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Top 10 Legal Mistakes by Start-Up Breweries

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We all have had an unwavering desire to act on the idea of the American Dream. We have a deep need as humans to do something we love, and do something that brings us pride and happiness.

The dream doesn’t come easy. It doesn’t appear by accident, and we shouldn’t expect to achieve it passively or second-handedly. It takes hard work and focus. However, that doesn’t mean you can’t have help and support along the way. As a famous singer once said, “I get by with a little help from my friends.”

The dream is opening a brewery. Whether you’re an award-winning homebrewer or just starting out, the idea has been on many of our minds at some point. Candace L. Moon, Esq., a craft beer attorney from San Diego, Calif., gave a seminar called, “Top 10 Mistakes Start-up Breweries Make” at the 2014 National Homebrewers Conference. She has worked with the likes of Green Flash Brewery and Heretic Brewing Co. and provides valuable insight when deciding to open a brewery.

Below are her top 10 legal mistakes start-up breweries make. To Moon, these are the main areas to consider and plan for when you start down the road to opening your own brewery!

Disclaimer: Nothing in this post, or corresponding presentation, should be taken as legal advice. Please see a licensed attorney for advice on your particular situation.

  1. Entity choice
    • Creating an entity helps protect your family and assets. Deciding on what form of entity is going to depend on the state you’re living in and how you’d like to structure your brewery. Each option has pros and cons so make sure to talk with a few different professionals (CPA, attorneys, etc.) when deciding what entity is best for your brewery.
  2. Violating securities laws while raising capital
    • Keep track of where you raise money. If you raise money in exchange for giving ownership interest in the company, you need to report it. There are many state laws around securities laws while raising capital so check with a few attorneys to ensure you’re following the law. It’s very easy to violate these laws when you’re unaware of the rules and regulations.
  3. Entering into agreements without counsel
    • A new brewery deals with lots of contracts. It can be very easy to sign a contract and when you want to get out, you can’t. Some agreements won’t require counsel, but if you’re unsure and want to protect yourself and assets, consult proper counseling.
  4. Not registering or updating federal, state or local agencies of business changes
    • Anything that changes with your company should be reported to the necessary agencies. If you don’t, you’re susceptible to very steep fines and penalties.
  5. Failure to establish an intellectual property strategy
    • Many breweries fail to establish intellectual property strategies (trademark, copyright and trade secrets). Do your research! There are plenty of free resources and services available to help you avoid headaches down the road and protect your brewery and brand.
  6. Keeping track of money coming in and going out
    • There are a lot of people involved who want their money: federal and state agencies, employees, shareholders, etc. An easy solution to keep track of money is to hire a bookkeeper. If you don’t want to hire a bookkeeper, hire a consultant to come set you up. You’ll thank yourself in the end.
  7. Not securing the correct insurance
    • There are many brewery-specific insurance packages. Find a broker you trust and keep updating your insurance policy as you grow.
  8. Violating employment and labor laws
    • It can be very easy to violate employment and labor laws because the state and federal laws differ (i.e. wages). One solution is to use an human resources company.
  9. Failure to utilize available resources
    • There are tons of free available resources at your disposal. From free consultations to the Internet, you can find out what you need and don’t need without breaking the bank.
  10. Failing to continually adjust your business plan
    • Your goal is to make money by creating great beer. As you grow, be aware of where your business is going and adjust your business plan accordingly to avoid growing pains. Ask yourself what the next step is and what needs to be done. Anticipate, don’t react.

Full “Top 10 Legal Mistakes Start-up Breweries Make” Seminar Links:

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