergens to be disclosed on labels for packaged food, and the FDA maintains general allergen guidance at fda.gov. For food served and prepared on-site, many states and cities separately require an allergen-awareness plan, staff training, or menu disclosures — those requirements come from state or local health codes, not one uniform federal rule, so check with your health department. A documented process for handling allergen questions and avoiding cross-contact in the kitchen is basic risk management regardless of what the letter of the law requires.

ADA accessibility of the dining room

A restaurant is a "public accommodation" under Title III of the Americans with Disabilities Act, meaning the dining room, restrooms, entrance, and path of travel generally need to be accessible. This is federal and applies regardless of state, but the standard is not identical in every situation: new construction must be fully accessible under the ADA Standards for Accessible Design; alterations must be made accessible to the maximum extent feasible; and an existing space carries an ongoing duty to remove accessibility barriers where doing so is "readily achievable" — a flexible standard that takes your size and resources into account, so a small operator is not held to a large chain's budget. That flexibility is not permission to ignore it. See ada.gov for the standards and its small-business guidance.

What to do

1. Confirm zoning allows a restaurant at your address and seating capacity before you sign a lease.
2. Set up your business structure and federal tax ID, then register state and local tax accounts, including sales tax if your state taxes prepared food.
3. Submit plans to your health department before finalizing the build-out, and schedule your pre-opening inspection with lead time.
4. Enroll staff in required food handler training and designate a certified food protection manager on your jurisdiction's timeline.
5. Pull building, electrical, plumbing, and mechanical permits for any build-out, and don't open until you hold a certificate of occupancy.
6. If serving alcohol, apply for your state and local liquor license early — often the longest lead time on the list — and ask about liquor liability insurance.
7. Get a music license before you play recorded or live music.
8. Set up I-9 verification for every hire, classify staff correctly as employees, and confirm which tip-credit and overtime rules apply in your state.
9. Put an allergen-response process in place and confirm the dining room, restrooms, and entrance meet ADA accessibility requirements.
10. Line up general liability, property, liquor liability, and workers' compensation coverage — see our guide to business insurance basics.

Free help exists and is worth using before you spend money: the SBA (sba.gov), SCORE, and your state's Small Business Development Center all counsel new owners at no charge, and irs.gov has the federal tax side.

This is general information, not legal, tax, or financial advice, and it doesn't create an attorney-client or accountant-client relationship — for anything specific to your restaurant, talk to a lawyer or CPA licensed in your state.