Starting a brewery from scratch can be very expensive and time consuming. To start with, you’ll need to buy equipment and buy or lease space that you’ll likely have to renovate. Those expenses can be avoided if, instead of opening your own brewery, you enter an alternating proprietorship agreement. An alternating proprietorship is an arrangement in which you and another brewer or other brewers take turns using a brewery premises for manufacturing beer.
Generally, in an alternating proprietorship, an existing brewery (also known as the “host brewery”) rents space and equipment to a new brewery (the “tenant brewery”). Alternating proprietorships allow host breweries to sell excess time and tenant breweries to start brewing beer with minimal investment.
If you’re interested in starting an alternating proprietorship, you should first negotiate an agreement with an existing brewery and reduce the terms of that agreement to writing. You and the host brewery must file applications and receive approval from the TTB before beginning the alternating proprietorship.
Running a corporation also requires more clerical work. Someone has to keep shareholder ledgers, call director elections, conduct director and shareholder meetings, draft and track corporate resolutions, and deal with other corporate formalities. These are tasks that can divert your attention from running your Winery. In larger companies, these levels of formality can be helpful by distributing clear decision-making power among different people, especially when there are managers or investors who have diverging interests. This can happen, for example, where some investors are interested in seeing a company grow rapidly so it can be sold off, while others may not want rapid growth and instead prefer to treat the Winery as a lifestyle business. But in smaller wineries, there may only be one to four people who own and run the company, and oftentimes they are close friends or family. If they set themselves up as a corporation, the same handful of people will be shareholders, directors, and officers anyway. An operating agreement can allocate managerial authority among these people in a simpler, more efficient way.