A vendor is a party who sells something. Vendors can sell many different items such as food, real estate, jewelry, clothing, solar panels, etc.
In the context of the law, vendors must adhere to both local and federal laws regarding the sale of their goods. Vendors are often subject to inspections from regulators.
Often, a vendor must obtain a license or permit from the proper authorities in order to operate their business legally. Permits can help regulators to know that the particular vendor is qualified to conduct business in the field they are in.
Unqualified vendors usually present a significant problem in business. For example, if an insurance company promises insurance to one hundred people, but suddenly cannot pay out claims due bad financial planning, then this could cause large-scale financial distress. This is why insurance vendors commonly have to get licensed in the state that they are in.