A new law will soon greatly benefit all New York State Liquor Authority liquor license applicants.

The new law (S.6231C) which will take effect in October 2010, creates a new program within the NYSLA whereby an applicant for a liquor license can receive a temporary permit while waiting for their liquor license application to be processed. Presently, an applicant can only receive a temporary permit if they are purchasing a business which already has a liquor license. The new temporary permit program will be a one year pilot program and should allow applicants to serve alcohol via the temporary permit within just weeks of applying.

The bad news . . .this new program is currently slated to apply to applicants located OUTSIDE of New York City only.

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.

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.  We’ve gotten conditional letters of approval for our self-certified liquor license applications within just one week from the date that we filed the applications! This allowed my clients to serve booze within just a couple of weeks of the date that I filed their application. . . a process that used to take months.  Kudos to the New York State Liquor Authority on this self certification program.   

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.