Incorporating a brewery or distillery: get the entity before the licences

Two regulators, one entity, months of lead time

Production alcohol is licensed twice before the first sale. Federally, CRA issues the excise licence — beer falls under the Excise Act, spirits and wine under the Excise Act, 2001 — and duty is accounted for as product is produced and packaged, with spirits licensees typically asked to post security. Provincially, the AGCO licenses manufacturers and separately authorizes the on-site retail store and by-the-glass taproom service. Licence categories, conditions, and application requirements change, so verify the current CRA and AGCO requirements for your product and premises rather than working from another brewery's checklist.

Every one of those approvals names a legal entity and, in most cases, a specific premises. That has a practical consequence: the corporation must exist before the industrial lease is signed, because the lease, the zoning conversations, and the licence applications all have to describe the same entity at the same address. Founders who apply personally or under a numbered placeholder and restructure later buy themselves delay while rent accrues on tanks that cannot legally run.

Put the brand somewhere deliberate

The last row of that table is the strategic one. A craft producer's trademarks, name, label art, and recipes usually end up worth more than the equipment, and unlike the licences, you choose where they live. The claims, meanwhile, live in the operating company: the taproom slip, the employment dispute, the excise assessment. Early on, holding everything in one corporation is simple and defensible. As real value accumulates, a holding company that owns the trademarks and licenses them to the operating company shields the brand from operating claims — with two honest caveats: the excise and AGCO licences stay with the entity that actually produces, and royalties between your own companies must be commercially defensible.

The arrangement to avoid is the accidental one: a brand registered in a founder's personal name, or never registered at all, discovered during a buyer's due diligence. Register the trademark early — naming collisions are routine in craft beverage — and register it to the entity you intend to keep.

Founders, investors, and the agreement before the first outside dollar

Craft breweries and distilleries are capital-hungry, and most raise from friends and family before any bank shows interest. Before the first outside dollar arrives, the structure needs founder and investor share classes in the articles and a shareholders' agreement that answers the uncomfortable questions in advance: what happens when a founder leaves, who approves new debt or dilution, and how shares move on death or divorce. A brewery dispute with no shareholders' agreement is fought over an illiquid asset with licences attached — the worst possible venue.

Two financial notes belong in the plan. Associated corporations share one $500,000 small business limit, which matters once a holdco or second venue appears. And excise is the discipline that keeps the whole structure alive: duty and remittance failures put the licence itself in jeopardy, and directors carry personal liability for unremitted source deductions and HST. Batch-level duty tracking is laid out in brewery and distillery bookkeeping.

Contract brewing, growth, and an exit that keeps the licences intact

Contract arrangements cut both ways and both test the structure. Brewing for others puts your licence and premises behind someone else's brand, so the agreement must be explicit about which entity produces, owns product at each stage, and remits duty. Having others brew your brand while you build means your business is, for a time, only the brand — which makes deliberate trademark ownership the whole ballgame.

At exit, buyers often prefer to purchase shares so the excise licence, AGCO approvals, and LCBO relationship stay undisturbed inside the corporation — transfers and re-applications are possible but slow, and regulators can require notice or approval of a change of control, so confirm current requirements when a deal is live. Sellers prefer shares too, for the $1.25 million lifetime capital gains exemption on qualifying shares. That rare alignment is worth protecting years in advance by keeping the corporation clean. US exports, TTB labeling, and aluminum tariffs add a further layer covered on our brewery cross-border tax page.

Source: CRA — Excise duty rates.