Hypothetical brewery opening situation and the law

OK

I have a friend who owns a bar. With full liquor license etc.

If he were to invest in all the equipment necessary and create a space for a extremely small scale brewery on that premises what would be the legal ramifications?

All brewing, fermenting, and serving of final product would be done on this property. I would merely serve as the brew master, recipe designer, and slave. They pay all the tax, buy ingredients, etc. I am contracted as a brewer and we split the extremely minimal profits 60/40 in my favor.

Is there any major hurdles, red tape, unknowns, or anything else that at this moment I am blissfully ignorant of. I hope not, because this whole thing seems possible to me at the moment. I sincerely hope no one has a way to crush this but if there is one I need to know it and soon.


Okay lay it on me.

 

Is this really hypothetical, or are you seriously considering pursuing this? Because if it's the latter, my best advice (I'm an attorney), is for you to consult a lawyer. Someone in your state who practices in business formation and partnership law. What you are proposing can have some legal and financial risks. It is well worth spending a few hundred dollars to get at least an initial opinion on how to manage some of those risks.

Good luck!

 

Well nothing is official at this time. The owner and I have sat down and discussed it. His wife is a lawyer and I am sure she will be researching it. I am not risking anything or opening myself to the expense of a lawyer. This would be their show and I would just run the production "if" that production ever got off the ground. I just want to know if there is a big hidden gotcha before I get my hopes up to much farther. Not many people even on this very very small scale really have the opportunity to actually go pro, and I might. I am being cautious but moving forward slowly also.

 

So basically you will be strictly an employee.....no ownership? You have no worries then.........other than getting paid.

 

But can an employee be on 100% commission?
From you post it didn't seem clear if you had thought through all the brewery red tape , there is a lot of work that goes into setting up a brewery of any scale. A lot of hoops to jump through for multiple city/satte/federal sign off.

 

Yes.
Your buds licensing is for "retail" of alcoholic beverages,
not "manufaturing" of said beverages.
It has to do with the " 3 tier system " which the specifics vary from state to state on.
Tier #1 - manufacturer
Tier #2 - distributor
Tier #3 - retailor
Your buddy will have to get a "microbrewery license" which will allow you to make beer on the premises which can be sold directly to the public for consumption on site. (no carryout sales)
How much that licensing costs also varies from state to state & it may or may not be very inexpensive.
Unless your buddy is patient AND happens to have several thousands in extra capitol that he doesn't mind risking on equipment/licensing/grains in hopes of attaining a better profit margin per beer then i wouldn't get too excited about this happening.
(fyi i am not a lawyer)

 

If he buys the equipment gets it installed and approved with the state and the TTB. Then he hires you as the "brewmaster" and your salary is dependent on the amount of revenue that is made. Of coarse the guy wants to make money on this so after all the taxes and what not he can figure out how much to pay you as an employee.

Of coarse there are alot of other factors involved when trying to open a brewery. You can also check out probrewer.com and find out from some of those guys that are consultants. Give them your scenario and they will let you know for sure.

 

As mentioned, there is a lot of red tape, and it's a time consuming process. The federal level doesn't have an application fee, but it is a lot of paperwork, 95 days before you get an answer, and then you need to buy a surety bond if you're approved. The bond amounts vary from $1,000 to $150,000, based on the size of the business.

The red tape, expenses, and timelines vary drastically from state to state, and without knowing where you are, it's impossible to even hazard a guess as to how difficult it may or may not be. It's typically much more expensive and restrictive on the state level than on the federal level. Many cities or counties also have additional levels of red tape, permits, and associated costs. It will likely require a surety bond on the state level also.

If you're serious about this, I'd suggest doing some reading on the TTB.gov website, as well as your states alcohol board website. That will give you a better idea if your plan is even possible in your state, and give you a rough idea of the requirements and costs.