United States: Succession Planning And Craft Brewers: Transitioning Your Legacy

You've spent the last 20 years working hard brewing great beer, providing a living for yourself and your employees, and establishing a conscientious reputation in the community.  Now, you're starting to ask yourself, what's next?  Or perhaps, how do I protect what I've worked so hard to build?  Or, maybe you haven't been at this for 20 years, but you've been watching the increasing consolidation in the craft brewing industry and are wondering what it means for you.  In either event, time spent focusing on your succession plan will be time well spent.

Recognize the Differences.  A succession plan is a plan to transfer management responsibilities, legal control, and economic ownership to one or more successors upon your retirement, disability, or death.  When you started your brewery, all three of these hats (management, control, and economic ownership) were likely worn by you.  As discussed below, these hats can be worn by different people, which provides a great deal of flexibility in the succession planning process.  (While the following discussion refers to stock, the same principles apply to membership interests in limited liability companies (LLCs)).

Give Yourself Time.  Establishing an effective succession plan (particularly if it does not involve a sale to a strategic buyer or non-craft brewer) takes time.  Allow yourself ten years for a smooth transition.  With proper planning, a succession plan can protect your retirement income, promote family harmony, preserve your craft culture, retain key non-family managers, provide continued employment for your employees, facilitate a management buyout, and save taxes.

Keep it in the Family . . . Or Not.  A stumbling block for the owners of many closely held businesses is the desire to treat children equally.  Treating children "fairly" is not the same thing as treating them "equally," and, in the closely-held business context, fair treatment is the recommended course.

If your children are too young for you to know whether they have any interest in your brewery, your succession plan should focus on selling the brewery to an outside party or identifying and retaining key non-family management personnel who can continue the brewery until your children are willing and able to run the brewery.  Your plan should also include independent board members to serve as stewards of your legacy.

If your children are willing and able to run the brewery, the focus of your succession plan will shift to transferring the brewery to your children at the lowest transfer cost, while ensuring your own financial comfort.  If only one of your children is working in the brewery and if you have sufficient other assets in your estate, you could leave the brewery assets to the child who is active in the brewery and leave other assets of equivalent value to your other children.  If your non-brewery assets are not sufficient to allow for such a division, options may include separating the non-operating assets (for example, real estate) from the brewery or having the child who is active in the brewery buy out the children who are not active in the brewery.

If you have multiple children working in the brewery, family dynamics may intensify other challenges the brewery is facing.  A co-leadership structure is often impractical and unadvisable.  Instead, control should be given to one child.  In some cases, it may be possible to explore spin-off or split-up opportunities (for example, separating the distributorship from the brew pub).

If none of your children are interested in continuing the brewery, the brewery can be sold.  Potential purchases include competitors or strategic buyers (including another craft brewer) (see Lucid Brewing's acquisition of American Sky Brewing, June 2015), key management personnel, an employee stock ownership plan ("ESOP") (see Left Hand Brewing, July 2015), local investors, or a noncraft brewer (see AB InBev's acquisition of Elysian Brewing, January 2015).  In many cases, a sale does not have to be an all-or-nothing proposition and can, in fact, be a combination of these strategies (even if you are considering transferring part of your brewery to your children).

Who Will Manage Brewery Operations?  Transferring management responsibilities is often the most difficult part of a succession plan.  Establishing requirements for managers, evaluating and selecting successors, designing incentives to motivate nonfamily managers, and defining the role of nonfamily managers are all essential elements of a transfer of management responsibility.

Who Will Vote the Stock?  Transferring legal control (i.e., the right to vote your stock) can take place in a variety of ways.  You can immediately transfer voting control to a family member or an outside party by selling or gifting a majority of the voting stock, or some combination of the two.  The transition of voting control can also happen gradually by selling or gifting the stock in minority increments over time.

Before any transfer of stock occurs, the founder should execute a shareholders agreement.  A well-drafted shareholders agreement will address a variety of issues, including stock transfer restrictions, planned and unplanned owner exits, stock valuation methodology, and drag‑along and tag‑along rights.

If you are not ready to transfer voting control, another option is to recapitalize your stock.  When stock is recapitalized, voting and nonvoting shares are issued for each share of stock currently owned.  You can then transfer the nonvoting stock to the new owners, while retaining voting control for yourself.  You can also consolidate voting control by placing the voting stock in a voting trust or entering into a voting agreement with the other owners of voting stock.

Who Will Reap the Financial Rewards?  The owners of stock (voting or nonvoting) are entitled to the economic benefits of that stock (e.g., S corporation distributions or C corporation dividends).  Ownership can be outright or in a trust, which may be particularly desirable for asset protection purposes.

Protect Your Cash Flow.  When transferring management responsibilities and/or stock, the founder's cash flow from the brewery will likely be a key consideration.  Current sources of income for the founder may include salary, bonuses, S corporation distributions, C corporation dividends and partnership/LLC income.  After the founder's employment by the brewery and/or stock ownership terminates, the founder's income may come from one or more of the following sources:  rental payments (for real estate rental), salary continuation payments, consulting fees, deferred compensation, noncompete fees, and installment payments from a stock sale.  A properly structured succession plan will take each of these into account.

Although there is a lot to consider in creating a succession plan, don't let it overwhelm you.  The plan can be implemented in stages and will evolve over time, as your brewery does.  The most important step is getting started.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions