Brewery owners daily make business decisions for the company and their employees. From contracts and ownership structures to insurance and taxes, a brewery owner must make many decisions before they are able to pour the first pint.
- Contracts – Regardless of the industry, nearly all businesses require a contract. Typically, contracts involve two parties but can include more. Starting and maintaining your brewery will require you to sign many contracts: leases, agreements (founder’s, operating, and investor), supplier contracts, purchasing/leasing and warranty agreements for equipment, employment contracts, distribution agreements, etc. Although each contract is unique, several legal issues should be addressed, such as how each party handles sensitive business or proprietary information. A careful and thorough review of any contract helps prevent miscommunication and misunderstandings between all parties and ensures your business is protected.
- Ownership Structure – There are several ownership structures to consider when creating your business. After you have determined the goals and plans for your brewery business, you will need to select the appropriate ownership structure. There are several structures you can choose from, such as:
- Sole proprietorship: a one-person business
- Partnership: owned by two or more people
- Limited partnership: owned by two or more people where one person is the “general partner” and the others are limited partners
- Limited liability company (LLC): limits the owners’ personal liability for business debts and/or court judgments against the business
- Corporation (Inc.): limits owners’ personal liability like an LLC but without the constraints of an LLC
Each structure has advantages and disadvantages, each serving a different purpose. Understanding each structure’s organization is crucial. Selecting the right structure will impact your control over the business and personal liability. If you discover your initial ownership structure no longer aligns with your business, you can change it, but it may come at a cost. Research each structure to ensure you select the perfect one for your business.
3. Securing Sufficient Insurance - Finding an industry-specific insurance broker will be immensely helpful in thinking through your insurance needs. Before selecting an insurance policy, consider your entity structure, location considerations, how many employees you have, and if you will have food trucks on site. Each of these considerations poses risks, and you want to know you are sufficiently protected and prepared in every situation. Insurance costs will vary and depend on the size of your brewery and business, deductibles, and coverage/insurance amounts. Below is a list of coverages you may need to obtain.
- Property: Physical loss or damage to your brewery property
- General and Liquor Liability: Bodily injury to a customer on your property and the resulting lawsuit
- Product Recall: Reduce expenses to pull your beers off shelves due to packaging errors or contamination
- Workers' Compensation: Work-related injuries or illness
- Inland and Ocean Marine: Protect your product while it is in transit
- Business Income: if your brewery has to shut down unexpectedly
- Cyber: Losses associated with cyberattacks, including data breaches
- Auto: Liability for auto accidents, vehicular liability for a company, or personal vehicles (if used for business)
If you are a Colorado brewery, click here for the Colorado Brewers Guild’s Brewers CoOp for an insurance quote.
4. Bookkeeping and Taxes - Keeping up on your bookkeeping and tax needs can be time-consuming and potentially confusing. You may need help to classify employees correctly, pay and file appropriate taxes, deploy motivating and sensible employee incentive plans, meet all the different tax deadlines, and keep track of assets, expenses, price setting, and amortization. All of these factors may affect your profit margin. A certified public accountant (CPA) can manage all these issues efficiently and accurately.
When considering a CPA, bookkeeper, and/or a bookkeeping program, think about your business's current and future needs.
- Is the person qualified to handle a larger business than you currently operate?
- Does the bookkeeping program have capabilities beyond your current business needs?
From a tax perspective, consider the following:
- Tax credits available to small businesses and breweries
- Tax benefits for fixed assets and startup costs
- Tax allowance for new companies that may be operating at a loss for the first one to three years
- Tax implications for owners who own or partially own other companies
Partnering with an attorney specializing in beer law gives you access to someone else’s industry knowledge. Your beer attorney likely has the connections you need. In addition to legal advice, they may have recommendations for equipment companies, consultants, CPAs, real estate agents, and insurance brokers with experience.
Starting and operating a craft brewery requires more considerations than you might think. Are you navigating the world of craft beer and protecting your business on your own? There’s no need! Contact us for a free consultation. Our Beer Law HQ team can support you from day one.