Legal Checklist for Starting a Brewery in New York – UPDATED

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.  It is not an exhaustive list but it covers everything from trademarks, to commercial leases, to your federal and state brewing licenses, and includes numerous detailed hyperlinks to relevant forms and information.  I published an earlier version of this article in 2015, so I figured it was time for an update.

1. Put Together Your Business Plan and Funding: Draft a business plan and start lining up potential investors or other sources of funding, such as loans and grants. Think about whether you might be eligible for grant programs like the Regional Economic Development Councils A professional may be able to advise you as to different grants available to breweries and how to best go about applying for them.  The Brewers Association Guide to Starting Your Own Brewery by Dick Cantwell is a great starting point, I have a copy myself.
2. Choose and Clear Brewery Name/File Trademark: On an intent-to-use basis, you can file a federal trademark application years in advance of when you actually begin selling beer. Because there are so many breweries in the country (over 5,000 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.  Remember, names don’t have to be identical for there to be trademark problem.  So how do you take care of this responsibility?  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: 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, which can be a real issue if a different company does your design work.
3. Lock Down Social Media Profiles: In addition to securing a URL for the brewery, using your cleared brewery name or a close variation thereof I recommend locking down profiles on at least Facebook, Twitter, and Instagram. Tip: Try to get the same handle for each platform.  Even if you don’t plan on using the accounts for some time, better to secure them now as your customers will want to be able to tag the brewery in social media posts.  You should also set up an Untappd account at some point, but it’s probably not necessary until the brewery opens.
4. Form a Legal Entity: You will almost certainly 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.  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. 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 legal 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.
5. Location and Brewing Equipment: Choosing a good location for your brewery couldn’t be more important.  Do you choose a downtown area with lots of foot traffic, a more rural area with lots of parking, or somewhere in between?  Once you’ve got a location, you will need control of the premises before you can submit your licensing applications, which usually means a deed (in the case of a purchase) or a lease (if you are renting).  In either case, you will most likely need the help of an attorney to help you navigate what can be tricky legal waters.
   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 by a professional who can make brewery-specific recommendations, such as negotiating a rent free period while you build out or wait for your licenses to issue.
6. Federal License from the TTB: 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 123 days. There is some good news, there is no fee charged by the federal government to apply.  The application is most frequently completed online, but the various forms and documents can be found here.  Some of these forms include:

• Power of Attorney: You’ll need this form if you are authorizing an attorney to handle the application process for you. Most breweries, in my experience, apply to TTB on their own, but it may be wise to engage an attorney to help answer questions you might have or review the application before you submit it.
• 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: Good news and an update since the last version of this article. If you plan to pay less than $50,000 annually in federal excise taxes, then you no longer need to submit a Brewer’s 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 sponsored by both the Brewer’s Association and the Beer Institute 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: The personnel questionnaire is required for certain people associated with your brewery, depending on the type of application you file and how many shareholders there are. 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, including Certificates of Label Approval (“COLA”).
• 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, grants, and bank account records.

7. State License from the SLA: 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, for example, they are convicted felons, a police officer, or one whose license to sell alcoholic beverages has been revoked in the last year.  The SLA links change frequently as forms are updated so the links below may not work by the time you read this article.

• Types of Brewery Licenses and Fees:
  • 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.
  • Brewer (D101): This license is for brewers that will brew more than 75,000 barrels per year and thus likely won’t apply to most new breweries.

• Manufacturer 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: Certain people affiliated with your brewery will need to fill out questionnaires, depending again on the type of corporate entity you have and how many shareholders are involved. You also need to provide the number of employees and the Workers Compensation and Disability Insurance Carrier Names and Policy Numbers.
    • This questionnaire 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. Again, in my experience, brewers typically file the SLA application themselves, but they may want an attorney on hand to answer questions about the application or review it before its submitted.
  • Combined Manufacturer License: Recent changes to New York law allow companies to apply for multiple licenses in the same manufacturer application. If, for example, you are starting a brewery/distillery, this is something to consider.

 

• 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)

8. NYS Farm Brewery or Microbrewery: What type of brewery license from the SLA should you choose? Typically it comes down to microbrewery or farm brewery.  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.  Farm breweries must manufacture at least fifty barrels of beer and cider annually, and can’t manufacture in excess of 75,000 barrels.  Farm breweries can operate a restaurant or other food or drinking establishment and sell there the beer made at the brewery.  Farm brewers also can take advantage of other benefits relating to cider, selling other NYS farm alcoholic beverages on the premises, and operating branch offices.  For a more detailed look at the micro-brewery vs. farm brewery discussion, see this article I wrote for the NYS Brewers Association.  You may also want learn about what qualifies as New York State Labelled Beer.

9. 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.

10. NYS Department of Agriculture and Markets: This branch of the state government will inspect your brewery after it is licensed.
11. Make Delicious Beer: And be sure to join the NYS Brewers Association!

 

Please see www.trademarkyourbeer.com for more information about brewery trademarks. This blog 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 any attorney at 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. This blog 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.