≡ Menu

Starting a New Winery? Ten Questions You Should Ask

Starting any new business can be overwhelming, and taking the leap to start a winery is certainly no exception. The details can be intimidating and a newcomer can often lose sight of the larger picture. This article aims to review ten of the very basic legal or compliance steps all new winery businesses should consider when starting out. And for those already producing wine, the below may provide a point or two of new insight.

What Are Ten Questions Every New Winery Should Ask?

  1. Who are the owners and how will the business be organized? First and foremost, you should determine who the owners of the winery will be and how it will be funded. This is a key point in the TTB federal winery permit application, as well as mot state license applications. Depending on the setup, you will be required to submit certain types of information to both the federal and state governments. Furthermore, you should consider how the business entity itself will be set up. For example, sole proprietorship, partnership, LLC, corporation, or similar. Each entity type has its own benefit and drawbacks, and the type of entity you choose may depend on your business itself, the owners, and your ultimate goals. You should work with an attorney well-versed in business law to determine the entity that is best for your needs.
  2. Is my business information filed with the state and is it up-to-date? When forming a new business, the state may require business information to be filed with the state. For example, this may include the Articles of Organization or the Articles of Incorporation. This step should be completed before you submit your winery permit application with TTB. If you are a new entity, you will not necessarily be concerned about whether the information on file with the state is accurate and up-to-date. However, if you are using an entity that was previously formed and whose information has been on file with the state for a while, you should consider whether any of this information (such as address, ownership, etc.) has changed and may need to be updated with the state. If ownership or addresses or similar have changed, certain documents may need to be updated.
  3. Do I have an EIN? An Employer Identification Number (EIN) is absolutely one of the first steps when setting up a new business. The EIN can be set up online through the Internal Revenue Services (IRS) website and can generally be obtained instantaneously. The number will be used for tax purposes and is also necessary for the TTB federal winery permit application, as well as for most state applications.
  4. Should I register my business? Most likely, your state government will require you to register the business and obtain a certificate of authorization (or similar) in order to do business within the state. Because every state varies, this step—along with the cost—can be quite different from one state to another. However, at the very least, you should consider whether or not (1) your state requires the business to register; and (2) whether or not you also want to file a Doing Business As (DBA) name. The DBA name is used as a “fictitious” business name as an alternative to the actual entity name. It is a popular option for companies that have been formed using human names and may want to operate under a more professional or industry-specific name.
  5. Is my winery registered with FDA as a food facility? This is an essential step for almost every winery. If your facility is manufacturing, processing, packaging, or holding food in the U.S., your facility is required to be registered with the Food and Drug Administration (FDA) as a domestic food facility and maintain an active FDA food facility registration. For food facility registration purposes, “food” is defined by federal regulations to include wine. A TTB federal winery permit does not exempt wineries from this requirement. Keep in mind that the FDA food facility registration needs to be renewed every even-numbered year for FDA’s biennial renewal and in order to remain active with FDA. The good thing about this registration is that is can be obtained instantaneously once the application is completed and is generally easy to update.
  6. Do I need to obtain a bond for my TTB permit application? A bond is a legal guarantee that federal excise taxes will be paid for wine produced or stored at the specific winery location for that specific winery. It is also one of the top reasons why the TTB winery application will be sent back to the applicant for corrections. The required penal sum of the bond for the TTB winery permit application ranges from $1,000 to $100,000 depending on the winery’s tax liability, which is determined by the volume, type, and alcohol content of the wine produced at the winery. It covers the tax liability that the winery owes to the federal government in regard to excise taxes; it does not authorizes the production, purchase, or sale of the wine itself. There are three ways for a bond to be issued: (1) by a surety company; (2) in cash; or (3) through a treasury note. The best option will depend on your business, as well as the tax liability owed. As of July 2016, the bond is mandatory for the TTB winery permit application.
  7. Do I have all paperwork organized for the federal TTB winery permit application? This application is incredibly time consuming and requires many details before you will obtain an approved license from the TTB. On top of that, it generally takes at least three months (if not more) for the license to be reviewed and approved by TTB. There can be many bumps along the way, and the specialist assigned to the application may get in touch with you multiple times to request more information or clarification. It is thus incredibly important that all documents submitted to TTB are in top shape and contain specific requirements that TTB will need to review the application. Small oversights can hold the application back weeks, if not months. Review every step of the application at least two times to ensure that the information you are submitting is complete, thorough, and accurate.
  8. Do I need a state license to operate as a winery? In all likelihood, yes. The type of license and the agency overseeing licensure will vary by state. In some instances, you may need multiple licenses depending on whether you will, for example, have a tasting room. You may also need to register with multiple state agencies. Some states also provide several types of winery license options, which can be less costly and may provide benefits like self-distribution. These alternative licenses may depend on your proposed production amount and the raw ingredients you plan to use. Every state winery license application varies and requires knowing the particulars and complexities of state regulations.
  9. Do I need a formula approval for my wines? There are some wines that are required to have formulas approved by TTB. Traditional table wines (i.e., grape wine between and including 7% alcohol by volume to 14% alcohol by volume) or dessert wines (i.e., grape wine above 14% alcohol by volume) will generally not require a formula approval unless you start adding additional ingredients, like flavors, colors, other fruit wines, etc. to the process. Other products, like mead, sake, and vermouth, will require a formula approval before you can obtain a label approval from the federal government. The formulation process for a domestic wine requires you to submit a list of ingredients, their use rates, and a method of manufacture. The process can be tricky and requires many details. It can also be extremely time consuming and may take several weeks (or even months) to obtain formulation approval. The average processing time can vary significantly depending on a number of factors..
  10. Do I need a label approval for my wine? Generally speaking, yes. Wines at or above 7% alcohol by volume will generally be required to obtain a Certificate of Label Approval (COLA) from TTB before the wines can be sold at market. While you may be eager to start printing your labels, the label approval cannot be obtained until after you have the federal basic winery permit from TTB. The average processing time for federal wine labels varies significantly and can be as little as 10 days to about 40 days. This is something you must budget for in the time it takes to get your wine to market. Further, the label submission process can often require many intricate details, as there are federal regulations that govern both mandatory and non-mandatory language that must and can appear on wine labels. See 27 CFR Part 4 for more information.

The above considerations are not an exhaustive list of all the compliance or legal questions you should ask, but they are some of the top considerations that new wineries should keep in mind. Further, the state license or compliance requirements may vary significantly. This article is not drafted to address any specific state requirements, but rather to provide an overview of the types of issues that an applicant may encounter.

For more information on TTB permits, state licenses, or establishing an alcohol beverage business, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

Lindsey A. Zahn

About 

Lindsey is the founder and author of On Reserve: A Wine Law Blog. She is an alcohol beverage and food attorney and is admitted to the New York State Bar.

{ 0 comments… add one }

Leave a Comment