It’s that time again! It has been a busier week than I had realized, there’s a lot to cover, so get ready. Here’s my summary of the best articles in (small) Business and (craft) Beer
This year has some special issues going on for personal and corporate/business taxes. Here’s a good summary of upcoming changes that you need to know about The Fiscal Cliff: 3 Tax Changes You Need to Know Are Coming: http://www.entrepreneur.com/blog/224051
When you’re a startup company, you need a lawyer (whether you think you do or not). One question comes up: do you pick a lawyer from a big firm or a small firm or solo? Hiring a Lawyer for Your Startup – Big Firm or Small Firm? http://www.jdsupra.com/legalnews/hiring-a-lawyer-for-your-startup-big-f-23236/?utm_source=jds&utm_medium=twitter&utm_campaign=bizlaw
The title says it all: What to Know About Investing in Your Own Business: http://smallbusiness.foxbusiness.com/finance-accounting/2012/07/16/what-to-know-about-investing-in-your-own-business/
Every business has that one (or sometimes more than one) employee that’s a little… out there. I’m thinking red Swingline staplers here. How do you deal with them? Especially if their the wunderkind that’s helping you stay afloat? How to Manage Your Smartest, Strangest Employee: http://blogs.hbr.org/cs/2012/07/how_to_manage_your_smartest_st.html
Since we’re talking about employees here, have you ever had anything go… missing? If you run a business with employees, you need to understand your legal rights (and obligations) regarding employee theft. Employee Theft and Fraud in the Workplace: Legal Considerations http://smallbusiness.jdsupra.com/post/employee-theft
Working for tips? What are the tax rules around tips? Think you know? You may not. When is a Tip Not a Tip? – When the IRS Says So. http://smallbusiness.jdsupra.com/post/when-is-a-tip-not-a-tip-when-the-irs-says-so?utm_source=jds&utm_medium=twitter&utm_campaign=bizlaw&utm_term=+&utm_content=+
Here’s the “hot sheet” of current Employment Law trending topics -> Lewd Conduct, Lactation Accommodation, and Other Steaming Hot Employment Law News! http://www.jdsupra.com/legalnews/lewd-conduct-lactation-accommodation-a-84063/?utm_source=jds&utm_medium=twitter&utm_campaign=bizlaw
Veering away from employees and over to leadership, here’s a good article on how leaders make the bridge between the strategic and the tactical. How Smart Leaders Translate Strategy into Execution: http://blogs.hbr.org/cs/2012/07/how_smart_leaders_translate_st.html
Can’t let a week go by without a social media legal issue. This seems like a “duh” moment, but, if you didn’t know… You Don’t Own Your Tweets: http://www.jdsupra.com/legalnews/guess-what-you-dont-own-your-tweets-45112/
(Craft) Beer Business
eBay auctions for beer bottles that just *happen* to be full (wink wink nudge nudge) have been an ongoing issue for the Craft Beer industry. Here’s Cigar City’s take. An eBay Auction that the Brewery Embraces: http://beerpulse.com/2012/07/an-ebay-auction-that-the-brewery-embraces/
Trader Joe’s has their house brand(s) of beer contract brewed at some very respectable breweries and offer some seriously good beer at reasonable prices. But… there’s trouble “brewing” in TX. Dispute Brewing at Trader Joe’s: http://www.star-telegram.com/2012/07/15/4101255/dispute-brewing-at-trader-joes.html
Midwestern (and global) drought. It’s starting to show signs of impacting the food market for grain. Will beer and rbewers be impacted? Grain Prices Pushed to Record Highs: http://www.reuters.com/article/2012/07/20/us-usa-drought-idUSBRE86F1D420120720?feedType=RSS&feedName=environmentNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2Fenvironment+%28News+%2F+US+%2F+Environment%29
Jolly Pumpkin et. al. getting a new, expanded, operations base. Northern United Brewing Company (owners of Jolly Pumpkin Artisan Ales and other beer brands) is opening an larger brewing facility in Dexter MI. Thank goodness Ron Jeffries will still be overseeing the beer! Jolly Pumpkin’s Parent Company Opening New Facility Expandable to 150k Square Feet: http://beerpulse.com/2012/07/jolly-pumpkins-parent-company-opening-new-facility-expandable-to-150k-square-feet/
We’ve talked about cans before (“That’s right, cans.”), but have you considered that some beers or brands might work better in cans than in bottles, simply because it’s in a can? Here’s Midnight Sun’s Experience, “[they did ] ‘okay’ in our 22-ounce bottles…. When we put them in cans, they started flying off the shelves….” Alaska Beers Get Canned: http://www.anchoragepress.com/food_and_drink/brew_review/alaska-beers-get-canned/article_cb5ee510-d1ee-11e1-b3f9-001a4bcf887a.html
Just for Fun
If you don’t read Mental Floss, you totally should. Give it a day, or just follow them on Twitter. It’s addictive. http://mentalfloss.com/
- Three Matts new brewers in capital (stuff.co.nz)
- Capital’s craft beer reputation grows (stuff.co.nz)
- Reboot Charlotte: Breweries Tap Into NoDa’s Artistry (foxcharlotte.com)
- Small Brewers Are Fermenting Hope for Passage of Brewery Law (njspotlight.com)
- Minn. Craft Beer Gives All To Fight Invasive Species (minnesota.cbslocal.com)
Wait, no. I mean intentionally a non-profit organization? I’m sure there are plenty of brewer/owners out there that would readily admit that their business is currently a “non-profit.” I mean, in the legal, tax-status sense.
And the answer is: maybe.
Classic lawyer-speak, “maybe.” What I really mean is that maybe you could, but I don’t think you would want to. But here’s what goes into the analysis:
In order to be a non-profit organization, you have a “charitable purpose.” You can fill out your state paperwork to incorporate as a non-profit corporation (for example, in NC) and be an “entity.” But then, to get the tax benefits, you need to apply for tax exempt status at the IRS. NC, like many states, simply follows the Federal decision on whether your company is tax exempt or not. And, here’s the kicker, a main goal of your company cannot be “to make money.”
If I can’t make money, why would I start a company? – I hear you ask. Well, the answer to that is, generally, you wouldn’t.
But, there are those that want to give back to the community, help out the less advantaged, etc, without assuming all the personal liability or to go after serious fundraising. I work with several non-profits that focus on everything from providing job training to at-risk youth to providing a home for abandoned children. That’s what the non-profit business structure is made for and where it works best.
Well, can’t I make a little money? – Aha! Sure enough, there’s an entity called an L3C or Low-profit Limited Liability Company.
Many states allow L3Cs, such as NC, but many states do not, so you need to be sure of what your state does and doesn’t allow. L3Cs, generally, are sort of a hybrid between non-profits and for-profits. For an L3C, the state expects you to (1) have a business that makes money and (2) have a “charitable purpose” that uses the money that the business makes. A good example might be a church or community thrift store. No one opens a church thrift store thinking they’ll retire to the bahamas in a few years. It’s meant to be low-profit. An L3C, just like a non-profit, can pay employees and raise funds. What it can’t do is “intend” to make money for the sake of making money or for the sake of the owner(s).
But what about breweries?
So, how does all that relate to a brewery? Well, as a start-up, a brewery (at least typically) has a long, tough slog to get to being profitable. Could a brewery be a non-profit during that time to ease the expenses (especially the taxes). Answer: No.
The State, and especially the IRS, are going to say that you don’t have a charitable purpose as the goal of the business – so you won’t get your tax-exempt status. Even if you did get your tax-exempt status, you’d lose it eventually as you paid the owners more and more over time, then the IRS might come after your for tax fraud (remember, it brought down Capone!).
Could a brewery be an L3C? Well, yes, actually.
Let’s take the Trappist Abbey of St. Sixtus of Westvlateren as an example (assuming that Westvleteren was in North Carolina – aside: wouldn’t that be AWESOME?!?). The monks at the Abbey have often been asked if they’re going to increase production. They’ve replied (I’m paraphrasing here) “We brew beer so we can afford to run the Abbey and be monks, not the other way around.” This attitude and set-up would be a perfect model for an L3C: a business tightly linked to a charitable purpose where there is little or no excess profit.
But, Westvleteren is a special situation. After all there are only 7 Trappist breweries in the world. It would take a very special set of circumstances for a brewery to want to be an L3C organization and for an L3C to fit the business plan/model.
So, I’ll end this the way I started, I think a brewery could be a non-profit or an L3C, but I’m not sure that a brewery would want to.
- TurboTax – Are 501C3 Stock Investment Profits Tax-Exempt? (turbotax.intuit.com)
- Roald Smeets – Westvleteren Brewery (roaldsmeetsbeerinbelgium.wordpress.com)
- IRS Announces that 501(c)(3) Non-profit Organizations which Lost their Tax Exempt Status Are Now Eligible to Apply for Reinstatement (prweb.com)
- Heightened Scrutiny on Non-profits by IRS (getirshelp.com)
- IRS workshops help nonprofits retain tax-exempt status (jsonline.com)
- An Open Invitation for Heart-Centered Entrepreneurs:July 9th Launch of Special Q&A Sessions to answer questions on Non-Profit,501©(3),Tax Exempt and Funding processes (prweb.com)
- Ann Arbor-area brewer helps craft new state rules for small breweries (annarbor.com)
I’ve been thinking about the Big Beer companies, the big and the getting-bigger companies.
The story starts a few weeks ago. I had been watching a thread on a forum where a homebrewer started off by saying something like “I can’t drink macro lager anymore. I can’t believe anyone who like craft beer can stand to drink that other stuff.” There were a lot of comments like “I can’t drink that swill,” or “there’s no substitute for flavor.” There were some comments to the tune of “yeah, but at the ball park or the beach on a hot day,” or “I still have a macro beer at a party now and then.”
So here’s my thinking: Whether you like their product or not, you have to give credit to the breweries that are turning out light american lager on a global scale. Any homebrewer that has tried to do it can tell you that Light American Lager is a *very* difficult style to brew and brew well. Yet, here are the massive companies turning out millions of gallons of the stuff all over the world and achieving flavor and production consistency that most small commercial brewers can only hope to emulate. Clearly, these macro breweries know their business and have the brewing down to a science. Folks like AB-InBev, MolsonCoors/SABMiller have developed, used, re-invented, and forgotten more beer science than most people will ever know. They have their process control tight and their Quality Control tighter. They know how to brew beer.
And they’ve got money. And they’re not stupid – they’re watching the steady growth of craft beer year over year. And they’ve got to want in. Examples of attempts include everything from AB-Inbev’s Shocktop and Amberbock to MolsonCoor’s Blue Moon. Some forays are more successful than others (Budweiser American Ale anyone?).
So: (1) they’ve got the money (i.e. capital to invest), (2) they’ve got the science know-how, (3) they’ve got creative people (surely out of those hundreds of thousands of employees, someone’s got to be creative right?), and (4) they’ve got the marketing and desire to do it. Why aren’t they bigger players in the craft beer segment. Some have turned to buying up craft breweries to help augment their foothold, but these guys are science and marketing juggernauts, why do they struggle with getting into craft beer?
This seems like a conundrum from the outside. I have my thoughts on why this is, I’m sure you do too. My question here is, what do you think the long term role of the marcro beer companies is going to be in the craft beer market segment?
- Budweiser: The Great American Lager No More? (winemag.com)
- Why the hell would you open a brewery? (jslawcenter.wordpress.com)
- For the Love of the Craft Brewer (winemag.com)
- Oregon craft beer production up 5.5 percent in 2011: 1.168 million barrels (oregonlive.com)
- “Budweiser, Coors & Miller aren’t brewed by American companies. Support your local craft brewery this 4th of July.” (elephantjournal.com)
- MillerCoors Nabs Nine Medals at 2012 World Beer Cup (sacbee.com)