Alternating Proprietorships: Getting Started Without a Brewery

Look at all that space? Room for one more? (Photo: GoodLife Brewing in Bend, OR - and my wonderful family Jess and Axel)

 

The craft brewing industry is ablaze with growth. More and more American craft beer is being sold; more and more brewers are popping up across the country. Its beginning to seem doable – starting your own brewery.

 

Many of you want to take that big step into professionally brewing. There are probably thousands of homebrewers who have systems and product worthy of floating through the open market. So why aren’t we all selling our grog? Well there’s an easy answer to that – regulation. The federal Alcohol, Tobacco, Tax & Trade Bureau and the Washington Liquor Control Board each enforce regulations that demand a level of professionalism, investment, and most daunting – commercial space.

 

Well, there is an answer for you. If you believe you have the recipe and drive to make it big, but lack the investment to setup your own shop, you might want to consider an Alternating Proprietorship (AP). The AP is also an option for those of you brewers with lots of space, and empty brewing, who are looking to offset your investment.

 

An AP is a permissible means of developing a brewing operation without your own shop. In short, the AP structure allows a “host” brewery (a previously existing entity holding a Brewers Notice) to provide brewing operation for a “tenant” brewery, who remains responsible for taxes, records and label submissions.

 

The AP is not a new concept, having been around for decades. But back in 2005, the TTB publicly issued Industry Circular 2005-2, which shined a light on this less expensive, startup option for brewers. The Industry Circular helps provide guidance on what types of relationships are permissible and what roles the tenant and host brewery must play.

 

There are a number of huge benefits to considering the AP option, if you plan on starting a brewery in the future:

 

  • AP’s allow you to develop a brand well before you are ready to invest in your own space
  • The host brewery takes on much of the physical pressure, burden and liability of the brewing operation.
  • AP’s allow a brewer to begin placing their product in the stream of commerce to better preserve intellectual property rights
  • AP host breweries often serve as a buffer to allow for easy transition into a highly-regulated industry.
If you are ready to take the plunge or ready to share your space – consider an AP. Contact your attorney to discuss structuring such a relationship – and get brewing.

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