Liquor License Transfer When Buying a Liquor Store
For most buyers, the liquor license is what makes a liquor store a liquor store. Without the ability to sell alcohol legally, the inventory, location and customer base lose much of their value. That is why liquor license transfer, or obtaining a new license where a transfer is not available, is often one of the most important conditions in an acquisition, and one that buyers, sellers and lenders all watch closely.
This article explains the licensing considerations buyers commonly face when acquiring an existing liquor store. It is not a state-by-state guide, and it is not legal, regulatory or licensing advice. Liquor licensing is regulated at the state and local level, rules vary significantly, and they can change. Buyers should confirm the requirements that apply to their transaction with the applicable licensing authority and qualified legal or licensing professionals.
Why Licensing Is Different From Other Business Assets
Most business assets, such as fixtures or inventory, can be sold through a purchase agreement. A liquor license is a regulatory privilege, and the licensing authority typically has a role in deciding who may hold it. Depending on the jurisdiction:
- A license may be transferable to a new owner, transferable only with approval, or not transferable at all
- A buyer may need to apply for a new license rather than take over the existing one
- The number of available licenses may be limited
- Retail sales of some products may be handled differently, including through state-controlled systems
- Licenses may be tied to a specific location, a specific owner or both
Because of these differences, buyers should not assume that what applied to a store in one place applies anywhere else.
Who May Need to Approve the Buyer
Licensing authorities may review the buyer and other owners before approving a transfer or a new license. Reviews can involve applications, disclosures about ownership and financing, background checks, fingerprints, eligibility requirements and public notice or local input. What is required, and whether approval is granted, depends on the jurisdiction and the facts of the application. Approval is never guaranteed.
How Licensing Affects the Deal Structure
Whether the buyer purchases the store’s assets or the entity that holds the license can affect how licensing is handled. In some jurisdictions, a change in the ownership of a licensed entity may itself require notice or approval. Our article on the liquor store asset purchase versus entity purchase discusses these structural choices, which should be made with legal advice.
Licensing as a Condition to Closing
Purchase agreements commonly make licensing approval a condition to closing, so the buyer is not obligated to complete the purchase if the required approvals are not obtained. Agreements may also address:
- Who prepares and pays for the application
- Cooperation required from the seller
- What happens if approval is delayed or denied
- How the store will be operated between signing and closing
- Escrow or holdback arrangements, where used
Some jurisdictions have specific rules about escrow, the timing of closing and whether operations can continue while an application is pending. These rules vary, so they should be addressed with an attorney familiar with local requirements.
Licensing and Compliance History
Buyers should review the store’s license history, including any violations, citations, suspensions or pending matters, as well as compliance practices such as age verification. A history of problems may affect the transfer, the store’s reputation and its future operations. Our liquor store due diligence checklist covers what to review.
How Lenders View Licensing
Lenders financing a liquor store acquisition generally want confidence that the buyer will be properly licensed to operate. Lenders may require evidence of licensing approval before funding, may coordinate closing with the licensing process and may review the license as part of their collateral and risk analysis, depending on the lender and the jurisdiction. Our guide to liquor store loan requirements explains what lenders review.
Planning for Licensing
- Learn the applicable requirements before signing a letter of intent
- Engage qualified legal or licensing professionals early
- Confirm your own eligibility and that of any co-owners
- Build licensing conditions into the purchase agreement
- Allow for uncertainty in the timing of approvals when planning financing and the lease
- Coordinate the licensing process with your lender and landlord
Licensing in the Bigger Picture
Licensing is one part of a broader acquisition process that also includes valuation, due diligence, inventory, the lease and financing. Our guide on how to buy a liquor store walks through the full process, and sellers can learn how to prepare licensing information in our guide on how to sell a liquor store.
US Professional Funding helps buyers finance the acquisition of existing liquor stores and can help plan the financing around the transaction’s licensing conditions. Learn more about our liquor store acquisition financing.
