bluestar Posted May 24, 2011 Share Posted May 24, 2011 I am looking for feedback and experience from any other small distillery that has set up operation in two states. In particular, we are looking at state licensing code in each state (Michigan and Illinois, in this case) that prohibits owners of one distillery from having financial interest in another. Either, the law only pertains within the state (not likely), or the owners would own a single company that would have two DSPs, one in each state. If the latter, should one presume a license is issued to the distillery for operation of the DSP within each state, respectively? If so, do the restrictions of the state license hold only for each DSP, or for the total? As an example, in Michigan I can produce 60000 gallons under their license, in Illinois I can produce 5000 gallons under their license. So, can each DSP produce each amount, respectively? Or can the company only produce a total that is the lesser of the two licenses? We are looking for precedence, since this situation has never happened with a distillery in either Illinois or Michigan, to either state's knowledge. And my lawyers are flummoxed. Link to comment Share on other sites More sharing options...
Scott @ Twenty2Vodka Posted May 24, 2011 Share Posted May 24, 2011 I am looking for feedback and experience from any other small distillery that has set up operation in two states. In particular, we are looking at state licensing code in each state (Michigan and Illinois, in this case) that prohibits owners of one distillery from having financial interest in another. Either, the law only pertains within the state (not likely), or the owners would own a single company that would have two DSPs, one in each state. If the latter, should one presume a license is issued to the distillery for operation of the DSP within each state, respectively? If so, do the restrictions of the state license hold only for each DSP, or for the total? As an example, in Michigan I can produce 60000 gallons under their license, in Illinois I can produce 5000 gallons under their license. So, can each DSP produce each amount, respectively? Or can the company only produce a total that is the lesser of the two licenses? We are looking for precedence, since this situation has never happened with a distillery in either Illinois or Michigan, to either state's knowledge. And my lawyers are flummoxed. I'd hate to see the bill from a lawyer that's exhausted their "considering" period to admit being out of options...gives me chills just to think about it... <Edited out this paragraph because I clearly read the original post wrong..> -Scott Link to comment Share on other sites More sharing options...
Scott @ Twenty2Vodka Posted May 24, 2011 Share Posted May 24, 2011 Are you sure you need 2 DSPs? We distill in Maine and sell in Maine and NJ. I don't need to have a DSP license for NJ. What detail am I missing here? Is this an investor/shareholder who already has a DSP license in Illinois and will then also have an interest in your DSP in Mich? I think we need some more clarification? Wish I could help more, Good Luck, -Scott Link to comment Share on other sites More sharing options...
bluestar Posted May 24, 2011 Author Share Posted May 24, 2011 Are you sure you need 2 DSPs? We distill in Maine and sell in Maine and NJ. I don't need to have a DSP license for NJ. What detail am I missing here? Is this an investor/shareholder who already has a DSP license in Illinois and will then also have an interest in your DSP in Mich? I think we need some more clarification? Sorry, to be clear, I am looking at possibly distilling in BOTH Michigan and in Illinois. Either because I will set up both distilleries myself. Or will partner. We are currently set up as an LLC in Michigan, so we might then set up as well as a "foreign" LLC DBA in Illinois. We were ready to go forward just in Michigan, but then an opportunity turned up for a location in Illinois AND Illinois modified their license so it is comparable to Michigan: added on site sales, tasting room, and higher production limit. Link to comment Share on other sites More sharing options...
Scott @ Twenty2Vodka Posted May 24, 2011 Share Posted May 24, 2011 Ahhh, so 2 Distilleries and 2 states. With that, I cannot help other than sharing my experience of paying for 1 distillery. I cannot imagine my financial state if I had to pay for 2x of everything, coupled with only having half the time of my day to dedicate to each. Might seem like a good idea, but really, is 2 at the same time across multiple states the best option for you? Good luck, -SCott Link to comment Share on other sites More sharing options...
will Posted May 24, 2011 Share Posted May 24, 2011 Notwithstanding other considerations, (1) get different lawyers, (2) the laws of Michigan pertain to operations in Michigan, and the laws of Illinois pertain to Illinois operations. Many of the bigs have operations in multiple states. So, form different entities (probably full C-corps) in each state, and be forthright with each state on your applications, indicating your interest in each of the companies. Remember that in order to receive remuneration from an entity, you need only be a consultant, not an employee or owner. You may find that it's to your benefit to own one company and provide guidance to the other. Depending on your state, you and your wife may also be different entities. In some 3-tier states where you can't be a producer and also a retailer, a husband can be one, while the wife is the other. Good luck, Will Link to comment Share on other sites More sharing options...
Few Spirits Posted May 25, 2011 Share Posted May 25, 2011 Why you want to be in two states? Focus efforts on one. And, yes, you probably ought to get different lawyers (says a lawyer). Link to comment Share on other sites More sharing options...
Jay Posted May 25, 2011 Share Posted May 25, 2011 2 states sounds like a lot of work, the 60,000 gallons sounds much more appealing than the 5,000 gallons. Link to comment Share on other sites More sharing options...
will Posted May 25, 2011 Share Posted May 25, 2011 Here's an interesting twist. 60,000 or 5000, which is better? Depending upon how a law or regulation is crafted, the correct answer may be the 5000 gallon state. If that state permits only 5000 gallons to be produced in order for the distillery to remain in the "micro" category, but makes no limit on how many gallons of spirit produced by other distilleries can be purchased for use in packaging operations, then the 5000 gallon state may be just fine because there's really no functional limit on how many bottles can be produced and sold....and in case you haven't noticed, that's where the money is. So, just because something sounds like a good deal, doesn't mean it is a good deal. If I had to operate distilleries in two states, I would spend all of my time driving between them. Good luck, Will Link to comment Share on other sites More sharing options...
Curtis McMillan Posted May 25, 2011 Share Posted May 25, 2011 trust me one BIG shop should be able to do the job. (none of us are ready to franchise Link to comment Share on other sites More sharing options...
bluestar Posted June 2, 2011 Author Share Posted June 2, 2011 An update: my lawyers in each state both interpret that a single entity (Corp., LLC, proprietor) can have a distillery operating in each state (MI & IL) under separate state licenses, and the statutes in each state apply to the production in that state. That does mean, likely, that if one DSP produces within its limits, and then transports under bond to the other, and it is sold there, that you have to count the volume twice, once in each state. It is the production (and any activity, including bottling, counts as production) is limited by each state for each license. Link to comment Share on other sites More sharing options...
will Posted June 2, 2011 Share Posted June 2, 2011 cite the statutes for me in each state, and provide links to the text for me. you can do that privately if you wish. if the states worded their statutes or regulations using the same terms used by the feds, then "production" means the making of alcohol from sugars, and "processing" means everything else...flavoring, filtering, bottling, etc. in other words, if they said "production" alone, then that likely excludes "processing" ... which would mean that you could do as much of that as you want. anyway, i'll be happy to read over your shoulder. Link to comment Share on other sites More sharing options...
Scott @ Twenty2Vodka Posted June 2, 2011 Share Posted June 2, 2011 I am still very confused on the function or purpose of having 2 distilleries setup in 2 states for a start up. What are you expecting to save or gain from this setup? Are you considering that it's going to cost you 2x as much to pull this off? You will literally have double everything except for time. What am I missing here? -Scott Link to comment Share on other sites More sharing options...
Scott @ Twenty2Vodka Posted June 2, 2011 Share Posted June 2, 2011 And I just caught on from your update that you said "Lawyers in each state". Double lawyers too!?!? It has already begun... Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now