Legal Blog

Saturday Side Hustle: A Three-Tier Compliance System

In the United States, businesses have to be mindful of federal, state and local laws, all of which require compliance. This three-tier system (if you will) can become confusing in certain industries. The cannabis industry is a great example of that right now (more on that in a separate paper), but for the purposes of this blog, we’re talking about alcohol regulations. To avoid a little confusion, let’s start at the local level. 

In Maryland, local licensing involves an application to a local licensing board which is made up of citizens, perhaps with divergent viewpoints and levels of adherence to logic, and there are different requirements depending on your business structure. If your business is a partnership, all of the partners apply as individuals and the license issues to them collectively as individuals, not, for example, to a d/b/a. A good thing to know about your partners is how long they’ve lived in the city or county where your establishment will be because they have to have lived there at least two years before applying.

Maybe you have a partner that just relocated to this geography from somewhere else, so you decide to form a corporation to circumvent this requirement. In this case you’ll need to elect at least officers, and if there are at least three of you, one of you has to meet the residency requirement. Alternatively though, if you are a close corporation, an individual stockholder can apply if there are no officers or directors and the majority of stockholders holds a vote to allow for this. 

If your business is an LLC, the LLC has to authorize someone to apply, and three have to apply if you have authorized at least that many, and in any case, at least one has to meet the residency requirement. Interestingly, that individual, for an LLC, must also be a registered voter and taxpayer of the jurisdiction or municipality where your establishment will be located. I suppose if you fall out of compliance at some point its nice for the tax authorities to get after someone.

Suppose you’ve gone through all this and narrowed the field of applicants. Then one day your lawyer or whoever may be navigating you through this process asks you for your fingerprints and some money. “Why?” you ask. Because they don’t tend to issue licenses to convicted felons maybe. Maybe this happens in an awkward meeting where one of your partners then excuses himself to the lavatory, never to be seen again. It could happen.

Once you’ve got a handle on these issues, you’ve got to put up some money so notice of your application can be published. Why does notice have to be published? So your new neighbors can oppose your application, of course! By now you’ve already researched the zoning rules so you know you can set up shop at the target location (hopefully), but that doesn’t mean some old crab (or competitor) down the street can’t try to stop you in your tracks.

For more information on this topic, please contact Scott Lloyd at


ABOUT SCOTT LLOYD | 301.575.0357

Scott Lloyd is a registered patent attorney who specializes in intellectual property counseling and commercialization work. He has served as a technology commercialization specialist and advisor to companies in a diverse array of markets, including biotechnology, pharmaceuticals, medical devices, food and beverage, specialty chemicals, technology, and engineering. In addition, Mr. Lloyd spent ten years as in-house general counsel to small and mid-sized companies, where he managed corporate matters and resolved commercial disputes in addition to intellectual property strategy, and now serves in the same capacity for entrepreneurial clients. He serves as counsel to small and mid-sized business owners seeking to implement growth strategies and succession plans.

While in house, Mr. Lloyd has also contributed to the successful formation of international affiliates of domestic businesses as well as a $400,000,000 business acquisition.




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