When a restauranteur sells their business, you must retain an attorney experienced in all aspects of the transaction, including the lease assignment and “transfer” of the liquor license.
Liquor Licensees are not allowed to “transfer” a liquor license, in that licenses are not allowed to be sold to or given as a gift to another party. The SLA’s Licensing Department uses the terms “transfer” and “new” applications only to make a distinction between applications for a restaurant or bar that is currently licensed and selling the assets of their business (a transfer) and a restaurant or bar that is not currently licensed (a new license). In both cases, the applicant must apply for their liquor license, including serving the 30-day community board notice and attending a 500-foot hearing, if applicable. The 500 Foot Rule applies to an application for new licenses and a “transfer” of an existing liquor license unless a license has existed at the premises continuously on or before November 1, 1993. ABC Law, Sec. 64(7) (c).
Until a few years ago, restauranteurs sold their businesses by selling corporate stock or “corporate change.” This was done to avoid going through the Community Board liquor license evaluation process. The Alcoholic Beverage Control Law has been changed to close this loophole. Corporate change applications filed with a business sale (a “substantial corporate change”) must go through the Community Board. “Substantial corporate change” is a change in eighty percent (80%) or more of the officers, directors, LLC Managers/Members, and shareholders. It also applies to situations where an existing shareholder or LLC member obtains eighty percent (80%) or more of the shares of a corporation or LLC membership interest in the restaurant/bar. When buying a restaurant through a stock sale, the licensed business has to file a corporate change application to transfer the liquor license, disclosing the new principals or officers joining the corporation or LLC. They must also inform the source of funds (bank statements or loans) to purchase the interest.
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