See what's new at BLG!

Subscribe For Updates

There's always something going on here at Bend Law Group. Be sure to check back often to read about our personal and professional endeavors.

Search Blogs

The Top 6 Pitfalls Of Buying A Business And How To Avoid Them

Published on

This article first appeared on Forbes. Buying a business is similar to buying a home. If done correctly, it can have a daily positive impact on your life and increase your net worth. But just as you wouldn’t purchase a lemon for a home, if you purchase the wrong business, it can be a damaging drain… Read More

This article first appeared on Forbes.

Buying a business is similar to buying a home. If done correctly, it can have a daily positive impact on your life and increase your net worth. But just as you wouldn’t purchase a lemon for a home, if you purchase the wrong business, it can be a damaging drain on your financial and emotional resources.

I have helped with the purchase and sale of dozens of businesses, and I find that the same pitfalls come up over and over again. By knowing what they are and avoiding them, you’ll be happy with your business purchase not only on the day you take the keys but for many years to come.

1. Have a narrowly defined non-compete provision

The last thing you want is to provide the jet fuel for the seller to open a competing business next door. To protect yourself, you should include a non-compete provision that prohibits the seller from participating in a competing business.

The provision should narrowly define the type of similar businesses the seller is prohibited from not only owning but also working in. In addition, the provision should include a set amount of time that the seller is prohibited from operating a similar business within a specific geographic scope. For example, if you are buying a restaurant, you would specify that the seller cannot invest or work in the restaurant industry for five years within 30 miles of the restaurant you are purchasing.

2. Run a lien search

A lien is an interest or a legal right that a creditor has on another person’s property. It’s important to make sure that there are no liens attached to the assets you are purchasing. By running a lien search, you can ensure that the assets are not encumbered by a lien, and you’ll know that a third party does not have any interest in the assets you are purchasing.

Have the escrow agent for the business purchase run the lien search, or if you are not using an escrow agent, hire a filing company to do so.

Investing a few hundred dollars in a lien search can pay enormous dividends as it ensures that any problems the seller has with creditors don’t become your problems with creditors.

3. Research the company’s financial history

Have a CPA “kick the financial tires” of the business to make sure the purchase price is supported by the company’s revenue and expenses. A solid CPA can not only help you determine whether the asking price for the business is fair but will look under the financial hood of the business to see if the numbers the seller is providing you are actually accurate.

4. Carefully review the commercial lease

Often, one of the biggest assets of a business is its commercial lease. It is worthwhile to hire an attorney who specializes in commercial leases to highlight the key terms and negotiate fixes for any “gotcha!” clauses. Often sprinkled throughout a commercial lease are additional expenses you should be aware of to determine the true rental price of the property and not just the sticker price.

5. Hold the seller accountable

Ideally, the seller will sign the purchase agreement not only on behalf of the company but also as an individual. Here’s why this helps you as the buyer: If the seller only signs the purchase agreement on behalf of the seller’s legal entity, that company could be dissolved and you would have no way to hold the seller accountable for the promises made in the agreement.

In contrast, if the agreement is also signed by the seller as an individual, you can still hold the seller accountable even if the seller’s legal entity is dissolved. By requiring not only the legal entity but also the seller to be personally accountable for the promises made in the purchase agreement, you can help make sure that the promises made in the agreement are fulfilled.

6. Have a dynamic purchase price

If possible, you should consolidate a dynamic purchase price into the purchase agreement. For instance, instead of paying the full purchase price at closing, you can pay a portion of the purchase price then the rest of the balance after agreed-upon metrics have been hit or the seller’s obligations have been fulfilled. This way, you help make sure that the ultimate purchase price matches the value you get from the business.

Navigating the waters of buying a business can be tricky. There can be a variety of pitfalls that vary from deal to deal. But by following the above tips and working with an attorney and a CPA, you ensure that you’re buying a business that’s right for you. When you turn the key on the first day, you’ll have the returns you initially forecasted for many years to come.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

Read Less

Taxation of a California Startup

Published on

When deciding how to incorporate a business entity, it helps to know how each entity is taxed at the state and federal level. Business structure, liability, management and taxation are all factors in determining the best entity for the business. However, because there are many entities that provide liability protection, it’s important to carefully consider… Read More

When deciding how to incorporate a business entity, it helps to know how each entity is taxed at the state and federal level. Business structure, liability, management and taxation are all factors in determining the best entity for the business. However, because there are many entities that provide liability protection, it’s important to carefully consider the annual taxes your startup may face.

For tax purposes, a business entity is treated as one of the following:

  1. Disregarded entity
  2. Partnership
  3. S-corporation
  4. C-corporation

Using broad strokes, this post discusses the tax implications of each entity at the state and federal level. This information is pivotal when structuring a start-up enterprise and will be critical moving forward because the tax rules that apply to each entity are quite different.

Federal Taxation

1. Disregarded Entity

A sole proprietorship is the simplest and most common form of starting a new business. In this type of business entity the owner and the business are one. There is no separate legal entity. For tax purposes, a sole proprietorship will include all sources of income when determining estimated tax payments.

A single member LLC (i.e. one owner) is treated as a “disregarded entity” and a multiple member LLC is treated as a partnership for tax purposes unless the LLC, whether single or multi-member, elects C-corp or S-corp tax status (more on this below).

A single-member LLC owns the assets of the entity for tax purposes and is also subject to the liabilities. Therefore, a single-member LLC, which is treated as a disregarded entity, does not file a US federal income tax return. Instead, the sole member of the LLC reports the LLC’s income and expenses directly on its own income tax return. In other words, a disregarded entity is essentially treated like a sole proprietorship, branch, or division of the owner.

In a single member LLC or a sole proprietorship the activities of the entity will generally be reflected on Form 1040 Schedule C for sole proprietorships, Form 1040 Schedule E, and Form 1040 Schedule F for LLCs.

2. Partnership

Even though LLCs are recognized as a type of business entity under state corporate law, LLCs do not have their own US federal income tax regime. For tax purposes, an LLC with multiple partners is classified as a C-corp, S-corp or a partnership. An LLC taxed as a partnership allows the LLC members (the “partners”) to have the profits and losses allocated directly to them without the entity level taxation that comes with a C-Corp. This allows the profits and losses to “pass through” directly to the owners.

One important note to consider: when a multi-member LLC is formed the default is to be taxed as a partnership. However, an LLC can elect to be taxed as an S-Corporation or even a C-Corporation (rare) if desired.

LLCs that are subject to partnership tax rules are not responsible for actually paying the tax on business earnings. Instead, LLCs prepare an annual partnership tax return on IRS form 1065. This report is for information purposes only. Each owner is responsible for paying its taxes after the LLC prepares each member a K-1, which documents the profits and losses attributed to each owner.

3. S-Corporations

An S-corporation is also a pass-through entity for tax purposes; therefore, it generally does not have to pay the entity level tax that C-corporations must pay (more on this to follow). Instead, the S-corp’s profits and losses pass through to its stockholders who include their respective share of those items on their income tax return.

Like standard partnership taxation, an S-corp is a pass-through entity. However, unlike standard partnership taxation an S-Corp has limitations around making S-Corp election. Under federal law, in order to qualify to by an S corporation the corporation must be (1) domestic, (2) have only allowable shareholders (ie. Individuals and certain trusts and estates), (3) have no more than 100 shareholders, (4) have only one class of stock, and (5) Not be an ineligible corporation.

Similar to an LLC, the S-Corporation does not pay income tax, but it is still required to file Form 1120S.Like in the LLC taxed as a partnership, this is for information purposes only. The S-Corporation also prepares a K-1 for each of it’s shareholders and it is the shareholders responsibility to report their respective profits and losses.

Having touched on both standard partnership taxation and S-Corp taxation it’s worth pointing out some key differences:

  • All partnership income is generally considered self-employment income to the owners while in an S-Corporation generally only the compensation (such as the salary, and not the distributions) is subject to employment tax.
  • An S-Corporation must allocate profits according to share ownership, while an entity taxed as a partnership can generally divide profits in any way it chooses. For example, a shareholder in an S-Corporation who owns 10% of the stock must receive 10% of the profits. This is not necessarily true in an LLC taxed as a partnership.
  • Finally, entities taxed as a partnership do not qualify for certain statutory benefits which are available to C and S-Corporations. For example, a partnership cannot offer incentive stock options to employees, but they can offer a profit interest (i.e. share of profits, but not ownership) to achieve a similar tax result.

C-Corporation

C Corporations are separate entities for both state law and tax purposes. C-Corporations are taxed annually on their earnings, and the shareholders are taxed on these earnings when distributed as dividends (this is considered the dreaded “double taxation”). Once all of the corporation’s deductions and credits have been claimed, the remaining income is normally taxed at using the corporate income tax rates. Unlike individual tax rates, the corporate tax rate is not adjusted every year to account for inflation.

Unlike a disregarded entity, a partnership, or an S-Corporation, a C-Corporation pays its own tax as if it was an individual taxpayer. A C-Corporation reports its income and claims its deductions on Form 1120, and the shareholders report any distributions provided to them on their individual tax returns.

CA STATE TAXATION

As a sole proprietor, you will report all of your state and federal tax on your Schedule C.

All California LLCs not classified as a Corporation for tax purposes must pay the annual minimum franchise tax of $800, and an LLC fee (more on this below) payable each year to the Franchise Tax Board. The LLC fee is $900 if the LLC makes between $250,000 and 499,999, it goes to $2,500 if the LLC makes between $500,000 and $999,999, followed by $6,000 if it makes between $1,000,000 and $4,999,999 (and on from there).

A California S Corporation must pay the $800 minimum franchise tax as well as 1.5% of net income earned (take note that the LLC fee is based on gross receipts, while an S-Corporation is based on net income).

Finally, a California C Corporation must pay the annual minimum franchise tax of $800 as well as 8.84% of it’s net income.

CONCLUSION

When structuring an entity it is very important to work with an accountant and lawyer who can help you understand anticipated taxes. We routinely strategize during the formation stage, and we’d be happy to talk more about your upcoming legal needs at (415) 633-6841 or at info@bendlawoffice.com.

By Doug Bend. This article was co-authored by Alex King and Rishi Gupta.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

Read Less

Marijuana Is Legal! But Business Is Not?

Published on

Marijuana Is Legal! But Business Is Not? How to Build Your Recreational Cannabis Brand Before Your License to Sell Is Issued Guest Author: Rachel Davey Last Tuesday, Californians voted YES on Proposition 64 to legalize recreational use of cannabis for adults, ages 21 and over. Massachusetts and Nevada also approved recreational marijuana, and many other… Read More

Marijuana Is Legal! But Business Is Not?

How to Build Your Recreational Cannabis Brand Before Your License to Sell Is Issued

Guest Author: Rachel Davey

Last Tuesday, Californians voted YES on Proposition 64 to legalize recreational use of cannabis for adults, ages 21 and over. Massachusetts and Nevada also approved recreational marijuana, and many other states took strides toward complete legalization. While Prop. 64’s passage was a certain victory for prospective non-medical cannabis retailers, they will have to wait to jump into business.

Immediate Changes

  • Adults over 21 have new rights. They may possess or transport (up to 1 oz.), grow (up to 6 plants, inside home), and use recreational marijuana (in private).
  • There could be a year-long gap before selling non-medical marijuana is legal. State-issued licenses are required to sell and have yet to be issued.
  • The Administration. The new “Bureau of Marijuana Control” will usurp the previous “Bureau of Medical Marijuana Regulation.” It will promulgate and enforce planting, licensing, distribution, and sales rules consistent with Prop. 64.
  • Regulatory Overload- Tempered. 64 states that rules and regulations should not be “unreasonably impracticable” and they must be “based on best available evidence” and mandate only “commercially feasible procedures.”
  • “Gifting” Medical Marijuana to Non-Medical Users. If “gifting” transactions are discovered, responsible medical dispensaries could be shut down, or barred from obtaining a state license to sell non-medical cannabis in the future.
  • Selling Marijuana Without a License Can Result in a Misdemeanor Charge with Up to 6 Months in Jail and $500 in Fines.

Changes by January 1, 2018.

  • Licenses to Sell Issued; Business Begins. 64 only allows non-medical marijuana to be sold by state licensed businesses. Growing, processing, or transporting marijuana for sale also requires this license. The state must begin issuing sales licenses for recreational retailers no later than January 1, 2018.
  • Cannabis Tax. State commercial cultivation and retail excise taxes take effect. Cities and Counties may vote to adopt additional taxes.

The Federal and State Divide: Trademarking Cannabis Goods and Services

There is still a federal and state divide. Federal law continues to designate marijuana as an illegal drug. As an illegal drug, cannabis and its related goods and services are not “trademarkable” subject matter that can form the basis of a federal trademark application in the United States Patent and Trademark Office (USPTO).

However, in California, where recreational marijuana is now legal, applicants may file California trademark applications with the Secretary of State. But there is one caveat: California requires “actual use” of the word mark or logo to file a trademark application, rather than the USPTO requirement of “good faith intention to use [within 6 months]” in commerce.

For prospective recreational cannabis sellers, this might seem like impasse: non-medical marijuana names and logos can’t be trademarked until used in commerce, and they can’t be used in commerce until the state issues a retailer a license to sell—which might begin to happen in January 2018. However, waiting to take action in selecting your mark could be fatal to developing your brand.

Before falling in love with, or investing any start up capital into, a brand name for your non-medical marijuana shop, you should think deeply about your chosen name. Not only must you be the “first to use” the mark in conjunction with some goods or services, but also the name itself must have sufficient trademark strength, to be eligible for protection. There are three different levels of “strength” as to some word mark in conjunction with some goods or services:

  1. Inherently Distinctive. These words are the strongest, and are automatically eligible for protection. These words are often arbitrary or fanciful. For example: “Fat Cow” computers is arbitrary, but “Fat Cow” ice cream is not, because it is descriptive of the product. And the word “Google” for a search engine is fanciful.
  2. A descriptive word can only be protected if it becomes distinctive of the Applicant’s goods or services—that is, a substantial segment of the buying population associates the name with its source. The words themselves describe the qualities or characteristics of a good or service (for example, “Park’N Fly” as a service mark for an airport parking and shuttle bus service), describes a geographic location, or is a surname.
  3. Generic words have no power and are not registerable. These words are the generic words for the goods or services they to which they attach. For example, “Car Wash” for a car wash business is generic. One recently-generic term you might be familiar with is “Xerox” for copy machines. The consuming public referred to copying as “Xeroxing” so uniformly, that the mark lost its power. Consumers no longer identified “Xerox” as the source of the copying machine; the term was used ubiquitously to describe copy machines of all brands.

Potential recreational cannabis retailers should seek out trademark guidance specific to their company’s needs early, in order to select a mark that has not been taken and is eligible for trademark protection, so that they can start building their brands as soon as they are licensed to do so by the state.

If you are in the cannabis industry and are looking to prepare for the effects of Proposition 64, we are happy to help you navigate the new waters.  Please give us a call at (415) 633-6841 or email us at info@blgtrademarks.com.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article. 

Read Less

The Importance of Website Privacy Policies in California

Published on

As companies increasingly include an online presence, or are only located online, a common question is: do I really need a privacy policy? Unless you are operating a non-interactive website, such as a blog that has no way for users to enter any information, the answer in California is nearly always “definitely.” Who needs a… Read More

As companies increasingly include an online presence, or are only located online, a common question is: do I really need a privacy policy? Unless you are operating a non-interactive website, such as a blog that has no way for users to enter any information, the answer in California is nearly always “definitely.”

Who needs a privacy policy

Under the California Online Privacy Protection Act of 2003, any operator of a commercial website, mobile application, or online service that collects “personally identifiable information” from its users is required to post a privacy policy on its site and comply with that policy. “Personally identifiable information” means any individually identifiable information about a user, and includes data such as a user’s name, address, email-address, telephone number, social security number, and any other identifiers that permit the user to be contacted physically or online. This means that if a site is collecting payment information from users it absolutely needs to have a privacy policy, but even if a site is only collecting email addresses to add users to an email list, this still requires a privacy policy.

Privacy policy requirements

In order for a privacy policy to be compliant with the law, it must:

  • Identify the categories of personally identifiable information that the website collects;
  • Identify the third-party persons or entities with whom the operator may share the collected personally identifiable information;
  • Describe how users can review and request changes to their personally identifiable information;
  • Describe how users are notified of changes to the operator’s privacy policy for the website;
  • Identify the effective date of the privacy policy;
  • Disclose how the operator responds to web browser “do not track” signals; and
  • Be conspicuously posted on the operator’s website.

Moreover, if a site or online service is directed to children under age 13 or collects information about children under age 13, the Children’s Online Privacy Protection Rule imposes additional notice and consent requirements.

Consequences of not having a privacy policy

A website that does not have a privacy policy that collects personally identifiable information from users is in violation of the law, and therefore could be prosecuted by the government. Additionally, the California Attorney General’s Office recently released a new online form that allows website users to report sites that do not have privacy policies or whose policies do not comply with the legal requirements, which should increase the likelihood that violators will be penalized.

Not only does the privacy policy need to comply with the legal requirements, but the website owner must comply with the procedures and disclosures listed in its policy and update the policy if its procedures change. A site operator’s failure to comply with the policy could bring rise to a lawsuit by a user, and users can also report these types of violations to the Attorney General’s Office.

Conclusion

A well-drafted privacy policy not only ensures that the online company is complying with the law, but it also protects users and site owners by providing a greater level of understanding regarding how users’ information may be shared and updated. Additionally, all online companies should strongly consider posting Terms of Use on their site to make sure that they are adequately informing users about their policies and protecting themselves from potential lawsuits or intellectual property infringement.

Bend Law Group can assist online companies, including mobile application developers, by drafting privacy policies and terms of use that accurately describe the company’s practices and comply with the legal requirements. If you would like to talk more about your online legal needs or have any questions, please give us a call at (415) 633-6841 or send us an e-mail at info@bendlawoffice.com.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

Read Less

The Four Layers Of Defense For Your Small Business

Published on

By: Doug Bend & Ambere St. Denis This first appeared on Forbes. Our firm has counseled hundreds of business owners. But the ones who sleep best at night are those who have made strategic legal and insurance investments to protect their business and personal assets. That’s why we recommend the following four layers of defense… Read More

By: Doug Bend & Ambere St. Denis

This first appeared on Forbes.

Our firm has counseled hundreds of business owners. But the ones who sleep best at night are those who have made strategic legal and insurance investments to protect their business and personal assets. That’s why we recommend the following four layers of defense for small business owners:

1. Exceptional Customer Service

It is hard to overstate the amount of litigation that could be avoided by great customer service. The saying “penny wise and pound foolish” is never more true than when it comes to a customer potentially suing you for negligence. All it takes is for an unhappy customer to complain to an attorney at a cocktail mixer who responds, “You should sue!”

The least expensive legal defense you will ever pay is apologizing and comping a product if a client is unhappy. If a customer was harmed at your business, apologize and be quick to fix whatever might have caused the injury and err on the side of reimbursing the customer’s reasonable, documented expenses.

By doing so you will not only prevent potential lawsuits, but you might turn what could have been a 1-star Yelp review into a 5-star review.

2. A Solid Contract

Not every dispute can be solved with an apology or a free product or service. If that first line of defense fails, it is important to have a solid contract in place that plans ahead. Think of it as a chess game for worst-case scenarios. This way, you are able to tell customers, “We are sorry you are still unhappy, but Section 17 of our services agreement clearly provides that our liability is limited to X amount.”

3. Business Insurance

Even if there is a solid contract in place, there may be a lawsuit over whether the contract is enforceable or if the contract covers what occurred. A solid insurance policy can help cover the costs of the litigation, and if you lose the lawsuit, the damages.

Be sure to know what the insurance policy covers and what it does not. Many mistakes occur when a business believes they have coverage when they actually don’t. They are only left to find out after a potential claim has been brought to their attention.

4. A Legal Entity

A properly formed and maintained legal entity can serve as a crucial last line of defense to help protect your personal assets from your business activities. If a customer isn’t satisfied with your apology and your contract and insurance don’t cover the claim, a legal entity can serve as a final backstop to prevent the customer from going after your personal assets. Consult with a business attorney and your CPA about the best type of legal entity for your business, as there isn’t a one-size-fits-all legal entity choice.

This article was written by Doug Bend, the Founder of Bend Law Group, and guest author Ambere St. Denis, the Founder of Crimson Business Insurance Agency.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

Read Less

Determining Ownership from Restaurant Investment

Published on

Determining the right investment terms for a new restaurant is a balance between the restaurant managers retaining the amount of control and payout that they need to run the restaurant that they are envisioning, and the investors receiving a percentage of the restaurant that they think is fair for the amount of money that they… Read More

Determining the right investment terms for a new restaurant is a balance between the restaurant managers retaining the amount of control and payout that they need to run the restaurant that they are envisioning, and the investors receiving a percentage of the restaurant that they think is fair for the amount of money that they are investing. Deciding on the membership interest amounts that achieve these goals can be tricky during the planning stages of the new venture, and the information below provides some considerations for determining these amounts.

Investing in an existing company is much easier to calculate than a brand new company, because the existing company has a determinable value. Thus the ownership that is purchased with a certain investment amount can be merely a matter of doing the math (i.e. if an existing restaurant is worth $2M and an investor puts in $500,000, the investor could receive 20% of the restaurant). Making an investment in a brand new restaurant is less straightforward, however, because it is difficult to put a value on something that does not exist. This is especially true because there are so many variables to a restaurant’s success, from location to price point to surrounding locations to service style.

Therefore, in order to determine the amount of interest in a new restaurant that an investor will receive, the managers should consider:

  • How much of the restaurant ownership they want to retain for themselves (generally at least a majority, usually 60-70%);
  • How much of the restaurant ownership they want to sell to investors and if any equity will be set aside for service providers;
  • Approximately how many investors will be involved;
  • Where the investor is located, and whether or not they meet the definition of an Accredited Investor for purposes of federal and state securities compliance;
  • The amount of investment money that the managers are seeking and a clear business plan detailing exactly why this exact amount of funds is needed (often described in detail within a private placement memorandum); and
  • What requests or demands, if any, the managers have already received from investors regarding ownership amounts.

Given the unique quality of most new restaurants, it is impossible to create a formula that says that if there are a certain number of investors and investment money, there is a specific amount of ownership that must be given. However, considering these factors and speaking with an attorney to discuss your options can help a new restaurant owner decide what to offer to investors for their early confidence in the new endeavor. The attorneys at Bend Law Group can help with these discussions and the related ownership documents and SEC filings. If you would like to talk more about raising investment money for a restaurant or have any questions, please give us a call at (415) 633-6841 or send us an e-mail at info@bendlawoffice.com.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

Read Less

California ABC Announces Annual New Liquor License Lottery!

Published on

The California ABC just announced the application period for new general liquor licenses, which gives restaurant and bar owners the very limited opportunity to purchase a new Type 47 or Type 48 license from the ABC. The general liquor license is the most coveted license, as it authorizes the sale of beer, wine, and distilled… Read More

The California ABC just announced the application period for new general liquor licenses, which gives restaurant and bar owners the very limited opportunity to purchase a new Type 47 or Type 48 license from the ABC. The general liquor license is the most coveted license, as it authorizes the sale of beer, wine, and distilled spirits (as opposed to beer and wine-only licenses that are available year-round). The number of general licenses that the ABC can issue in a county is restricted by county population. If the maximum number of licenses has already been issued for the county, the only way to obtain a general license is to buy one from an existing licensee in the county, very often at a high premium. However, as a county’s population increases, the ABC authorizes new general licenses once per year during a priority application period by allowing the issuance of new licenses in the county and intercounty license transfers.

During the priority period, applicants can submit an application to obtain a new original general license in the county ($13,800 filing fee) or to transfer a license from anywhere in the state to the priority county ($6,000 filing fee). However, because the number of licenses in each county is restricted by population, only certain, growing counties are included in the priority application period and only for a specific number of the licenses.

The following Northern CA counties are eligible for new on-sale general licenses:

Alameda County – 25
Contra Costa County – 25
Monterey County – 18
Sacramento County – 25
San Mateo County – 8
Santa Clara County – 25
Santa Cruz County – 4
Solano County – 15

Unfortunately San Francisco, Sonoma, Napa, and Marin counties do not have any new general licenses available.

If you are interested in applying for a new general license in one of the authorized counties, here are a few things to keep in mind:

• The application period is September 12 – September 23, 2016. If you miss it, that’s it until next year. 5pm on September 23, 2016 is the hard deadline.
• An applicant must be a resident for California for at least 90 days (which includes being incorporated in California if the applicant is an LLC or corporation) to be eligible.
• This is a lottery system. If the number of applicants is less than the number of licenses available (unlikely), everyone wins. If the number of applicants is more than the number of licenses available, a public drawing is held. Unsuccessful lottery applicants will be refunded their application fee, minus a $100 processing fee.
• Successful lottery applicants will have 90 days to complete a formal application for their specific premises (formal applications require proof of a 2-year right of tenancy at the applied-for premises).
• Licenses issued through the priority system are subject to unique transfer requirements and restrictions, so be aware of these prior to applying.

Bend Law Group assists restaurants and bars in the start-up process, including incorporation, investment strategies, and ABC and health permitting, plus compliance and contractual matters after opening. We can help you submit your priority application for a general license and then the formal application once (fingers crossed!) it is approved. Please contact us at info@bendlawoffice.com or 415-633-6841 for more information.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

Read Less