Businesses selling alcohol can enjoy massive profit margins, but they must adhere to strict regulations.

A liquor license gives you legal permission to sell alcohol at your venue. The approval process can take some time, so it’s important to apply for one as early on as possible when you’re looking to open a restaurant, bar or liquor store.

Liquor License: Which One Do You Need?

The type of liquor license you need depends on whether you’re opening a liquor store, restaurant, bar, club or other venue and what sorts of alcoholic beverages you’ll offer.

The two major liquor license types to choose from are on-premise and off-premise licenses, also called on-licenses and off-licenses.

Off-Premise Liquor Licenses

If your business sells alcohol for customers to take home, you’ll need an off-premise liquor license. If it’s for customers to enjoy on location, you’ll need an on-license license.

On-Premise Liquor Licenses

There are a few subtypes of on-premise licenses geared toward different business types. Some states require multiple on-premise licenses.

Tavern License

This license is for bars, live music joints and other businesses sourcing most of their revenue from alcohol sales.

Beer-and-Wine License

Restaurants, breweries, wine bars and other businesses selling beer or wine need a beer-and-wine license.

Restaurant Liquor License

Restaurants with alcoholic drinks such as spirits and cocktails on their menus need a restaurant liquor license. While it doesn’t limit the type of liquor sold, it does limit the percentage of revenue that can come from alcohol sales.

BYO Liquor License

If you plan to let your customers bring their own liquor to your business’s venue, you’ll need a bring-your-own liquor license.

Before you can be approved to sell alcohol, you need to be a registered business.

Liquor License Requirements

Here are some qualifiers you should know about before applying for a liquor license:

1. Registered Business

Before you can be approved to sell alcohol, you need to be a registered business. While it may be possible in your state to get a liquor license as a sole proprietor, it’s recommended you have an LLC or corporation as a liquor license holder. This way, you bear less personal legal liability. As opposed to an LLC, a corporation will give you more personal asset protection and startup funding opportunities.

2. Clean Background Check

If any criminal history comes up on the business owner’s background check, your liquor license application could be denied. In some states, a background check done by your local government is required before you apply to your local Alcohol Beverage Control (ABC) board. Some states also require tax clearance certificates to verify that you pay your taxes.

3. To Pass Inspections

There will be some sort of on-premise inspection before your liquor-license application is approved, depending on state laws. Here are some of the things they may be looking at:

  • Your Location: In states with zoning laws, you can’t sell alcohol within a certain radius of schools or churches.
  • Daily Operations: If your establishment is already up and going, inspectors may check if your records of invoices and receipts from your vendors are maintained and organized, and if the place is clean
  • Your Working Manager: The working manager at your venue should be the same person registered on the liquor license application. In some states, an inspector will check in person.
  • Fire Safety: A fire inspector may check that your establishment is up-to-date with municipal fire safety codes.

4. Your Food Handler’s Permit

If your establishment serves food, you’ll need a food-service permit (also called a food handler’s permit). These typically are quicker to obtain than a liquor license. A food-service permit your local health department, which is where you can obtain your state’s food-service permit application.

To get your permit approved, you’ll need to pass a food safety inspection that ensures you’re meeting your health department’s food code.

5. Liquor License Availability in Your County

A potential hang-up in the process is the availability of new liquor licenses. In some states, each county has a limit on how many liquor licenses they are allowed to issue, based on the county’s population. If licenses are maxed out in your county, you won’t be able to get one — at least not right away.

If there are no new licenses available, you can try to buy yours from an existing business. Be sure to check with your local county officials and find out if any new licenses are available before you move forward, so you know what to expect.

Liquor License Costs

The cost of obtaining the liquor license will depend on the type of liquor license and your state’s requirements. Prepare to pay anywhere from $100 to $13,800.

Some states include a processing fee or a surcharge in addition to the license fee. Liquor licenses need to be renewed every 1 to 3 years, but in many states, you’ll pay less in subsequent years than you did to acquire the initial license.

How to Obtain a Liquor License

To get your liquor license, you’ll need to go through the application process with the liquor license board in your state, which is your local ABC board.

To ensure you’re up-to-date with the regulations and required process in your state, ask your local ABC agency directly. They’ll direct you to an online liquor license application form or send you the physical forms you need. They can tell you about any additional permits you need to submit with your liquor license application.

Prepare Your Application

Here are some of the things you’ll need to have on hand before applying:

  • Your business license
  • Your employer identification number (also known as a federal tax identification number)
  • Alcohol tax permit
  • Zoning permit
  • Building permit
  • Signage permit
  • Health permit
  • Food handler’s permit

Find Out Your State’s Requirements

It would be a bummer to get your restaurant liquor license only to find out you can’t serve your full drinks menu until you’ve obtained a beer and wine license, too. In certain states, you may need multiple licenses. Other states require additional permits you need to purchase with your liquor license, such as a permit for selling liquor at later hours. Make sure you research your state’s requirements.

You can use the Small Business Administration website as a resource, or ask your state’s ABC board directly.

Completing Your Liquor-License Application

You’ll need to submit several items pertaining to your business along with your application form. It varies state to state, but in general, the application you submit will include:

  • The required fees,
  • Background check disclosure: This is a written consent form you must sign allowing the ABC to run a background check on you, the business owner.
  • Fingerprints for the background check.
  • Your business venue’s lease agreement.
  • A financial verification sheet: This is a document you’ll need to fill out about your financials, which helps determine your expected alcohol revenue amount.
  • Certificate of good standing from the secretary of state, which certifies you pay your taxes and are in compliance with state business regulations.
  • Your food handler’s permit or license.

You’ll need to go through the application process with the liquor license board in your state.

Application Approval Process

It most likely will be several months until your application is approved.

If your establishment doesn’t pass the inspection, the process will be delayed until it does pass.

Keep in mind the ABC board in your state may inform churches and schools within a certain radius of your business that you’ll be selling alcohol. If any complaints are filed, a public hearing will have to be held, which could further delay the process.

Case Study: Massachusetts Liquor License Application Process

The Massachusetts Alcohol and Beverage Control board requires you submit a retail license application and a notarized Criminal Offender Record Information (CORI) form.

Submit these with a $200 fee using this online application, which will be reviewed by both your Local Licensing Authority (LLA) and the Alcoholic Beverages Control Commission (ABCC).

Within 10 days of submission, you must place an ad in your city’s newspaper for a public hearing. The hearing is held by the LLA, which will decide to approve or deny your application. If the LLA denies your application, you can appeal to the ABCC, which will make the ultimate decision.

Getting the Go-Ahead to Sell Liquor

Acquiring a liquor license takes patience and requires close attention to details. Once you’re on the other side, you can enjoy profit margins bolstered by alcohol sales.

Another reason to raise a glass? You only need to undergo the process once. Renewing the license is much more straightforward.

Get weekly business insights & expert advice to help grow your business.