How to make a liquor license transfer go down smoothly

By Frank Sluzis of Scaringi Law posted in Liquor License Law on Thursday, November 5, 2015.

In Pennsylvania, the demand for liquor licenses far exceeds the state-controlled supply, meaning the only way to get one is to purchase and transfer a license within the same county.

When everything goes smoothly, a liquor license transfer should take about eight to 12 weeks. However, problems arise and delays mount when transfer applicants aren't prepared for the Pennsylvania Liquor Control Board's vetting.

I've found problems often start when the applicant makes mistakes creating and operating the corporate entity that will hold the license.

By avoiding the following problems, liquor license buyers can save themselves headaches in the all-important weeks that precede the grand opening of a bar or restaurant.

Ducks in a row

It's common for a new establishment seeking the transfer of a liquor license to create a corporate entity. This is done for tax purposes and to limit personal liability.

In vetting liquor license transfers, the PLCB wants to see the sources of money used to buy the license. This goes back to the days after Prohibition, when the aim of such laws was to keep out organized crime and other shady operators.

Everything must be transparent. Corporations must list all directors and stockholders; hold board meetings to conduct all business; and keep minutes of all of the board's financial decision-making. This is true even if the sole corporation stockholder and director is the owner-operator or his or her family. The PLCB will still want to see that all rules of corporate governance are followed.

We are talking about articles of incorporation, stock certificates, corporate minutes and full listings of directors and stockholders, along with the percentage of shares owned by each. All of this must be made available to the PLCB analyst vetting the liquor license transfer.

Unfortunately, many liquor license transfer applicants who have set up corporations or limited liability companies haven't followed all of these procedures, leading to delays in the transfer process.

That's why it's important to consult with an attorney who is experienced in guiding liquor license transfers. Preparation will ensure your grand opening isn't delayed.

Following the money

The PLCB will want to trace the origin of all money used for the liquor license transfer. Silent partners aren't allowed.

The PLCB will want to see all bank loan documents. If there is a corporate structure holding the license, all of the meeting minutes addressing the financing for the application must be provided. Additionally, the PLCB will want to review bank records going back at least six months for the corporation and all of its listed directors and stockholders. The source of any large deposits into any of these accounts will have to be explained.

If a new corporation has been established to hold the liquor license and own the establishment, any transfers of cash must be documented. Far too often, prospective liquor license holders simply incorporate and think that is the end of it.

The PLCB sets a tight timetable for reviews, and its analysts are typically busy. If the application contains missing elements and the examiner issues a deficiency letter, there might not be enough time to remedy the application before the examiner's investigation is closed. If that happens, the process has to start anew, adding weeks or months to the transfer process.

That's why it's so important to get the application process right the first time.

In this case, time is money -- yours.

As former chief prosecutor for the PLCB's Nuisance Bar program and past assistant counsel to the PLCB attorney, Frank C. Sluzis of Scaringi Law is among Pennsylvania's leading experts in representing the interests of alcohol-serving establishments. He can be reached at 877-LAW-2555 or info@scaringilaw.com