Most up-and-coming brewers face the same set of questions and challenges when they decide to take the step toward opening their own craft brewery. Opening a brewery requires preparation, knowing state and federal laws and executing things in the right order.
While state laws and requirements vary in their specifics, they often overlap. For example, brewers will always need to choose a name or form an entity. They might also be required to get a brewer’s bond, which is a type of alcohol bond, when applying for their brewer’s license.
Below is a list of some important legal considerations you need to keep in mind when setting out to open your very own brewery. With this guide, you can spend less time deciphering rules and regulations and more time brewing beer.
1. Form a business entity, name it and trademark it
Before you can sell any beer whatsoever, you must create a legal entity. This usually means a limited liability company (LLC) or a corporation, which will separate your personal assets from your company’s liabilities.
When forming an entity, you will also have to make an operating agreement and/or a shareholder’s agreement. If you have co-owners, make sure that everyone’s rights, responsibilities and all other conditions are included – and clearly specified – so as to avoid future problems.
In order to form a company, you also need a name. Whether it’s ‘Johnny’s Beer’, ‘Nano Beer’ or something else, you’ll have to choose a name that is not trademarked by someone else already. Once you’ve decided on a name that both suits what you stand for and is available, don’t forget to trademark it yourself at the United States Patent and Trademark Office (USPTO).
The same applies to your beer brands and their logos. These also need to be trademarked, which you can do while filing for your entity’s name to be trademarked.
2. Prepare financial and lease documentation
When applying for a brewer’s license in your state, you should also prepare all the relevant documentation concerning your finances and the property your brewery will be in. This is a prerequisite in all states.
Your financial documentation should specify how you will finance your business. Are you raising money or did you take out a loan? You will usually need to include a ‘Statement of Funding Sources,’ similar to this one from the state of Oregon.
Make sure that when you submit these documents and, more importantly, when you obtain your financing, that you comply with state and federal laws. If you are in doubt, always obtain legal help before applying and submitting documentation.
Along with your financial documentation, you must also present documentation about the property you will be using. In most states, you must either lease, rent or own the property or be in the process of doing one of these.
Hey, also know the difference between tenant and contract brewing
This is important for when your brewer’s license application is reviewed at a later stage. At that point, your property and its documentation will be inspected, and authorities will determine whether it conforms to state and federal requirements for breweries.
3. Apply for a TTB Brewer’s Notice and obtain a brewer’s bond
Apart from getting licensed in your own state, which we’ll discuss in depth later, all brewers are required to apply for a Brewer’s Notice with the Alcohol & Tobacco Tax and Trade Bureau (TTB). When applying at the TTB, you will be asked to submit information related to the packaging, labeling and environmental impact of your operation.
The TTB collects federal excise tax on the sale of alcohol and is also the main federal authority when it comes to the requirements for the manufacturing and sale of alcohol. Applying for a license from the TTB is often the longest and most arduous part of the process – taking up to a year in the worst case scenario (though this is rather uncommon). However, you should expect processing time to be at least 6 months.
You will also be asked to obtain a brewer’s bond or brewer’s collateral bond when applying for your Brewer’s Notice. The exact amount of your bond will vary in accordance with the specifics and parameters of your brewery. Its amount depends on the expected excise tax liability of you operation – i.e. how much beer you will be selling and how much in taxes you will be paying.
The federal brewers bond is one of the two bonds you will be asked to obtain when opening your brewery. The other bond which is not always mandatory, unlike this one, is a local brewers bond in your own state. Its amount and conditions may vary according to state regulations. See below for more information on getting licensed in your state.
A primer on bonds, taxes and popular markets for craft breweries
You are almost a fully legal brewery! Click next page for the final three steps.
4. Apply for a state alcoholic beverage permit
Along with applying at the TTB, you will also need to apply at the appropriate office in your state. This could be the Alcohol and Tobacco Division (in Indiana), the Department of Revenue (in Colorado), the Liquor Control Commission, or the Department of Agriculture’s Food Safety Division (in Oregon), to name just a few.
You will be requested to supply a number of documents when applying for your license. Try applying at the TTB and in your state at the same time so as to minimize delays as much as possible.
First, you will have to decide what kind of license you need. The differences between the licenses are based on distinctions about the purpose and goal of your business, as well as the way in which it will operate. Whether you will need a supplier, which includes manufacturer, importer or wholesaler, or retailer license is up to you.
The amount of product that you intend to produce may also make a difference in your license, as well as in your licensing fee, as is the case in Washington state. For another example, see Colorado state’s requirements on obtaining a liquor license.
Some of the documentation you may be required to provide is:
● Liquor license application
● Business information
● Proof of ownership or lease and statement of funding (as already discussed)
● Floor plans (in compliance with state regulations, depending on the type of license you are applying for)
● A brewer’s bond (if applicable)
● Individual history forms
● Other documentation (related to lottery machines or food services requirements, if applicable)
5. Post a local brewer’s bond
An additional and important note must be made about brewer’s bonds. A brewer’s surety bond may or may not be required in your state when you apply for a license. For example, the brewer’s bond in Colorado was removed a number of years ago. Conversely, Indiana requires breweries to post a $10,000 bond in addition to the brewer’s bond posted with the TTB application.
The point of every surety bond is to provide protection to the state, the public or individual consumers. In the case of brewer’s bonds, these are usually sales tax bonds which guarantee that manufacturers and sellers of alcoholic beverages will pay tax on their sales.
In other words, a brewer’s bond is a form of financial guarantee. It guarantees that if a brewer does not pay their taxes, the bond will compensate for the losses they have incurred. If you’ve never posted a bond but are required to post one now, you should read more about how surety bonds work in order to understand their purpose.
So, don’t forget to check whether you need to post a brewer’s bond when you are preparing your documentation for your state brewers license.
6. Wait for your application to be approved
There are numerous steps that have not been included here because they differ from state to state. The tips above, however, are applicable in every state to some degree. The details are something that you must research thoroughly when you set out to open your brewery.
Don’t forget to get financial, legal or other expert advice whenever you’re not sure about the requirements. This can help you avoid costly errors.
Once you’ve gone through all of the above steps, all that remains is to patiently wait until all institutions, agencies and departments process your applications and give you the green light.
Was this helpful to you? What is your experience with opening a brewery? Was is complicated or easy? Are there any highly peculiar requirements in your state which should be included in this article? Please, leave us a comment, we would be happy to get your feedback!
Todd Bryant — the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping business owners get bonded and start their business.
