You’re a home or commercial brewer, passionate about beer and resolved to work for yourself and start your own brewery. You and your business partner(s) understand that most businesses fail in the first year because of poor planning and lack of cash flow. So you’ve performed your due diligence by preparing a robust feasibility analysis in the form of a business plan. Through your tireless efforts you’ve researched and accounted for things like market saturation, niche opportunities, differentiation and all manner of costs of doing business. Now what? Now it’s time to get your legal ducks in a row by following these seven essential legal/regulatory steps (in rough order) to starting your craft brewery in Oregon :
NOTE THAT THIS CONSTITUTES A GENERAL FRAMEWORK FOR OREGON START-UP BREWERIES TO CONSIDER AND SHOULD NOT BE CONSTRUED AS LEGAL ADVICE. EVERY COMPANY AND CIRCUMSTANCE IS DIFFERENT. YOU SHOULD CONSULT WITH YOUR ATTORNEY AND ACCOUNTANT IN STARTING YOUR CRAFT BREWERY BUSINESS.
(1) Perform a clearance search and then file an “intent-to-use” application to register a federal trademark for your brewery name, and other key brand names and/or logos. In January 2015, the United States Patent and Trademark Office (USPTO) lowered its cost for trademarks per classification by $50 dollars to $275 (renewal fees were also reduced from $400 to $300). An intent-to-use application is an additional $150 when you submit your statement-of-use (SOU). An ITU is well worth it because it saves your place in line while you are still developing your business and prior to placing your mark(s) into commerce. Attorneys provide trademark counseling, vetting and filing services, as well as prosecution/defense in the case of alleged infringement or dilution.
(2) Select a business entity and get your governing documents prepared. There are several choices of business entity to operate your company including an LLC, S-Corporation or C-Corporation. You can register your business by filing your Articles of Organization (LLC) or Incorporation (corporation) online at the Oregon Secretary of State website. The choice of entity is important and should only be made after talking with your attorney and accountant first. Note that the annual filing fee with the Oregon SOS is $100, and an assumed business name has a $50 biennial fee ($25 per year). If you choose an LLC, you’ll want an Operating Agreement. If you chose an S- or C-Corp, you’ll want a Shareholder Agreement and Bylaws. These are among the most important contracts your business will enter into. You should also hire an attorney to prepare these documents.
(3) Now, assuming you are not independently wealthy, it’s time to fund the business. If you are going to friends and family, you’ll need documentation that clearly outlines the terms of the investment and discloses the attendant risks of the investment. If you are interested in crowd funding—raising small amounts of money through a large number of investors—new rules (taking advantage of a federal intrastate securities exemption) from Oregon’s Division of Finance and Corporate Securities (DFCS) allows Oregon-based companies with 50 or fewer employees to raise up to $250,000 from Oregon investors in increments of $2,500 per investor, without registration of those securities with the federal Securities and Exchange Commission (SEC). The rules relating to fundraising are complex and should only be undertaken after consulting with experienced securities counsel. Lastly there are local banks divisions focused on emerging markets, including investment in the craft beverage industry, and private equity firms getting into this space. Whatever your funding source, make sure you’ve consulted an attorney and your paperwork is bulletproof.
(4) File your Brewer’s Notice application with the federal Alcohol and Tobacco Tax and Trade Bureau (TTB). Allow at least 5-6 months prior to serving your first pint, to obtain your permit from the TTB.
(5) Hire a commercial realtor and look for commercial space either for purchase or lease. A letter of intent (LOI) and/or sale agreement or commercial lease should be drafted and/or reviewed by an attorney.
(6) With your location dialed in, you can now submit your application for your OLCC brewery license. You want to give the OLCC at least 4 months to review and approve the application. And your local jurisdiction has a full 45 days to review and comment on your new application too (the City of Portland is known for taking the full time allowable). Greater than 95% of Oregon start-up breweries obtain a Brewery-Public House (BP) license. This allows for self-distribution (if you produced less than 5000 BBL per year during the previous calendar year) and on-premises consumption (i.e., “tastings” and “drinkings”) in addition to production.
At this time you can also complete your TTB paperwork. But remember, licenses and permits are only half the battle, ongoing record keeping and regulatory compliance (e.g., paying your excise taxes timely) is essential to a successful operation.
(7) If at the outset you plan to self-distribute, there is no present need to sign up with a local distributor. But when the time is right, pick a reputable distributor and negotiate a distribution agreement. The Oregon statutes are significantly skewed in favor of distributors in Oregon, so it is a good idea to use an attorney, if you have not done so up to this point.
There . . . you did it. Now it’s time to wow your community and cohorts with your delicious recipes and dynamic tap room. You can relish the experience (and all the hard work to come) knowing your legal house is in order.
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