Every brewery, winery, and distillery needs an estate plan

The founders, owners, key management, and rank-and-file employees all take pride in what they help make. However, through retirement, change of interest, health, or other circumstance, all founders and owners need to consider how to transition out of running the business. Whether a brewery, distillery, or winery, succession planning for Oregon craft beverage businesses is key to the long-term health of your operation.

There are many ways stakeholders and partners can plan how to pass the reins to a new generation, employees, or another organization. Every business will have a succession plan that is as unique as its history, circumstances, and operations. As you consider what’s right for your business and discuss options with your Oregon craft beverage attorney, here are some things to keep in mind.

Craft beverage business succession considerations

It’s not always easy to think ahead to a time where you will not be in charge of your craft beverage business. Just as you might plan an expansion, a new product line, a rebranding, or a new location, a brighter future depends on your willingness to look into the future and decide how you would like the operation to continue.

Some craft beverage businesses aim to pass ownership and leadership along family lines. Others might consider a model where employees become owners. It’s also not uncommon for a homegrown operation to decide to sell full or partial stakes to third-party entities, such as larger craft beverage conglomerates, private equity firms, or new operators who want to run their own brand, but like the idea of taking the wheel of an established organization.

Here are some things to consider about what type of succession planning for Oregon craft beverage businesses might be the best fit for your distillery, winery, or brewery:

  • Interest in and suitability of family members taking control and/or ownership
  • Feasibility of transitioning to employee-based ownership
  • Estate taxes at the state and federal levels
  • Changes of entity and/or management
  • Continue or wind down operations
  • Structure or adjust buy/sell agreements and operating agreements
  • Maintain voting control and decision-making authority

Here are 3 common scenarios:

1. Family succession

It’s not uncommon for craft beverage businesses to be family-run operations. Multiple generations might be involved in day-to-day business, upper management, and overall company direction.

Simply because relatives are on the payroll or are stakeholders, does not automatically mean that a family-based succession is the right choice. The most essential decision is ensuring that the right person or people are decision-makers for the organization. Is there a relative in the business who is that right fit? That can indicate that a family-based succession is right for you.

If there’s not a good fit, however, it’s also okay to work through a different plan. Ultimately, what matters is the operation passes on to a new generation of leadership, whether or not those leaders are in the family.

2. Transition to employee-based ownership

If family succession isn’t the right fit, some operations choose to work with plans where employees become owners. A transition to employee-based ownership might involve a change of entity, as well as documentation and legal compliance around creating and distributing stock.

Employee ownership can be a sound choice for organizations where motivated employees care deeply about the operation, want its quality, growth, and profit to continue, and want to be invested in the business for the long-term.

Partners can coordinate with their attorney for how to structure an employee ownership arrangement, such as

  • Parameters for distributing how many shares employees can own (such as seniority, type of position, merit, etc.)
  • Which employees may be ready for advancement into higher-level positions
  • Right-size head count to ensure that the right people are involved in the business during transition
  • Maintain morale and retention while partners work out and enact transition details

Employee ownership can be an empowering way for craft beverage businesses to keep ownership in the company family, while easing transition to new leadership. Sometimes, however, a full-fledged change of ownership can be the right choice.

3. Conclude a sale to a third party

Owners and partners often put significant investments of toil, time, and resources into their craft beverage business. However, when the time comes to transition out of the business, there may not be suitable family members or employees to take over leadership. Sometimes partners also want to cash out on their hard work, as part of their nest egg for retirement or other life changes.

In circumstances like this, craft beverage businesses might look to selling the business to a third party. This can take a variety of forms, such as private equity firms, larger craft beverage operations, or simply new owners who want to take the reins of an established operation.

Owners can structure a deal like this in a variety of ways, including a full or partial sale. Some owners may want to step out of day-to-day business, but keep decision-making power or voting authority, so they might choose to sell a partial stake in the operation. Other owners may want to fully exit the business.

Working on a third-party transition can be a time of uncertainty for employees and management. The right level of transparency in discussing this change can go a long way to continuing a healthy business, even as it changes hands.

Your Oregon craft beverage business can pass to a new generation and remain a healthy operation

Succession planning for Oregon craft beverage businesses

The right transition plan for your Oregon craft beverage business can take many forms. There is no one-size-fits-all solution. Creating a plan takes time, soul searching, and careful discussion with partners, stakeholders, and your Oregon craft beverage attorney. In time, though, your operation can have a succession plan in place that fits your priorities, goals, and values, and that helps your business pass to new ownership and, hopefully, a new chapter in a healthy operation.

Succession planning for Oregon craft beverage businesses? The right lawyer can help you make the right choices.