Legal To Do List for Starting a Brewery in New York

Do you have a brewery in planning or are you thinking about starting your own brewery in New York? Congratulations! Below is a legal to do list in chronological order for you to consider as you begin the process. The list covers everything from trademarks, to commercial leases, to your federal and state brewing licenses, and includes numerous detailed hyperlinks to relevant forms and information.

  1. Put Together Your Business Plan and Funding
  2. Choose and Clear Brewery Name/File Trademark: Using what’s known as an intent-to-use trademark application, you can file a trademark long in advance of when you actually begin selling beer. Because there are so many breweries in the country (over 4,000 at last count) it is more important than ever to choose a name that is not too close to someone else’s trademark, and then to protect that name with a federal trademark. How to do this? With proper trademark searching and a federal trademark registration.
    1. Individual Beer Names: You should also strongly consider running trademark searches and filing for trademark registrations for your important beers. If it’s a flagship beer or a beer that’s likely to be packaged, it’s probably a good idea to trademark the name.
    2. Copyright: Later down the line, as you develop label art for your beer packaging, you’ll want to consider the benefits of copyright registration, as well as ensure that you actually own the copyright in your label art.
  3. Form a Legal Entity: You will most likely want to set up a legal entity for your brewery. This could be a limited liability company (“LLC”), a corporation (an S corporation or C corporation), a partnership, or even a non-profit corporation. Many breweries choose to go the LLC route, and they are relatively easy to set up. There are fewer formalities required with an LLC as compared to a corporation, such as meetings, keeping minutes, having a board of directors, etc. There are also tax advantages to choosing to form an LLC.
    1. Draft an Operating Agreement: In conjunction with the formation of the legal entity you will need an operating agreement. What’s an operating agreement? In simple terms it is a formal document that sets forth, for example, who owns the company, who will make important decisions concerning the company, how profits and losses will be distributed, how the entity will be taxed, and the rules governing adding or subtracting members.
    2. Get an EIN: To apply to the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) for your federal brewery license, you’ll need an Employer Identification Number (“EIN”). Once your entity is formed, you’ll just need to fill out an application online with the IRS.
  4. Location and Brewing Equipment: To answer a frequent question, yes, you need your location and brewing equipment before beginning the federal and state licensing process (see the Questions and Answers document from the TTB here). You’ll have to diagram out the brewing premises in connection with both federal and state license applications, so it’s necessary to have both in place before applying.
    1. Zoning: Finding a location for your brewery is obviously critical and an important issue to bear in mind as you are selecting the location are the local zoning laws. You will want to be sure whatever property you are considering is zoned for a brewery, otherwise you will need to seek either a variance or rezoning, which can be a hassle. Oftentimes, properties need to be zoned for industrial or light industrial use for a brewery.
    2. Commercial Lease: If you will be leasing space for the brewery you will, in all likelihood, need to sign a commercial lease. You will want to have the lease reviewed carefully and make any necessary changes. You also want to ensure, if possible, that the lease will only be fully enforceable if the required licenses issue.
  5. Federal License: Here’s the big one, the application for a brewery license from the TTB. The current average processing time for a federal license from the TTB is 68 days. Thus, you’ll want to apply at least six months in advance of your planned opening date. There is some good news, there is no fee charged by the federal government for the application. The various forms and documents can be found here. Some of the forms include:
  • Power of Attorney: You’ll need this form if you are authorizing an attorney to handle the application process for you.
  • Brewer’s Notice: This is the primary application form. On it you provide, for example, the brewery name, the location of the brewery, the type of entity that will hold the license, the EIN, the owner of the property where the brewery will be located, the number of barrels you estimated you’ll produce in a year (typically small brewers will choose “not more than 60,000 barrels per year”)
    • The Brewer’s Notice also requires the submission of certain documents including the Articles of Incorporation/Organization, the Trade Name Registration, a diagram of the brewery with dimensions, the legal description of the brewery, the by-laws of the legal entity that owns the brewery, and a statement describing the security at the brewery.
  • Brewer’s Bond: All new breweries are required to file a Brewer’s Bond, or a Brewer’s Collateral Bond, (an original), with the TTB. This bond is the government’s way of ensuring that the brewery will pay its excise taxes. Bonds are issued by surety companies and you will need to make sure the bond is in the correct amount. For new breweries that pay their taxes on a semimonthly basis, the amount of the bond must be equal to 10 percent of the maximum amount of tax removed for consumption or sale. If you plan on paying $10,000 or less in excise tax for the year, which would cover many microbrewers, the amount of the bond will be 10% of that or $1,000. $1,000 is the minimum amount allowed for the bond.
    • Excise Tax: The current reduced excise tax rate is $7 per barrel for the first 60,000 barrels for brewers who produce less than 2 million barrels per year. The excise tax is $18 per barrel after the first 60,000 barrels. If you pay less than $50,000 in beer excise tax, you may be eligible to file tax returns and pay excise taxes on a quarterly basis.
    • Pending legislation could reduce the excise tax rate per barrel for the first 60,000 barrels for brewers who produce less than 2 million barrels per year to $3.50.
  • Personnel Questionnaire: You must fill out the Personnel Questionnaire for member, partner, officer, director, and also for any stockholders owning 10% or more of the company. The questionnaire asks for names, addresses, arrest/conviction records, employment history, personal references, etc.
  • Environmental Information: This form attempts to gauge whether your brewery will have a significant impact on the environment. It queries the types of heat and power your brewery will use, and asks for an estimation of the amount of fuel that will be used each year. It asks for a description of any air pollution equipment that will be used in connection with fuel burning equipment, boilers, smokestacks, etc. You need to describe the amount of solid and liquid waste you expect to create, and how it will be disposed of. You also need to describe the operational noise the brewery will create aside from normal office operations.
  • Supplemental Information on Water Quality Control: This queries whether your brewery intends to directly or indirectly discharge waste into a navigable waterway.
  • Signing Authority for Corporate and LLC Officials: This form authorizes individuals to sign forms submitted to the TTB.
  • Source of Funds & Property Lease Information: There is no form to be filled out here, but per the linked PDF, you do need to submit a copy of the lease (if your brewery leases space). You also need to submit information about the sources of funds for the brewery, including financial gifts, loans, and bank account records (if the source of funds includes money from a bank account).
  • Food Facility Registration: You also need to register your brewery with the FDA, which means your brewery may be inspected by the FDA. Instructions for this form can be found here.
  1. State License: At the same time you file your federal application with the TTB, file your application with the NY State Liquor Authority (“SLA”). New York has several options for brewery licenses and you should carefully consider which provides you with the best business model. People are not eligible to hold licenses if they are convicted felons, a police officer, or one whose license to sell alcoholic beverages has been revoked in the last year.
  • Types of Brewery Licenses and Fees:
    • Brewer (D101): Authorizes manufacture of beer; $15,000 bond, $4,000 license fee, $400 filing fee, and $1,800 ancillary, for a total fee of $6,200. This license is for brewers that will brew more than 75,000 barrels per year.
    • Micro Brewer (MI 101): Authorizes manufacture of up to 75,000 barrels per year; no bond required, $320 license fee, $400 filing fees, and $164 ancillary, for a total fee of $884.
    • Farm Brewer (FD 106): Authorizes manufacture of up to 75,000 barrels per year of NYS labeled beer; no bond required, $320 license fee, $400 filing fees, and $164 ancillary, for a total fee of $884. Details about the requirements of the farm brewery license can be found below.

 

  • Wholesale Application: This is the primary form to be filled out for approval by the SLA and the different sections of this form are discussed below. Instructions can be found here.
    • Application: Requires name and address of applicant, choice of the type of brewery license you’ll be applying for, your federal tax ID #, and your Certificate of Authority Permit #. You also need to provide information about the partners or individuals if the business will be a sole proprietor or partnership. If the brewery will be an LLC or corporations, you’ll need info about the principals, i.e., the stockholders, officers, directors, LLC members.
    • Right to Premises: You need to explain your right to the brewery premises, e.g., ownership, lease, etc. The lease must run, or allow for renewals, for the full term of the license period. You must also list anyone else, including the lessor, that will share in receipts or losses.
    • Landlord Identification: You have to provide information about the landlord and all principals of the landlord, including whether any of them were previously licensed with the SLA or police officers
    • Financial Disclosure: This form requires you to identify all costs and sources of funding for the brewery and disclosure of all investors. The total expenses (real estate, cost of equipment, etc.) must equal the total investment (cash and borrowed funds).
    • Premise Questionnaire: You must state what the area where the brewery is located is zoned for, describe the buildings, identify the prior use of the building, etc. You also need to certify that the proposed location complies with all state and local regulations and zoning codes.
    • Method of Operation: This is where you choose the type of brewery you will be operating. Some choices are Brewer, Micro Brewer, Farm Brewer, as well as Tenant versions of each of these. You must provide a detailed statement explaining the planned method of operation including describing the production methods and the quantity of product to be produced annually.
    • Bulletin #254: You need to sign this form acknowledging a number of statements including that the licensed premises must be physically separate from any other premises, no other businesses may be conducted on the licensed premises, the books and records must be kept on the premises, etc.
    • Personal Questionnaire: If there are 10 or less shareholders, you must fill out the questionnaire for LLC member and manger, and each stockholder, officer, and director. If more than 10, you still need to fill out the questionnaire for all LLC member and managers and officers, directors, and shareholders with 10% or more of the company. You also need to provide the number of employees, the Workers Compensation and Disability Insurance Carrier Names and Policy Numbers.
      • This form requires detailed information including, name, social security number, height, weight, residence history, employment history, SLA license history, and conviction/criminal history.
    • Applicant’s Statement: Certifies, for example, that the information in the application is accurate.
    • Notice of Appearance: Use this form if someone else is handling the application process for you, like an attorney.

 

  • Supporting Documents To Be Submitted with Wholesale Application:
    • Bond, Form L-9
    • Investment records showing source and availability of funds to be used for brewery
    • Lease or other document showing rights to the brewery premises
    • Premises diagram
    • Photo identification for all principals (copies)
    • Photos of the brewery premises (exterior and interior)
    • Photos of all principals
    • Proof of citizenship for principals (e.g., passport, birth certificate)
    • Holding corporation stipulation (if applicant is owned or partially owned by another legal entity)
    • Filing fee

 

  • Supporting Documents To Be Submitted During Application Process
    • NYS Department of State Corporate Filing Receipt
    • Assumed Name Filing Receipt (if using DBA)
    • TTB Brewer’s Notice showing premises address
    • Photos showing premises is ready to open
    • Certificate of Authority to Collect Sales Tax
    • Workers Compensation policy number and carrier name & Disability Insurance policy number and carrier name (or Certificate of Attestation of exemption from coverage)

 

  • Farm Brewery License: The farm brewery license is a relatively recent option for brewers. The legislation, which went into effect on January 1, 2013, requires brewers to use certain percentages of ingredients grown in New York: (i) Through 2018, at least 20% hops and 20% of all other ingredients must be grown in NYS; (ii) between January 1, 2018 and December 31, 2023, at least 60% of hops and 60% of all other of ingredients must be grown in NYS; (iii) after January 1, 2024, 90% of hops and 90% of all other of ingredients must be grown in NYS.
    • Farm brewers can make NYS labeled hard cider and sell it on the premises by the glass.
    • Farm brewers can sell beer and cider from other farm breweries, and can sell beer and cider to other farm breweries, farm cideries, farm wineries, and farm distilleries.
    • Farm breweries are allowed to have five branch offices located away from the brewery premises that will be considered part of the brewery, and all activities that could take place at the brewery can be conducted at the branch offices. The form for farm brewery branch offices can be found here.
    • Farm breweries can operate a restaurant or other food or drinking establishment and sell there the beer made at the brewery.
    • Farm breweries must manufacture at least fifty barrels of beer and cider annually, and can’t manufacture in excess of 75,000 barrels

 

  1. Make Delicious Beer: And be sure to join the NYS Brewers Association!

Author Information: Brendan Palfreyman is an attorney with Harris Beach PLLC in Syracuse, NY and a member of the NYS Brewers Association and NYS Distillers Guild. A major focus of Mr. Palfreyman’s practice is representing and counseling breweries in New York State. Mr. Palfreyman is an award winning homebrewer, craft beer advocate, and appeared on Beer Sessions Radio hosted by Jimmy Carbone to discuss craft beer and trademarks.

bpalfreyman@harrisbeach.com

Twitter: https://twitter.com/bpalfrey10

(315) 423-7100

 

This article is intended to provide general information on a wide range of issues, including legal issues, affecting the brewing industry.  It is not intended to provide specific legal advice and no legal advice is given.  You understand that merely using this blog does not create an attorney client relationship between you and Harris Beach PLLC or Brendan Palfreyman. The blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Brendan Palfreyman