Does Your New Business Need a Liquor License? If So, Here Are a Few Things You Should KnowAdded by Brian L. Ballard in Articles & Publications, Business Law, Wine, Brew, Spirits Law on July 31, 2013
If your new business entity, whether a corporation, limited liability company, partnership or otherwise, anticipates the need for an Idaho liquor license (such as, for a restaurant/bar use), there are a few things you need to know, if for no other reason than to keep you from being surprised, disappointed, or frustrated with a process that seemingly should be so simple…but, is not.
First, liquor licenses in Idaho are distinct from beer and wine licenses. Liquor licenses (liquor being essentially “distilled spirits”) involve, to a larger degree, the Idaho State Police Alcohol Beverage Control (ABC) as the controlling agency, both for administration and enforcement purposes. Do not forget: ABC does not pursue economic development as its primary objective. ABC is first and foremost a police agency, whose mission, by constitutional mandate, is to encourage temperance. Odd, you might think, for the State to control administration of liquor licenses and the policing of violations? It gets odder. The State also controls the liquor dispensary, from which all who hold liquor licenses must also purchase their liquor inventory. The model of a prefect trifecta.
Second, the one who owns a liquor license is not necessarily the one recognized by ABC as the owner, unless the owner is actually the licensee and specifically listed as such on the license itself. The licensee is the one that uses the liquor license upon the premises (the restaurant/bar) as the bona fide operator of the business, buys the liquor inventory from the state dispensary, keeps track of taxes from the sale of liquor by the drink, and is responsible for violations (for example, serving someone under age). The licensee, for a lot of different reasons, may or may not be the owner of the liquor license, and may be only a lessee of the license. Confused or concerned yet? Go to the next paragraph.
Third, the applicant for a liquor license must undergo a background check conducted by ABC, which includes, without limitation, a national fingerprint check. This means that a real live person, not just an entity in its company name, must be identified as the stockholder, member, or partner of the entity applying for a liquor license, and that person or persons must submit to having his or her fingerprints taken (a new fingerprint card for each application), ostensibly to check for a felony or other bad things committed by an applicant, and thus establish grounds for denial of the application. This might be a good thing. After all, this would seem a legitimate concern in the administration of a license for use of a controlled substance. However, there are a few side effects, of which I will mention only one example. What if your business entity is a limited liability company whose members are also limited liability companies? Eventually, as will need to be revealed to ABC by your org. chart, the identities of actual persons will become known, and most, if not all, will need to be fingerprinted and pass a background check. Think about it: 100 persons as investor members in a limited liability company? How easy is a fingerprint card for each person going to be to round up, especially if some members are in distant places? And, get this, ABC has 90 days to conduct the background check before it must rule on whether or not to issue the license. How does that match up with the speed of business today?
I have mentioned only a few of the things you need to know if you want your business to be licensed to serve liquor by the drink in Idaho. There are many more things you need to know, and fortunately, we can help. We’ve been through the liquor license drill many times, we take pride in having a respectful and good working relationship with ABC, and we have the attorneys and consultants that you will need. As we like to say in our Wine, Brew, Spirits Group, we can give you the stout advice you need to boost your spirits. For more information, please contact us at 208.344.6000.
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