Tuesday, September 3, 2013

Transferring a Liquor Permit Business

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Transferring a liquor permit in Ohio generally takes at least 30-90 days, and can take longer, depending on several factors.  There are some factors that are outside the control of the parties.  But there are some things that the parties and their legal counsel can do to speed up the process.

Under Ohio law a number of events occur when a liquor permit transfer application is filed.  First, the application is entered into the Ohio Division of Liquor Control (ODLC) system. This can take a couple of days.  It is important for your legal counsel to ensure the initial application is properly completed and executed.  A minor error can lead to delays or cause the application to be rejected.

Upon receipt and acceptance of the application, ODLC will send out a number of notices to state and local government agencies to advise them of the pending permit transfer request. The political subdivision where the liquor license will be operated is given 30 days from receipt of the notice to object. Most political subdivisions take most or all of the 30 day period before responding to the notice. The board of elections in the county where the license will be operated is also required to verify the wet/dry status of the proposed transferee’s business location. In addition, ODLC is required to notify any church, school, library, or public park within 500 feet of the proposed liquor permit business location. These entities are also given 30 days to object.  It is important to monitor this notice process and make sure that the notices are sent out timely by the ODLC. The complete notification process is spelled out in Ohio Revised Code Section 4303.26(A).

Under Ohio law, a liquor permit cannot be transferred if there are outstanding taxes owed by the transferor. Upon receipt of the notice that a liquor permit transfer application is being processed, the Ohio Department of Taxation (ODT) will confirm whether all sales and withholding taxes have been paid by the seller. ODT has 20 days to notify the parties of any outstanding tax delinquencies. If there are any outstanding tax obligations and/or unfiled tax returns, the delinquencies must be resolved or the permit cannot be transferred.

The process of transferring an Ohio liquor permit involves a lot of documentation. To complete a liquor permit transfer in Ohio requires the following documentation to be filed with the ODLC: an Officer/Shareholder Disclosure form, a copy of the executed lease or a Summary of Tenancy Rights form, a copy of the purchase agreement or a written Summary of the Transaction, Financial Verification Sheet regarding the funds being used to purchase of the business, Personal History forms and an Ohio Background Check (including fingerprints) for all the owners and officers of the business.  Upon receipt of this documentation, the ODLC will process the documents and notify the parties as to any additional documentation needed.

Once all the objections have been waived or resolved, any delinquent taxes have been paid and all required documentation has been delivered, reviewed and processed, ODLC will do a final  building inspection.

When negotiating the transfer of a liquor permit business, the parties need to consider the length of time it takes in Ohio to transfer the license.  The transfer may be accomplished in as little as 30 days.  But it may take as long as 180 days.  During the period of time after the closing of the purchase transaction, and the date ODLC approves the transfer of the liquor permit (30-180 days), the Buyer can only operate the Seller’s liquor license under a Management Agreement.  Under the terms of the standard Management Agreement, Buyer agrees to operate the business, indemnify Seller for any expenses and liabilities that are incurred after the date of closing, and, in exchange, Buyer gets to keep all the net profits derived from operating the liquor permit business during this period of time.  A copy of the Management Agreement must be provided to the ODLC.

If you want to talk to one of our business attorneys about buying or selling a liquor permit business, please contact us at 937-223-1130 or Jsenney@pselaw.com.

AND ONE MORE THING.   The Economic Development Transfer (TREX) was developed through legislation to try to help those areas of the state that have an over-issuance of permits by permitting liquor licenses to be transferred into such areas from other areas of the state which meet certain criteria. Therefore, if you are unable to obtain a new Liquor Permit through the normal Quota System, or if you are unable to do a regular transfer of ownership and location because there are no openings or the number of applicants on file exceeds the openings available, you may be able to use TREX transfer the ownership and location of a permit from outside your desired area to you, as long as you meet the TREX requirements.  The list of possible permits for sale that the Division of Liquor Control has available is the Division’s safekeeping list that can be found on the ODLC website at https://www.comapps.ohio.gov/liqr/liqr_apps/PermitLookup/PermitHolderSafekeeping.aspx.   If you are interested in learning more about TREX or want assistance with a liquor permit application, please contact one of our business attorneys at 937-223-1130 or Jsenney@pselaw.com.

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