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Liquor License

Tags: escrow bulk sales, legislation, liquor license

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Liquor License, In order to sell liquor in the State of California, a license obtained from the California Department of Alcoholic Beverage Control (ABC). In most cases the license is transferrable. However, the filing is still a requirement when transferring a business that sells liquor.

Contributor: Transactional Attorney
While the term "liquor license" is frequently generically used to describe the state license required to operate a business which sells alcoholic beverages, there are many different categories of liquor license depending on the type of business and how and where it transacts its sales.

Simply because a Seller is operating their business in a certain way currently does not ensure that they are complying with the provisions of the liquor license they hold. A Buyer purchasing a business which sells alcohol must clearly understand the nature of the existing license as well as the process required to transfer that license to a new owner.

License transfer procedures vary from state to state. In California, for example, they must be done through the California Board of Alcoholic Beverage Control (ABC) and typically take at least 55-65 days, but can potentially take much longer. If you are buying a California business involving a liquor license transfer it is important not to assume that your transfer will be approved within the 55-65 day range. Business transactions involving the transfer of a liquor license must go through escrow, and an escrow company experienced in working with liquor license transfers is an invaluable resource during the process.

This is a license issued by a state, a county, or a municipal government (depending on the state) allowing a merchant to sell "alcoholic spirits." The types, scopes, limitations, and requirements of a liquor license vary widely from state to state, and often within states. Some variations are: a license to sell liquor to take away (a package store) or to consume on the premises (a restaurant or tavern); a license to sell all liquor or just beer and wine; a license that allows entertainment on the premises or prohibits it; a license that is paid for once for a very high price and then is transferable to a new owner (with government approval (I call this the "pay by the bottle" license), or a license that has a far lower annual fee and is transferred by the governmental authority (more like "pay by the drink.") Liquor licenses present special circumstances and definitely should be handled by an escrow agent experienced in this area.

Because any U.S. business that sells or serves alcoholic beverages must have a license issued by the state in which it is located, the liquor license is one of the assets sold when a restaurant, bar, or retailer offering beer, wine or "hard" liquor is transferred to a new owner. Each license has a value which might range from a few hundred to hundreds of thousands of dollars depending on the type of license, and-- since states limit the number of licenses issued--the supply and demand factors in the city and the neighborhood where the business is located. A license held by owner of an expensive and popular restaurant with full bar in an affluent area will be worth considerably more than one owned by the proprietor of a convenience store in an out-of-the-way location that is authorized only to sell beer and wine.

But transfer of the license is not automatic. The buyer must apply to the state's liquor licensing agency, which will investigate the applicant and the business to make sure they meet the agency's requirements, and will agree to the transfer only if it approves the prospective licensee.

Most state liquor licensing agencies recognize four general classes of businesses that require licenses; the classification of the business determines the type of license it needs to conduct business. The four categories recognized in most states are:

--On-sale general or full license: This applies primarily to eating and/or drinking establishments that are licensed to sell virtually every kind of alcoholic beverage for consumption on the premises.

-On-Sale limited, or in many states, On-sale beer and wine: Required for eating and drinking establishments permitted only to serve a limited type of beverage - primarily beer or wine, with lower alcoholic content, by percentage, than beverages that can only be sold by an establishment with a full or general license.

--Off-sale General or Full License: Is held by package liquor stores, super markets, grocery or convenience stores that sell a full range of alcoholic beverages for consumption off the premises.

--Off-sale Limited or Off-sale beer and wine are businesses licensed to sell only unopened bottles or cans of beer or wine, representing the only alcoholic products offered, or in establishments selling beer and wine along with groceries and related items for off-premises consumption.

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