This article is written as a follow up to my article regarding the New York State Liquor Authority Self Certification Process: http://www.restaurantlawyerblog.com/2010/01/04/liquor-licenses-granted-in-under-one-month/

In short, the process works great.  Its now January 4, 2010 and I’ve gotten conditional letters of approval for my self-certified liquor license applications within just a few days of the date I filed the applications! This is allowing my clients to serve booze within just a couple of weeks of the date that I file their application. . . a process that used to take months.  Kudos to the New York State Liquor Authority on this self certification program.   

There are a two ways to buy a restaurant in New York. You can do it by purchasing the ownership shares of the seller or you can purchase the assets of the seller. Each has its advantages and disadvantages in New York but an asset purchase is almost always more beneficial for the buyer. With an asset purchase, the buyer is only assuming certain specified liabilities of the seller. With a purchase of the ownership shares (stock certificates if seller is a corporation and membership interests if seller is a Limited Liability Company), the buyer will be assuming ALL of the liabilities of the seller, known and unknown. In either scenario, a lien and judgment search must be performed on the seller’s business.

GENERAL RULE: Buy the restaurant by means of a bulk asset sale / purchase rather than a purchase of the ownership shares.

You must review the existing lease carefully to determine if the seller is able to assign it to you. If they are able to assign it, you must determine whether the existing clauses are acceptable to you including the term remaining on the lease, the rent amount, the security deposit, the personal guaranty, etc. If they aren’t able to assign the lease, the landlord needs to be contacted to inquire if they are willing to let the tenant “off the hook” and issue a new lease directly to you.

The purchase agreement, which will either be a stock purchase agreement or bulk asset purchase agreement, will need to state all of the terms of the sale including, but not limited to, the purchase price, the amount being held in escrow, the amount to be paid at closing, the specific assets being purchased, the date for closing, any contingencies to closing (e.g. liquor license granted to Buyer), and any personal representations and indemnifications. A Bill of Sale should accompany the purchase agreement along with a corporate resolution from the seller authorizing the sale. Remember, even with an asset purchase agreement, the buyer will be responsible for any unpaid New York State sales tax owed by the seller. This is why it’s very important to (i) file the appropriate bulk sales notice (form AU 196.10), (ii) have the seller personally represent that no taxes are owed and have him/her agree to personally indemnify the buyer for any unpaid taxes, or other liabilities, that were incurred on or before the closing date, (iii) set the closing date to occur after a tax release letter is received from the New York State Department of Taxation stating that no taxes are owed, and/or (iv) have a large portion of the purchase price held in escrow until the release letter is received from the Department of Taxation. This article is intended to give you a general idea regarding what to look out for but you should retain an experienced restaurant attorney if you are considering purchasing a restaurant or bar in New York.

Generally, no more than three on-premise liquor licenses are permitted within 500 feet of each other. This is commonly known as the 500 Foot Rule. However, there is an exception to this Rule known as the Public Interest Exception.   For more info on the 500 Foot Rule, See: http://www.restaurantlawyerblog.com/2009/02/02/liquor-license-the-500-foot-rule/ 

If the location is subject to the 500 foot rule, and no “grandfathering” or other exception applies, the license cannot be issued unless the State Liquor Authority makes an affirmative finding that it is in the public interest to issue the license. This clearly creates a presumption that the license should not be issued. The 500 foot rule requires that the Authority consult with the municipality or community board and conduct a hearing to gather facts to determine whether the public interest would be served by issuing the license. This is commonly referred to as the “500 Foot Hearing”.

GENERAL RULE: No more than three on premise liquor licenses will be granted within 500 feet of each other unless the public interest exception applies.

When considering whether it would be in the public interest to approve the application, the Authority may consider the following:
- the number, classes and character of other licensed premises not only in the area where the proposed establishment will be located but also in the particular municipality (or subdivision of the municipality);
- whether the applicant has obtained all other necessary governmental licenses and permits;
- the effect on vehicular traffic and parking in proximity to the location;
- the impact on the existing noise level;
- the history of ABC violations and reported criminal activity at the location; and
- any other factor specified by law or regulation that would be relevant to deciding whether public convenience and advantage, as well as the public interest, would be served by approving the application.

The hearing required by the 500 foot rule is conducted before designated staff in the Authority’s four offices. The Members of the Authority have delegated to specific licensing staff the ability to approve applications when, after the hearing is conducted, there is no community opposition and no other reason for disapproval. In cases where the application is opposed by the community, the matter is referred to the Members of the Authority for determination. However, the fact that the community opposes an application does not mean that the Authority must disapprove the application. Conversely, an application may be disapproved even if the community supports it.

GENERAL RULE: Choose a Limited Liability Company over the other choice of entities when opening a new restaurant, bar or hotel in New York.

While the two have very strong similarities, they are not without their differences. For example, S-Corporations are subject to stringent corporate formalities such as holding annual corporate meetings, keeping the minutes of the meetings, appointing corporate officers to serve, and issuing corporate stock to owner’s which may often be difficult to sell and/or transfer. In contrast, an LLC does not require annual meetings, appointing officers, the recording of meeting minutes, or the issuance of stock. Moreover, profits and losses distributed by an LLC need not be made in proportion to ownership share. However, in contrast, if an S-Corporation owner owns 50% of the shares, he/she MUST receive 50% of the profits and/or losses.

Additionally, the amount of S-Corporation shareholders cannot exceed 100 and all must be U.S. citizens or permanent residents. An LLC does not have these restrictions either.

A downside to forming an LLC is the publication requirement. Within 120 days after the filing of the initial articles of organization, notice must be published once each week for six successive weeks, in two newspapers of the county in which the office of the LLC is located (one newspaper to be printed weekly and one newspaper to be printed daily; both need be designated by the county clerk). If the LLC is located in New York City, this publication will cost about $1,100.00. By contrast, an S-Corporation does not have any publication requirement. This publication cost is the main disincentive to choosing an LLC when doing business in New York, but in the end, if you plan on being in business for the next 10+ years, given the flexibility of the LLC entity, this additional cost is worth it.

Basic License Application
For Sole Proprietorships, submit a notarized copy of your Business Certificate, certified as a true and accurate copy by the County Clerk of the borough in which your business is located. The address appearing on your Business Certificate must be identical to the address for which you are seeking a license. If you are a sole proprietor doing business under your own name, and not a trade or Doing Business As (DBA) name, you do not need a Business Certificate.
For Partnerships, submit a notarized copy of your Partnership Certificate, certified as a true and accurate copy by the County Clerk of the borough in which your business is located. The address appearing on your Partnership Certificate must be identical to the address for which you are seeking a license.
For Corporations, submit a stamped Certificate of Incorporation or a filing receipt. If applicable, you must also submit your corporation’s Assumed Name Certificate. These certificates must be stamped by the New York State Secretary of State.
Enter the Sales Tax Identification Number (9-digit number) on your New York State Department of Taxation and Finance Certificate of Authority on the license application form.
Photo ID of the person submitting the application.

Environmental Control Board Clearance. The Department of Consumer Affairs will review the Environmental Control Board’s (ECB) records to see if you have any outstanding violations. If you are found to have outstanding fines or violations, you can submit full payment for all fines at the Licensing Center and we will forward such payment to ECB. If you wish to dispute ECB’s records, you can go to the ECB at 66 John Street, 10th floor, in Manhattan to settle these fines or violations and to obtain a clearance letter.
A copy of a current Place of Assembly Permit from the Department of Buildings must be obtained if total capacity exceeds 74 persons. The permit must indicate the usage for which a license is sought. The permit must not be altered or defaced in any way. The Fire Department will inspect your premises if you do not have this permit. If the Fire Department inspection is positive, the Place of Assembly Permit does not have to be submitted.
Certificate of Occupancy for proper usage, which has been stamped by the Buildings Department within the past two years. The Certificate must show the approval for “Use Group 12″ and “Cabaret” or “Eating and Drinking establishment without restriction on entertainment.”
Current Food Service Establishment Permit.
Notarized Affidavit of Security Personnel Background Check.
If you are a SOLE PROPRIETORSHIP or a PARTNERSHIP, the proprietor and each partner must submit a Notarized Child Support Certification form.
License Fee. Must be paid by check or money order payable to NYC Department of Consumer Affairs.

Acceptable forms of Identification include:

1) A valid driver’s license or non-driver identification card issued by the commissioner of motor vehicles, the federal government, any United States territory, commonwealth or possession, the District of Columbia, a state government within the United States or a provincial government of the dominion of Canada.
2) A valid passport issued by the United States government or any other country.
3) An identification card issued by the armed forces of the United States.

BE CAREFUL: Birth Certificates, college IDs or Sheriffs IDs are not acceptable proof of age.

Tips for checking valid ID documents:
Check for tampered or fake documents.
Check the date of birth on the ID.
Check information and photo on the document and compare data to the person presenting the ID.
Check the lamination for unclear edges.
Check for bumps or uneven surfaces on document.
Check for erased ink or alteration marks around the date of birth.
If NYS license, check security laminate for continuous state seal.
Ask for a second form of ID.

On September 14, 2009, the NY State Liquor Authority implemented a program where attorneys can Self-Certify applications that they file on behalf of their clients. The Self Certification Program has been implemented to allow for the quick review of applications that are certified by an attorney to be true and accurate and comply with all statutory requirements. Only applications filed by Attorneys qualify for this program and the NYSLA is stating that applications filed pursuant to this program can be turned around in one month or less!  In order to qualify for the program:
1) ALL questions must be answered and have the correct response. If a question is not applicable to a specific application, “n/a” must be checked and the reason it is not applicable must be given. Use additional sheets to explain if necessary;
2) The application must not require Full Board determination (i.e. 500’ case with objections, new package store applications, percentage rent over 15%);
3) No one other than the applicant holds a security interest in the business;
4) Both the applicant and the attorney must sign the certification. If a partnership, all partners must sign.
This program will be in effect for a six (6) month period beginning September 14, 2009. Applications will be audited to determine if the program should remain in place.
Attorneys participating in the program must submit a monthly report (by the 10th of each month) listing the serial numbers of the applications they have filed under this program.

Consolidated Laws

Article 1 - Short Title; definitions. (Sections 1-3)

Article 2 - Liquor Authority. (Sections 10-19)

Article 4 - Special Provisions relating to Beer. (Sections 50-57-a)

Article 4-A - Special Provisions relating to cider. (Sections 58-59)

Article 5 - Special Provisions relating to liquor. (Sections 60-67)

Article 6 - Special Provisions relating to wine.  (Sections 75-85)

Article 7 - Special permits. (Sections 90-99-g)

Article 8 - General provisions. (Sections 100-130)

Article 9 - Local option. (Sections. 140-147)

Article 10 - Special provisions. (Sections 150-155)

Article 11 - Miscellaneous provisions.  (Sections 160-164)

GENERAL RULE: BYOB is illegal in New York.

You MUST have a license or permit to sell/serve beer, wine or liquor to the public. Venues without a license or permit may not allow patrons to “bring their own” alcoholic beverages for consumption.  In addition, owners of businesses may not give away alcoholic beverages to their patrons.  Those that do are in violation of the NYS Alcoholic Beverage Control Law. 

Applicants should be aware that allowing BYOB without a license may jeopardize their chances for approval of their license.

What are the permitted hours of operation for any given licensee? The hours of operation are regulated by county where the business is located, except for New York City which is regulated by statewide law.

What are the Notification to the Clerk/Community Board and Notification of Publication? On-premises license applicants must notify the appropriate government entity (village, town or city clerk or the appropriate community board if in NYC) as well as the designated newspaper of a pending license application at a particular location.

When filing my application, am I required to submit the entire fee? Yes.

Can I qualify for a temporary permit while I wait for my permanent license application to be processed? To qualify for a temporary permit, the following conditions must be satisfied:
There must be an active license in existence at the premises for which you are applying. The permit and $640.00 fee must be filed simultaneously with the Retail License Application. The temporary permit will expire 90 days from the date of issuance.

Are there any restrictions on the location of my premises? With certain exceptions, applicants for a liquor store license, wine store license and on-premises license cannot be within 200 feet of a school, church, synagogue or other place of worship.

In what instances will criminal convictions or administrative actions by the SLA disqualify my application? Individuals not eligible for a license include: (i) a person convicted of a felony in NYS, including felony DWI; (ii) a person convicted of a crime in another state or federal jurisdiction which would translate to a felony conviction if committed in NYS; (iii) a person convicted of misdemeanors under sections 230.20 or 230.40 of the NYS Penal Law or 1146 of the former NYS Penal Law; (iv) a revoked license will disqualify the licensee for a period of two years; if the revoked licensee was a corporation any officer or director may also be disqualified.

Note: If an executive pardon or a certificate of relief from disabilities is obtained, the convictions are no longer disqualifying in and of themselves, although all convictions may be considered as part of the total merit of the application.

How old must a person be to serve alcoholic beverages as a bartender or a waitress/waiter, etc.? A person must be at least 18 years of age to be employed in a retail premises “as a hostess, waitress, waiter or any other capacity where the duties of such person require or permit such person to sell, dispense or handle alcoholic beverages.” (Section 100.2-a - ABC Law)

How old must a person be to work as a cashier in a grocery store? Grocery store beer licensees may employ a person under 18 as a cashier “to record and receive payment for beer and wine product sales when in the presence of and under direct supervision of a person 18 years of age or over.” (Section 100.2-a(1)&(2) - ABC Law)

What must I do to conduct a teen night in my premises? At least 10 days prior to the event, you must notify the State Liquor Authority, in writing, advising them of the exact dates.

What is acceptable proof of age to purchase alcohol in New York? A valid driver’s license or non-driver identification card issued by the Commissioner of Motor Vehicles, the Federal Government, a State Government, Commonwealth, Possession or Territory of the United States or a Provincial Government of Canada; or a valid U.S. passport, or valid passport of any other country; or a valid military ID from the U.S. (Section 65-b.2(b) - ABC Law)

Can a restaurant deliver beer with a food order? Yes. The Authority has ruled that on-premises licensees may deliver beer in containers along with a food order provided that order is received in the licensed premises. An order received by the licensee in the licensed premises over the telephone (or by fax) complies with this ruling. The Authority’s ruling applies to beer only. The sale or delivery of wine or liquor for off-premises consumption by an on-premises licensee, other than a hotel off-premises (HOP) permittee, is a violation of the law.

If I have a felony conviction, can I work in a licensed premises? On-premises retail licenses (taverns, restaurants, night clubs, etc.) are prohibited from knowingly employing a person convicted of a New York State felony or other specified offenses. No person holding any license, other than a license to sell an alcoholic beverage for retail off-premises consumption, shall knowingly employ in connection with his business, any person who has been convicted of a felony, or any of the following offense listed in Section 102.2 of the ABC Law, who has not subsequent to such conviction received an executive pardon therefore removing any civil disabilities incurred thereby, a certificate of good conduct or other relief from disabilities provided by law, or the written approval of the State Liquor Authority permitting such employment. (See Section 102.2 - ABC Law). There are no prohibitions against a person convicted of a New York State translated felony, or certain specified offenses to be employed on any retail premises licensed for off-premises consumption (i.e. grocery stores, drug stores, or liquor stores).

Can a liquor store take returns of unwanted purchases? No, the State Liquor Authority does not approve the acceptance by a package store of the return of liquor or wine purchased by a customer in error. The State Liquor Authority authorizes package store licensees to accept the return of liquor or wine from a customer only if the merchandise is defective in quality. The bottle should be sealed and tagged with a statement as to the date and reason for its return and should be sent back to the manufacturer or wholesaler from whom it was purchased within a reasonable time.

Does a licensed premises have to take back empty bottle returns if they were not purchased from that premises? Yes, the “dealer” - the retailer - defined by the statute as a person who engages in the sale of beverage containers to a consumer for off-premises consumption in the state, must: accept at his place of business and from any redeemer, any empty beverage containers of the type sold by the dealer, regardless of whether or not the filled beverage container was originally sold by the dealer, and pay the redeemer the refund value of each such beverage container.

What can I do about a noisy or rowdy bar? Contact the police department having jurisdiction at the time the disturbance is occurring. You can also contact the New York State Liquor Authority by way of telephone, written complaint, e-mail, or personal visit to Zone Office. Complainant should make a written record of date, time and nature of disorder documenting specific problems with the licensed premises.

Can a customer bring in his or her own liquor/wine/beer into a licensed restaurant or bar? Yes, with the approval of the licensee and as long as the alcohol product is covered under the license in effect and the patron removes the unconsumed alcoholic beverage upon departing the licensed premises.

How old do you have to be to purchase non-alcoholic beverages? Non-alcoholic beverages do not come within the jurisdiction of the State Liquor Authority, except with respect to the so-called non-alcoholic wines which contain tiny percentages of alcohol. Such wines have been classified by the State Liquor Authority as standard wines that can only be sold in New York State for off-premises consumption by package store licensees. Non-alcoholic products may not be sold in this state by package stores. They may be sold by grocery and delicatessen stores, whether licensed or not. They may be served by on-premises licensees for consumption on the premises, and used by these licensees in the preparation of cocktails and other alcoholic drinks.

What are the provisions of Section 117-a of the ABC law? Unlimited Drink Offerings Prohibited. No licensee, acting individually or in conjunction with one or more licensees shall: offer, sell, serve or deliver to any person or persons an unlimited number of drinks during any set period of time for a fixed price; allow a person, agent, party organizer, or promoter, as such terms shall be defined by the Authority in rule and regulation to offer, sell, serve, or deliver to any person or persons unlimited number of drinks during any set period of time for a fixed price; or advertise, promote, or charge a price for drinks that in the judgment of the Authority creates an offering of alcoholic beverages in violation of the purposes and intent of this section, or which in the judgment of the Authority is an attempt to circumvent the intent, and purposes of this section, such as, but not limited to, offerings of free drinks, or multiple drinks for free or for the price of a single drink, or for a low initial price followed by a price increment per hour or other period of time, or for such a minor amount that in the judgment of the Authority the pricing would constitute an attempt to circumvent the intent and purposes of this section. With respect to an individual licensee, this section shall not apply to private functions not opened to the public, such as weddings, banquets, or receptions, or other similar functions, or to a package of food and beverages where the service of alcoholic beverages is incidental to the event or function. The State Liquor Authority has determined that 2 for 1, half price and Happy Hour specials whereby the price of a drink is not lower than one-half of the premise’s normal or regular price for the same drink does not constitute an attempt to circumvent, the intent and purpose of this statute.

Are football pools, dice games, sign up sheets illegal? Yes, Sections 106.6 and 105.22 of the ABC Law prohibit gambling in businesses licensed for consumption on and off the premises. This includes social, casual and professional gambling. Exceptions are the sale of lottery tickets when licensed by the Division of the Lottery and bingo or games of chance when authorized by the State Racing and Wagering Board.

Does the authority have tips or training for bartenders? Yes. A recent law enacted by Governor Pataki and the State Legislature provides a voluntary Alcohol Awareness Training Program for people licensed to sell alcoholic beverages in New York State and their employees. The Authority has established requirements for the curriculum of the program and approves schools and other entities to teach the program.