Business Startup

Brewery Law 101: When It’s OK to Give Beer Away for Free

Unfortunately for Washington breweries, the regulations governing when you can give beer away for free are far from clear. We’re continuing our Brewery Law 101 series by highlighting the Washington Liquor Control Board’s regulations governing giving beer away for free.

The LCB regulations prohibit the distribution of beer for free with a few exceptions. The exceptions include:

To Licensed Retailers and Distributors

The first carve-out under the regulations allows a Washington brewery to provide free samples of its beer to licensed retailers and distributors for the purposes of negotiating a sale. That is, you’re in the clear if you’re negotiating a sale of your beer!

For Teaching Others About Beer

The regulations also carve out an exception for distributing beer free of charge for instructional purposes....

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Business Startup

Brewery Law 101: Operating Agreements

Once you’ve chosen the right entity for your brewery or distillery, you’ll need to draft some key contracts governing your business entity. Today, we will continue our Brewery Law 101 series by discussing operating agreements. As we discussed in our post on brewery entities, an LLC likely is the right choice of entity for your brewery or distillery. So we will focus on operating agreements, as operating agreements are the primary governing document for an LLC. (While we are specifically discussing operating agreements, many of these issues will carry over to the governing documents you will want for any entity type.)

One of the most appealing attributes of the limited liability company and why it has been so widely adopted is the...

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Business Startup

Shareholder Inspection Rights for Washington Corporations

Becoming a shareholder in a Washington corporation comes with certain statutory rights, including the right to inspect the company’s records. These shareholder inspection rights may not be included in the company’s articles or bylaws, and many shareholders are not aware the shareholder inspection rights exist. But it can be very important to understand what documents you have a right to see as a shareholder. Below, we’ve highlighted the ins and outs of shareholder inspection rights in Washington and the procedural requirements for requesting records.

Who can request corporate records?

Under RCW 23B.16.020, shareholders of a corporation are entitled to inspect and copy a corporation’s records at the company’s office and during normal business hours if the shareholder gives that corporation at least...

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Business Startup

Brewery Law 101: Starting a Brewery: Which Entity Should I Choose?

This is our first post in our Brewery Law 101 series. Starting a brewery is fun and exciting, especially when you get to the beer brewing part, but first you should take some time to select the right entity. Selecting the best entity for a brewery or distillery involves a number of considerations, including (1) taxation, (2) owner liability, (3) governance, (4) capital structure, and (5) potential exit strategies, to name a few.

Below is a primer on some of the various entities that are available for Washington breweries. I have highlighted some of the main features of the primary entity options. You can find a more robust analysis of each entity by clicking on the hyper-linked terms.

The Sole Proprietorship

A sole proprietorship...

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Business Startup

Brewery Law 101: A Primer on the Basics of Owning and Operating a Brewery or Distillery in Washington

Over the course of the next few months, Collin Roberts and I will be putting together a brewery law blog series with what we hope will be helpful information for people interested in starting their own brewery or distillery in Washington. Starting a brewery or distillery isn’t all that different than starting any other business, but there are a few important issues to highlight that are important to be aware of as you open your brewery’s doors. Below are the topics we will be exploring over the next few months:

Choosing the right entity and other startup considerations for breweries Why are trademarks so important for breweries and distilleries? How labelling requirements may affect your trademark decisions Brewery Operating Agreements Navigating TTB Requirements and Licensing When...

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Business Startup

Understanding the Cumulative Voting System

When you form a company, there are several key decisions that you need to make upfront to make sure you protect your interests and position your company for long-term success. Sorting out the voting system for electing directors is one of those key decisions. Today’s post highlights cumulative voting in director elections and why it might make sense for your company.

What is Cumulative Voting?

Cumulative voting is a type of voting system that allows shareholders to vote their shares cumulatively, which is to say that the shareholders can vote all of their shares for a single director candidate. For context, in a “normal” voting system assuming one vote per share, each shareholder can vote only as many shares as they have...

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Business Startup

Delaware Says No Writing Necessary for Board Resignations

A recent Delaware court case discussed what type of action is necessary for directors to resign from a corporation’s board of directors. Ultimately, the court held that director resignations need not be in writing because Delaware Code Section 141(b) is a permissive statute.

 Summary of the Case

The CEO of Biolase, Inc, Federico Pignatelli, thought that Biolase’s board needed more experienced directors, and he asked some of the board members to resign so he could fill their positions with more seasoned directors. The board members resigned. But without Pignatelli’s knowledge, the directors he wished to replace had also aligned themselves with the new board members in order to try and replace Pignatelli as CEO. In an attempt to disrupt the new board...

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Business Startup

The 5 C’s of Business Lending

Nearly every business will at some point need to obtain financing to start or grow. While many startups and other businesses will look for investors to fund their business by means of equity investment, most businesses will take on debt either instead of or in addition to investment. The “5 C’s” of business lending are five key elements that describe what a borrower should have in order to obtain a loan with the best rates possible. Most lenders rely on the 5 C’s to make their lending decisions. Here is what your banker wants to know about you before they lend to you:

Character The owner’s business character will be based primarily upon the principal’s personal credit report. Banks rely on the...

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Business Startup

The Children’s Online Privacy Protection Act and Your Business

Are you about to launch a new app with youth appeal? Are you hoping that your new game will trend with tweens? Hold on—you might have to comply with the Children’s Online Privacy Protection Act (COPPA).

The government isn’t known for being on the cutting edge with technology, but the Federal Trade Commission seems to be well aware of apps such as Candy Crush and Snapchat. And it is continuously developing rules to regulate online services that collect data from users, especially children.

Just last year, revisions to the Children’s Online Privacy Protection Act took effect. The rule broadened its definition of personal information to include photos, audio recordings, geolocation, and persistent identifiers, including cookies that track activity online.

In this post, we’ll...

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Business Startup

Can LLC Members Pay Themselves a Salary?

As we’ve discussed in previous posts, the limited liability company (LLC) entity offers a ton of flexibility when organizing the management and economic structure of the company. Because of this flexibility, the LLC has quickly become the most popular entity to form when seeking limited liability protection for new businesses. One question that often crops up is, “Can I pay myself a salary as the owner of a LLC?”

Can LLC Members Pay Themselves a Salary?

The short answer is: It depends on how the LLC is taxed.

LLC Taxed as a Partnership

For tax purposes, a LLC is by default a pass-through entity—i.e. any money that comes into the business will “pass-through” to the individual members of the company regardless of whether they receive...

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