Obtaining a business license to operate a hotel involves a detailed process, but most state and local governments have simplified the procedure. If you are going into the hotel business, you may need more than one permit. In addition to obtaining state and local licenses, you will likely need a special hotel permit, depending on your area. Follow these few steps to help you get through the process.
Form a business entity. Your hotel business must have a professional name and operate as an official business. In most states this is a requirement in order to get a hotel business license. Form a Limited Liability Company (LLC). An LLC is a perfect entity for companies that do business with customers at a central location and charge sales tax. Because you will be taking a significant amount of risk by allowing customers to use your facility to sleep and dine, an LLC will allow you to protect your personal assets in the event of a lawsuit. Hotels also have considerable ongoing expenses. By operating as a LLC, you will have the ability to properly account for regular expenses and write-off many of them off, which is often not possible as a sole proprietorship or partnership. An LLC will also allow you to make financial decisions on behalf of your business. Contact your secretary of state for LLC registration forms (see Resources).
Obtain state license application. Contact your secretary of state to obtain a hotel business license application. In some states, a hotel is treated like any other business. In others, a hotel must meet additional requirements than businesses in other industries. Ask for a list of special requirements for a hotel. Have a copy of the license application sent to you or download it directly from your state’s website.
Complete state application. You may be required to disclose your articles of incorporation, proof of working capital and banking information and pay a state fee of $100 or more. Have a copy of your business plan and a professional drawing of your hotel’s layout handy. You may be required to furnish this information.
Apply for a city license. Many cities require hotels to obtain special-use permits and local business licenses. Contact your county clerk’s office to access the proper application forms. You will likely be charged a one-time application fee of $100 to $500. You may also be charged additional fees depending on how many sleeping rooms your hotel has.
Submit your applications. After thoroughly completing both applications, mail them to the appropriate departments. State applications, depending on your area, are commonly sent to the secretary of state or your state's department of revenue. Local applications will likely be reviewed by your county clerk or treasurer’s office.
Closely monitor the status of your applications.
Consult with an attorney or CPA if you need help understanding the requirements or producing business information.
Register your business with your municipal tax office before completing your city application.
Be prepared to have each room in your hotel inspected by your local building department, health inspector and possibly members of law enforcement. Expect to pay a fee of $5 to $20 per room (see Resources).
Always keep your hotel clean and up to code and monitor your license status closely. Most cities and states require hotels to renew their licenses every year or more. Failure to pay renewal fees could result in penalty. Hotels are also subject to random inspections.
Know the laws of your city and state that pertain to hotel operation well.
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