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Five steps to take before opening a brewery
Are you opening a brewery? If so, you might be overwhelmed by all the legal requirements, or confused about which ones apply to you. Todd Bryant is here to help.
Some requirements for opening a brewery vary from state to state. However, in all states, you’ll have to comply with the federal Alcohol & Tobacco Tax and Trade Bureau (TTB), and obtain a Brewer’s Notice.
Your Brewer’s Notice is one of a number of legal requirements. The best course of action is to be proactive, and extra cautious, about making sure your brewery is in compliance. That way you can move on to the fun part – brewing beer – without any worries.
See what other essential tasks you should complete by clicking ‘Next Page’
Form a Business Entity and Create a Business Plan
Without forming a business entity, you can hardly brew or sell your beer. Nor can you obtain a permit or license. Therefore, creating a legal entity, whether it is a limited liability company or a corporation, should be the first thing you do.
As you institute your entity, depending on what you choose, don’t forget to create and sign an operating agreement or a shareholder’s agreement, if you have any partners in your undertaking.
A business plan is also central to your budding brewery. You need an accurate assessment of the tasks, and costs, that are ahead of you, so don’t breeze through this step. Include major expenses, like your equipment and your business location. You’ll probably need to submit your business plan when applying for your license, so make sure you don’t leave anything out.
Find a Suitable Location
Having the right location, whether you’re leasing or owning the place, is a central part of the process. First of all, you want to find a place that can actually be used as a brewery – i.e., it must comply with federal and state requirements (more on these shortly). No compromise can be made here, since on-site inspections are part of the federal licensing process.
You should also consider whether the place will permit you to expand at a later date – a challenge that many brewers face within a relatively short period of time after starting their brewery.
Therefore, when picking your place, make sure to pick somewhere that is both in line with regulations, as well as with your own business plan. Finally, don’t forget to have every possible type of documentation related to your location. You’ll need it when applying for a permit.
Apply for a Brewer’s Notice With the TTB
Unless you’re brewing beer only for yourself, so-called ‘brew-your-own’ or ‘brew-on-premises’, you will need to apply with the TTB for a Brewer’s Notice. The TTB regulates the manufacturing and sale of alcohol, and therefore all such businesses must be approved by them. The Code of Federal Regulations, Title 27, Part 25 clearly lists all regulatory requirements for obtaining a Brewer’s Notice.
Applying for your Brewer’s Notice is among the bigger hurdles on the way. It will include submitting a report about the environmental impact of your operations, as well as information about the packaging and labeling of your products.
As part of your TTB application, you must obtain a brewers bond– a surety bond for sellers of alcohol– which is a form of financial guarantee that you will comply with TTB regulations for breweries. ‘Subpart H – Bonds and Consents of Surety’ of the Code of Federal Regulations explains more about the bond requirement.
Surety bonds are standard requirements for many business licenses. Some, like the brewers bond, are required on a federal level. They serve as protection for a business’s clients, and for the state, in case the business does not comply with federal and state regulations.
Apply for a State License
Many states will require brewers to obtain a separate brewers or liquor license from the relevant state authority – your local Alcohol and Tobacco Commission, or your Department of Revenue, for example. States often distinguish between a number of different brewers licenses, depending on the exact nature of your operations, the amount you intend to sell, or other factors.
Applying for your state license will have its own set of requirements. You may even need to obtain an additional surety bond, which guarantees your compliance with state regulations specifically. States have differing laws concerning surety bonds and the amount of these bonds, unlike the TTB brewers bond which has fixed requirements across the country.
Some states don’t ask brewers to obtain a bond at all, while others do – but depending on the type of license that a brewer needs to obtain. Iowa, for example, requires brewers to post a $5,000 surety bond, while Indiana state mandates that brewers post a $10,000 brewers bond.
These amounts signify the amount of coverage that a bond guarantees. This is not the same as the price of your surety bond, which is a percentage of the total amount, and is determined by sureties depending on the financial stability of applicants. Personal credit score is the most important aspect that sureties take into account when determining bond cost.
Check with your local authorities, to determine the license and bonding requirements in your state.
Learn About State Distribution Laws and Consider Distribution Options
It is advisable that you get legal advice and support when trying to understand your local distribution laws. These are often highly complex and sometimes limiting, especially towards brewers, so you have to be sure you know what you are facing.
Self-distribution is also an option in many states, such as Arizona, Iowa, California and others, yet you must keep in mind that it also takes up a lot of time and resources.
Planning on Opening Your Brewery?
Naturally, this list doesn’t include every legal hurdle to opening a brewery. Employee agreements, funding, and trademarks are just a few others. However, these five steps are the legal building blocks of your business.
Are you planning on opening your own brewery? Is there something else you think belongs on this list? We would be happy to hear your feedback, please leave us a comment!
Todd Bryant is the president and founder of Bryant Surety Bonds.
Not as pressing as getting legal ducks in a row, but I would add “Understand that there’s more to running a brewery than making beer.”
I’ve seen a number of breweries that didn’t take things like wastewater management into account when opening and then ran into problems 3-5 years down the road.