How to start wholesale liquor business
December 29, 2020 | Last Updated on: March 3, 2023
December 29, 2020 | Last Updated on: March 3, 2023
Alcoholic beverages are one of those things that never goes out of style, and there never seems to be a shortage in demand for new businesses selling and moving beverages around to customers. Even so, starting a liquor business isn’t quite as easy as starting a company in another industry, for many obvious and not-so-obvious reasons. There are more taxes, regulations, and rules in the liquor world than almost any other industry, so how do you actually start a business? In this article, we’ll take a look at how to start a wholesale liquor business.
Operating a wholesale liquor business is a bit different than selling booze at the grocery store. Buying wholesale in the adult beverage industry means that you’re buying alcohol directly from the manufacturer or wholesale distributor and then passing those beverages on, either to a retail business or directly to a customer in a retail store. How much is paid and how much the liquor is sold for (profit margin) will vary, but the concept remains the same in every case. The three-tier industry of manufacturers/distilleries, wholesalers/wine & spirits suppliers, and retail outlets means that there are multiple opportunities to get involved and make a profit.
Now that we know what wholesale liquor is, we’ll get into the steps to open a wholesale liquor business. We’re going to focus on the process that will be involved in selling in a retail environment, rather than starting a business to pass liquor on to other sellers, though many of the steps are the same along the way.
The first thing you’ll have to do is register your business as an official entity with your state and local officials. Deciding how to structure your business can be a stressful decision, but keep in mind that if you decide to start as a sole proprietorship or as a limited liability corporation (LLC), you can incorporate or change that structure later to fit a growing business or changing business needs. Each structure has its own legal, tax, and regulatory requirements, so it’s important to understand where your limitations lie. The goal of your business is to grow and expand, so you’ll need to make sure that the structure you choose won’t hold back that growth when the time comes.
Even before you start applying for your liquor license (we’ll get into that), you may need to register your business with state and local agencies as an organization that sells or resells alcohol and adult beverages by law. This will most likely differ depending on the type of wholesale business you want to open. If you plan on having a retail location, that will carry an entirely different set of requirements than a warehouse/shipping business might have. Each state has its own requirements, so take a look at your state’s website to get a handle on what you’ll need to do.
Now comes the hard part. After you’ve jumped through the hoops to register your business as a legal entity, you’ll have to get a license to sell liquor. Laws and regulations around the sale of alcoholic beverages can vary wildly from state to state, and each place can have its own alcohol and tobacco tax and trade bureau (TTB), so we’ll focus on the high-level steps involved in applying for a license:
Before you apply, remember that some states and local municipalities have limits on the number of licenses that can be issued in a location. If that quota has been hit, you’ll have to wait until the designated time period has passed. Alcohol distribution and liquor distributors still have to abide by these regulations, so take the time to understand them.
Gather your documentation. You’ll have to provide your business paperwork to the licensing body, which may include documents that outline the structure of your business, tax ID or financial information, personal information, references, and more.
Print an application from your state’s website and fill it out completely. Any missing or inaccurate information can cause a significant delay in your application and could lead to the application being denied. Your local small business administration may offer help in the application process.
Once you’ve jumped through the hoops at the state level, you’ll need to get through the process at the local level. In some places, this means going to a town meeting and making the case that you’ll be a positive and responsible business owner. You’ll have to show that you understand how to prevent underage alcohol sales, demonstrate that your business will be located an adequate distance from schools, churches, daycares, and other sensitive places, and may have to handle zoning questions. Just like each state has its own requirements, every town within those states will have its own local ordinances on liquor sales. If you’re planning on selling beer and wine in addition to liquor, you may have to apply for a different license than if you were selling one or the other
In some places, this process may also involve registering with liquor distribution sources, alcohol beverages suppliers, wine distributors, retail outlets, and more (see below)
After you’ve registered your business, applied for a license, and made it through the local process, you’ll have to find a distribution company to purchase from. You can search Google for reputable and reliable liquor suppliers that operate in your area, or you might be able to check with the local alcoholic beverage authorities to get that information. Different suppliers carry different things, so you may need to set up a relationship with more than one company to get the inventory you need to operate your business.
Also, keep in mind that you’ll want partners that can accommodate your growth. Setting up a new relationship with a vendor can put a real damper on business growth, so it’s important to find those partners that are on board to help you grow. Be aware that suppliers are under many of the same regulations that you are, even more in some cases, so it’s vital that you take the time to find a partner that is operating in compliance with federal, state, and local laws, and that obtains its products legally.
Taxes and fees are a huge part of liquor compliance laws, and if a business has fallen behind in one aspect or another, they may have temporarily lost the ability to sell. You may not know this right away and there’s no real way to prevent it from happening, but trusted partners will let you know as soon as possible to help prevent business interruption. If a supplier falls behind and tries to continue operating normally anyway, they can find themselves in a heap of trouble and may even end up dragging your business down as a result.
It may sound silly that a wholesale liquor business could be a trusted and positive influence in the community, but that’s just what we’re after here. In order to actually make money, you’ll have to attract customers, and one way to do that is to promote yourself as a legitimate and healthy part of the community. Social media pages like Facebook and Instagram are great ways to show off your business and advertise products that you have on sale, but they’re also a direct connection to the people that you’ll need to support your business and keep it afloat.
Traditional methods of marketing such as newspapers may be off-limits in your area, so you’ll need to check your local regulations to be sure that you’re not breaking any laws before trying to run an ad. There’s a great chance that the advertising managers at your local paper will know whether or not you can actually advertise a certain product, but it’s a good idea to do your own research, nonetheless.
Trade shows are another great avenue to get your name out into the business community. You may not reach customers directly, but conferences and shows will help you meet new suppliers, network with other business owners to get ideas about how best to grow your operations, and to see the latest technology and products from around the world.
Opening a business of any kind is an exciting process, but wholesale liquor business owners have to be extra careful about how they operate and promote their operations. You’ll find that, beyond all of the normal stresses of operating a business, you’re responsible for all manner of legal, regulatory, and financial obligations that companies in other industries are not. Also, unlike other industries, missing a step or messing up one part of the process can lead to serious legal consequences and perhaps even jail time in some places – a concern that most other businesses don’t have to tackle. That’s not a warning to dissuade you from opening a wholesale liquor business, but it is a caution that operating carelessly can have serious consequences. Take care of your licensure and make sure that you’re properly vetting customers and suppliers, and your wholesale liquor business will roll on without problem.