I get an Email, asking if I would want a story by Vic Lance, founder and president of Lance Surety Bond Associates, a surety bond expert who helps small businesses get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business. He was offering information for getting a license bond when opening a winery.
My answer: “Just send what he’d write, I’ll do the rest, okay?” The rest was sent. As I read it, I realized that it was a really well written advertisement, which was the ulterior motive. But, this one was so well written and completely out of my purview.
Print it as it exists. It is a good public service announcement. My labor for this blog came from changing the code, behind the scenes, so that when you click on links, you also don’t have to leave the page.
I declare that this is not an endorsement. I don’t know Vic Lance, but his biography is formidable, and all pdf. files are good links for you.
Vic Lance of Lance Security Bond Associates
If you’re in the wine business, chances are you could be described as “detail-oriented.” Anyone who’s opened his or her own winery knows the importance getting every last detail right. But, while you might be more worried about varietals and cultivars, have you studied up on getting your liquor bond?
The liquor bond, also called an alcohol bond or a liquor tax bond, is required by the federal government for any legally-operating winery. Whatever you call it, it serves as a guarantee to the government that your business will pay all its required taxes. In many cases, your state or county authority will require a separate liquor or wine bond for your winery, in addition to the federal requirement.
While the process of getting bonded isn’t complicated, there’s a little more to it than simply filling out a form and paying a fee. We’ve created this handy guide to getting your liquor bond, so you can get the best value and protect your business.
Getting licensed with the TTB
The first step is to get licensed with the Alcohol and Tobacco Tax and Trade Bureau (TTB). Officially, if you’re producing your own wine for commercial sale, the TTB considers your business a “bonded winery.” As such, you’ll need a basic alcohol permit from the Federal Alcohol Administration, and a permit to establish and operate wine premises
Why is the liquor bond required?
Along with the permit applications, you’ll have to submit proof of your wine bond. Should you fail to pay your taxes, the government can file a claim against your bond, which the surety will pay, up to the full amount of the bond. You’ll be required to pay the surety back in full, however, and a claim against your bond can have otherwise grave consequences for your business. If you avoid claims and stay on top of your taxes, the liquor bond requirement should be a relatively minor, and hassle-free, part of doing business.
Estimating the cost of your wine bond
The amount of your federally-required bond can vary widely, based on the size of your winery and how much tax liability you will have at a given time. Generally, wineries with stock valued below $50,000 follow slightly different rules than larger wineries. The cost of your bond will only be a percentage of your total bond amount, depending primarily on your credit score. Applicants with good credit, and a sound history of money-management, usually pay between 1% and 4% of the total amount.
You may have heard a rumor that anyone with bad credit can kiss their dreams of winemaking goodbye. In fact, with a reputable surety provider and a solid plan for your financial future, you can still get bonded with less-than-perfect credit. Premiums are generally higher, between 5% and 15% of the total bond cost, to mitigate the risk to the surety. Nonetheless, you will still be able to open your winery, and improve your financials over time.
In addition, remember that your state or county may have additional bonding and licensing requirements.
Getting the right bond for your money
Not all liquor bonds are created equal, and you want to be sure that the TTB recognizes yours as legitimate. Since surety companies don’t deal directly with the public, look for a surety bond agency that works only with A-rated, Treasury-listed surety companies. A reputable surety bond agency will shop around to get you the best rate on your bond, and can offer more personalized service for each applicant.
Giving your winery room to grow
Since your wine bond will be calculated based on your tax liability, an honest, accurate assessment of your business is a must. Plan carefully when it comes to where your product will be stored, and if you can hire a CPA with some winery expertise, then so much the better.
Remember, it’s better for your business to be bonded above your actual tax liability than below. The wine business can fluctuate drastically, and your tax rate can change from one year to the next, based on how much wine you make, or even a wine’s alcohol percentage per volume. You don’t want to be caught with a bumper crop, or a sudden surge in production, without adequate bond coverage. If you’re unsure about the year’s business forecast, give your winery a little room to grow.
The process of getting your winery licensed and bonded might seem intimidating at first. If you have any questions about how to get bonded, you can always leave a comment below.
Vic Lance is the founder and president of Lance Surety Bond Associates. He is a surety bond expert who helps small businesses get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.
Just remember that as of January 1, 2017, the majority of applicants for new winery TTB permits will not be required to hold a bond. Small wineries, in particular, will likely not need bond coverage if they stipulate what their forecasted production will be along with their permit application. Check with your compliance consultant for details.
Great update, Jon!