For many, there is no greater feeling of joy and accomplishment than firing up a homemade kettle, adding a variety of special hops, malt, barley and yeast (and a few “secret” ingredients) and creating a unique craft beer that can be enjoyed by friends and family alike. While for most it will always remain a hobby, the occasional home brewer may determine that he has produced a product that is meant for the larger market. Approaching that bridge can be easy; crossing it, however, requires significant effort and planning.
In several respects, establishing a craft brewing business is not unlike any other small business. Of course one must decide on entity formation. Is a partnership or limited liability company best? An S‑corporation? A C‑corporation? Much is to be considered here, from the extent of personal liability one is comfortable with, the involvement of others in the business, tax structure and complexity. Also to be considered is debt structure: if outside funding is required – whether for operational expense or equipment – is a traditional lending relationship best (most likely a small business arrangement), or private investment? And one must consider location. Is space available, or must space be leased? Additionally, one must always be mindful of insurance requirements and options.
Having determined the basics for establishing the business, one must also consider requirements specifically relating to craft brewing. Each state has individual compliance, registration and licensing requirements, in addition to overall federal requirements. From labeling, formulas, branding, sales, and shipping, a thorough review of relevant state and federal laws and regulations must be completed to ensure production (and sale) can be legally accomplished.
Getting “off the ground,” as only basically described above, is the first gating issue. From there, the complex world of successfully operating a craft brewing business begins. While the actual production of a quality craft beer may be second nature, the ancillary reporting (daily and monthly), inventory reconciliation, certification of equipment and distribution requirements must be strictly met. The time and expense can be significant, but the “pay‑off” for many is well worth the effort, both personally and financially. If you’ve considered the idea of establishing a craft brewing business, our counselors at WHP are well positioned to provide measured guidance and advice.