Navigating the Process of Obtaining a Liquor License

For a business owner or entrepreneur looking to obtain a liquor license or buy a licensed business, the process of applying for and receiving approval from the Michigan Liquor Control Commission (“MLCC”) can be daunting and, at times, frustrating.

Depending on the business you are running or hoping to run, there are several different types of liquor licenses and permits that allow you to sell alcoholic beverages to the public for consumption on-premises or off-premises, as well as for retail sale or manufacture of alcohol. The following is a high-level look at the application and approval process for obtaining what is known as a “Class C” on-premises, retailer license – this is the typical liquor license that is needed to serve beer, wine, and liquor to the general public for consumption on-site, at a bar or restaurant – that is being purchased as part of a sale and purchase of a seller’s business assets.

Prepare a Purchase Agreement: When representing a Buyer, we typically recommend preparing two separate purchase agreements:

• An Asset Purchase Agreement (“APA”), for the purchase of the Seller’s business assets, and
• A Liquor License Purchase Agreement (“LLPA”), for both the purchase of the Seller’s liquor license and permits and to control the Buyer’s application process.

Apply for the License:

• The buyer will apply to the MLCC for the license and permits it wishes to purchase.
• If the Buyer is interested in seeking a “conditional license” – which allows the Buyer to sell alcohol while waiting for approval of the permanent license – this is the time to submit that application as well.
• Along with the application, the Buyer will submit a wide variety of other materials, including, but not limited to, a fingerprint scan, its corporate governance documents, the lease or deed for its premises, the LLPA, etc.

MLCC Processes Application(s):

• As it reviews the Buyer’s application materials, MLCC will often send notices that include requests for additional materials or information – these are called Notices of Deficiencies (“NOD”). Timely responses to NODs help keep the process moving.
• An MLCC Investigator will reach out to schedule an on-site interview with the Buyer.

MLCC Investigator’s Report:

• After the interview, the MLCC Investigator will follow up on any open items or questions. Timely responding will keep the process moving toward completion of the Investigator’s report.
• If the Buyer has applied for a conditional license, it is typically sent to the Commission for approval while the Investigator finalizes their report. Once approved, the Commission will issue an approval order.

Closing the APA and Issuance of Conditional License:

• Suppose the Buyer has applied for and received approval for a conditional license. In that case, the parties will generally close the sale under the APA (“APA Closing”) and transfer the business assets to the Buyer.
• As part of the APA Closing, the parties must identify the alcoholic beverage inventory being purchased. Per the Michigan Liquor Code, the alcoholic beverage inventory must be sold and paid for separately from the rest of the Seller’s assets and inventory.
• Following the APA Closing, the Buyer submits any final documents required under the approval order for the conditional license to be issued. The conditional license is issued, and the Buyer can operate the bar or restaurant.

Permanent License Process Continues:

• When the investigation is finished, the MLCC staff sends its recommendation to the Commission, which votes at a meeting to approve the transfer, and an approval order is issued.

Liquor License Closing:

• When the approval order for the permanent license is issued, the Buyer pays the purchase price, and the parties sign final documents confirming that the Seller has transferred its liquor license.
• The Buyer submits these final documents to MLCC, and a new license is issued to the Buyer. The Buyer now has its full, permanent liquor license and permits for operating its bar or restaurant.
• Next up – ensure compliance with the requirements outlined in the approval order, and don’t forget to renew in April!

Engaging a hospitality attorney with experience dealing with the MLCC, and its processes, forms, and requirements can save you a lot of time – not to mention headaches – as you work through the MLCC’s application and review process. A hospitality attorney can ensure the appropriate application is completed and correct materials are provided and can be the MLCC’s point of contact to ensure their requests are responded to promptly.

If you need assistance navigating the process of obtaining a liquor license, please connect with a member of the Rhoades McKee Hospitality Services & Liquor Law Team.