A liquor license is a permit required by any business that wants to sell or handle alcohol.
Brick and mortar businesses such as restaurants, liquor stores, bars, nightclubs, and grocery stores require liquor licenses. Manufacturing, distilling, importing, wholesaling, or warehousing alcoholic beverages requires a liquor license. Liquor licenses are even required to sell alcohol on planes, trains, and boats! Liquor licenses are also commonly referred to as ABC (Alcoholic Beverage Control) licenses.
The most common types of liquor licenses are the retail licenses, and fall into two broad categories: On-Premise and Off-Premise licenses:
On Premise licenses permit alcohol to be sold for consumption on the premises of the business. There are three common variations:
Off Premise licenses permit alcohol to be sold for consumption off the premises of the business. There are two common variations:
There are actually 75 different types of liquor licenses in California, and you can find the complete list on the ABC’s License Type webpage.
There are three common variations of On-Premise licenses, which permit alcohol to be sold for consumption on the premises of the business.
On-Sale Beer Licenses authorize the sale of beer only. Type 40 licenses are issued to bars and taverns; full meal service is not required, but sandwiches or snacks must be available for customers.
On-Sale Beer and Wine Licenses authorize the sale of beer and wine. Type 41 licenses are issued to restaurants, which must maintain kitchens and generate the majority of their revenue from meals consumed on the premises. Type 42 licenses are issued for bars and taverns; food service is not required.
On-Sale General Licenses authorize the sale of beer, wine, and distilled spirits. Type 47 licenses are issued to restaurants, which must maintain kitchens and generate the majority of their revenue from meals consumed on the premises. Type 48 licenses are issued to bars and nightclubs; food service is not required.
Off-Premise licenses permit alcohol to be sold for consumption off the premises of the business. There are two common variations:
Off-Sale Beer and Wine Licenses authorize the sale of beer and wine in original, sealed containers. These Type 20 licenses are generally issued to brick and mortar stores.
Off-Sale General Licenses authorize the sale of all types of alcoholic beverages in original, sealed containers. These Type 21 licenses are also generally issued to brick and mortar stores.
Generally, yes. Transferring existing liquor licenses has several advantages over applying for new ones. The wait time to receive the license is typically shorter: the ABC quotes an average of 75 days for license transfers vs. an average of 90 days for new licenses. Transfer fees are generally lower than new application fees. Also, depending on the location, new licenses have a greater risk of denial and occasionally require additional city permits that can add 2 to 3 months to the licensing process.
Liquor license transfers are difficult at best: the forms are complex, and the information ABC investigators look at varies depending on the business and applicant. There is no “one size fits all” answer, and it’s best that an experienced Agent guide you through the process. Remember, mishandled liquor license transfers can delay closing escrow for months or even result in the ABC denying the transfer completely, which can torpedo the entire sale!
The ABC performs two investigations to determine an applicant’s qualifications before approving a license. They run:
Personal Background Checks on each applicant and their spouse, plus any associated companies. Applicants with moral turpitude charges on their police record, a history of insobriety, who falsified their application, who are not direct owners of the business, or are underage will be disqualified. All applicants must be U.S. citizens or legal U.S. residents.
Premises Checks on the business, which differ for license transfers vs. new licenses. License Transfer applicants must complete detailed diagrams of the premises, the real property, and the surrounding area. New Licenses where the premises are too close to a school, church, hospital, playground, or may disturb local residents can be denied. Locations in high crime areas, in areas not zoned for alcohol sales, that may create public nuisances, or where applicants do not have legal tenancy may be denied.
The process of applying for a liquor license is somewhat complex but can be viewed as four steps.
In the Initial Filing, applicants must meet with the ABC in-person and complete the application package, as well as submit other required paperwork.
Then, during the Notification Period, the applicant must post the Public Notice of Application on the premises for 30 days to notify the general public of the pending liquor license.
The ABC will conduct their Investigation to determine if both the applicant and the premises qualify for the transfer or new license.
Once the notification period and investigation are complete, the ABC will conduct their Final Review; if the application package is correct and the investigation was clean, the ABC will issue the permanent license and escrow can complete any remaining tasks and close.
Liquor licenses average 75 days for a license transfer and 90 days for an original license. Here’s the breakdown:
10 to 14 days to get an appointment (or a response) from the ABC, where the Buyer submits the complete application package.
30 days for the on premises posting period.
45 days average for license transfer investigations and an average of 60 days for new license investigations. This happens concurrently with the posting period.
10 to 14 days for ABC to issue the permanent liquor license, but only after escrow has received all license clearances and 100% of the Buyer’s purchase funds have been deposited.
Yes, a Buyer can take over a business using a temporary liquor license.
However, this multiplies the number of things that can go wrong during escrow and adds unacceptable risk to both Buyers and Sellers. Escrow will not disburse purchase funds to Sellers until the permanent license is issued, yet the Buyer is already in possession of and operating the business. Buyers take the risk that even though they’re in possession of the business, the Seller has outstanding debts to state agencies that will prevent escrow from closing.
Transferring the business without a permanent liquor license is simply not worth the risk.
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