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Manhattan Restaurant Law: Considerations When Buying a Restaurant or Bar

If you are buying a restaurant in New York, you will need need an attorney experienced in all aspects of the transaction 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 license applicant must apply for their own 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 for a transfer of an existing license unless a license has been in existence at the premises continuously on or prior to November 1, 1993. ABC Law, Sec. 64(7) (c).

Up until a few years ago, many restaurants and bars were sold via a sale of corporate stock or “corporate change”. This was done to avoid going through the Community Board process. The Alcoholic Beverage Control Law has been changed to close this loophole. Now corporate change applications filed in conjunction with a sale of a business (a “substantial corporate change”) must go through the Community Board. “Substantial corporate change” is defined as a change in eighty percent (80%) or more of the officers and/or directors, LLC Managers/Members, shareholders. It also applies to situations where an existing shareholder or LLC member obtains a total of 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 disclosing the new principals or officers joining the corporation or LLC. They must also disclose the source of funds (bank statements or loan) for their purchase of the interests.

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