So You Want to Start a Brewery or Distillery? Things You Need to Know to Start Your Business on a Solid Legal Foundation: Corporate Structure, Licensing, Intellectual Property, and Lease Agreements

August 16, 2019

Corporate Structure

Consider the best ownership structure for you and your partners. Below are several options for how to set up your business and the advantages and disadvantages associated with each, taking into account factors such as personal liability and income tax implications.

Sole Proprietorship

One individual is the sole owner of the business.


  • Direct control of decision-making
  • Inexpensive to form
  • All profits go to the sole proprietor


  • Unlimited personal liability of the proprietor (i.e., creditors can seek recourse against the personal assets of the sole proprietor to pay off any business debts)
  • Treated as self-employed for income tax purposes, which generally means higher tax rates
  • Difficulty raising capital or attracting investment
  • May be unable to take advantage of government grants or assistance programs such as those offered by the Atlantic Canada Opportunities Agency or the Department of Tourism, Culture, Industry and Innovation

An individual can carry on business with one or more partners by combining their financial resources. An agreement should set out the terms between the partners, including how each individual shares in the profits of the partnership and how disputes are settled. A partnership agreement should be drafted with the assistance of a lawyer to make sure everyone’s interests are protected.


  • Usually inexpensive to form
  • Sharing of the management costs of the business


  • Unlimited personal liability of the partners (i.e., creditors can seek recourse against the personal assets of the partners to pay off any business debts)
  • Partners are self-employed for income tax purposes, which generally means higher tax rates
  • Joint liability—you may be held liable for a decision relating to the business made by your partner
  • Difficulty raising capital or attracting investment
  • May be unable to take advantage of government grants or assistance programs such as those offered by the Atlantic Canada Opportunities Agency or the Department of Tourism, Culture, Industry and Innovation

An incorporated business is its own legal entity that is separate from the shareholders (owners). A corporation may carry on business, incur liabilities and own property and the profit or loss from these activities belongs to the corporation rather than the shareholders or directors. It is important to seek legal advice when incorporating to ensure each shareholder’s rights and obligations in relation to the company are clearly set out.


  • Limited liability of the shareholders (i.e., creditors cannot seek recourse against the personal assets of a shareholder); however, it should be noted that borrowing from an financial institution will almost always involve a personal guarantee from the shareholder(s)
  • An attractive vehicle to raise capital from investors
  • Possible tax advantages through the combination of lower corporate income tax rates (allowing for tax deferral opportunities) and compensation strategies (i.e., whether paying yourself for your services to the corporation through dividends, as an employee, as an independent contractor, etc.)
  • Ability to provide equity incentives to employees (shares and/or stock options/bonuses)
  • Funding from government grants and assistance programs is more accessible
  • A Unanimous Shareholders Agreement drafted by a lawyer allows the shareholders freedom to decide their roles and rights in relation to the business and share ownership


  • Can be more expensive than the alternative options
  • Corporations are required to file a separate tax return from the shareholder(s)
  • Negotiation of Unanimous Shareholders Agreement can be expensive (however, for a company with growth potential, they are a key component of incorporating)


Provincial legislation and regulations require a business brewing, distilling or selling alcohol or spirits to obtain certain licenses. To lawfully brew beer or distill spirits you require a license under the Liquor Control Act (Newfoundland and Labrador) and its regulations. Further, consider if your business classifies as a “brew restaurant” or a “lounge” under the regulations and how that can affect the licenses you require.

Brewing beer also requires submission of a notice of “food and beverage” undertaking under the Environmental Protection Act and regulations.

Intellectual Property

Logos are important, especially for consumer products like beer and spirits. Beer consumers often purchase clothing and accessories bearing a business’s logo, generating further goodwill. Trademarks can help you protect your logo and your brand. By federally registering the logo/name in your current market you have the right to demand that others do not use a similar name/logo in the market. If you spend the time and effort building a brand based on a name and logo and someone federally registers a similar mark or name in a market you may want to enter as you grow, you may face infringement liability for using the name or logo.

Lease Agreements

Brewing beer and distilling spirits are asset-heavy businesses requiring ventilation, drainage, etc. Make sure that your lease addresses these assets, to what degree they may be incorporated into the space, and who is paying for their installation. The lease should also address who holds what rights in the assets in the event the lease is terminated.

Craft breweries and distilleries are often start-ups with limited resources. Commercial leases are generally 3-5 years and may be one of the largest financial commitments your start-up makes. Newfoundland and Labrador has no legislation governing commercial leases, so it is important to consult a lawyer to make sure you understand what you are agreeing to over the term.


Like other entrepreneurs, craft brewers need to navigate a myriad of business decisions, but there are certain considerations that are unique to the industry. Consulting a lawyer as early as possible will help you identify and prepare for circumstances that will impact your business as it grows. If you have started or are planning to open a brewery or distillery in Newfoundland, Thomas Munn and the lawyers at Cox & Palmer have the experience to advise you at all stages of your business so that you can focus on your brewing.


Thomas is an associate at Cox & Palmer’s St. John’s office, practicing in corporate and commercial law, with a keen interest in the entrepreneurial community. He is currently a member of Cox & Palmer’s Start-Up Practice Group.

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