Opening a Restaurant: Top Legal and Financial Considerations

Any time you’re considering launching your own business enterprise, there are a number of hoops you’ll have to jump through in order to prepare, secure funding, and get your operation off the ground. But when you’re opening a restaurant, you may face additional legal and financial hurdles that are particular to your type of business. And if you fail to understand them or to follow through with addressing them, you could find yourself facing all kinds of trouble from the authorities and your financiers. Like any business undertaking, you need to have a clear understanding of your obligations and any potential pitfalls you might encounter so that you can plan accordingly and achieve success in your professional endeavors. So here are just a few of the biggest legal and financial concerns that may affect you when you elect to open a restaurant.

In terms of legalities, there are several things you’ll have to take care of. First and foremost, you need to consider your business structure. Although you might think the easiest course of action is to open a sole proprietorship or a partnership, this type of legal structure won’t protect you in the event of a lawsuit. Suppose an employee is hurt on the job, a customer slips and falls on the floor in your establishment, or an outbreak of E. coli is linked to your kitchen. You don’t want to be held personally responsible and have your assets at the mercy of a judge or jury. For this reason it’s probably a good idea to shield yourself from personal liability by setting up a C-corp, S-corp, or LLC, just for example, all of which ensure that any issues or liabilities your business faces will not result in you bank accounts, your house, and your other personal assets being up for grabs. However, there can be limitations, so you should meet with a business attorney before you select a particular corporate structure.

When you’ve got that in order you’ll want to look into zoning, permits, and licenses. When you’ve selected a location that you like for your business, you should check in with the zoning board to make sure that you are allowed to open a restaurant there before you purchase a lot of land or a structure. Of course, this shouldn’t be too difficult to determine since you’ll most likely be looking in areas that are already zoned for commercial interests. But you should definitely make sure if you want to avoid potential problems. Having proper building permits is also necessary, as is securing necessary licenses, say for serving liquor on the premises. If you make an error here, you could face some hefty fines, amongst other potential issues.

But your legal issues will be the least of your problems if you fail to manage your finances and you end up losing your business. The place to start is with projections that will ensure you plan for adequate startup funds and a realistic operating budget. Even with these considerations in place, many restaurants earn very little income beyond what they need to cover expenses, and there are a couple of reasons why. One common issue is an inappropriate accounting system. You not only need to keep track of where money is coming and going, but you also need to keep a tight rein on inventory, including what you purchase, what you use, what you sell, and what is wasted. And you need to beware of overspending. You might want the best equipment from Vulcan appliances or, upscale tables and chairs for your dining room, and fancy foodstuffs for your restaurant kitchen, but you need to carefully consider your potential for profit and loss when planning your layout, decor, and menu. With smart legal and financial decisions your restaurant can be a great success.

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  4. How to Get Started in the Restaurant Business With Little to No Experience
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