Is it a Change in Proprietorship or a Change in Control? – Distilled Spirits Plants (DSP)

Changes with respect to the information shown on the previously submitted registration, permit application, or applicable bond, must be filed with the Alcohol and Tobacco Tax and Trade Bureau’s (TTB) National Revenue Center in Cincinnati, Ohio.

CHANGE IN PROPRIETORSHIP

A change in proprietorship occurs when there is a change in the entity which owns and operates the business. It is synonymous with change in ownership, or it may be due to a change of entity type (for example a change from sole proprietor to LLC; from a partnership to a corporation, etc.). Either way, the entity which owned the business no longer operates or owns the operations at that location.

The Internal Revenue Code (IRC) provides that no individual, firm, partnership, corporation, or association, shall commence or continue the business of a distiller, warehouseman, or processor until all bonds required have been approved.

In addition, the IRC and corresponding regulations require the successor DSP to qualify in the same manner as the proprietor of a new distilled spirits plant, before commencing or continuing business. To ensure continuity of operations, all conditions and/or requirements of Federal laws and regulations must be met; therefore, it is imperative that the plant registration, bond, and other qualifying documents be filed well in advance of the proposed effective date of the change.
With respect to permit provisions, a successor owner may continue to operate, if within 30 days of the change, an application is filed for a new permit. In that case, the outstanding basic permit and/or operating permit will remain in effect until such time as TTB takes final action on the new application(s).

If a change in proprietorship occurs prior to the filing and approval of the new registration and bond, or if the permit application is not filed within the required 30-day period, all regulated operations must cease until approval is granted in writing by the TTB. Failure to do so will result in automatic termination of the predecessor’s permit and possible adverse action or significant tax consequences.

CHANGE IN CONTROL

A change in actual or legal control occurs when there are changes in stock ownership, LLC membership ownership, or possibly major changes in the corporate officers or directors of a corporation. In such situations, the legal business entity which operated the business in the past continues to operate the subject business. In other words, the same legal entity remains in existence which continues to operate the business in question.

Federal regulations require an amended registration, TTB Form 5110.41, to be submitted within 30 days of the change. The registration should show the next sequential serial number and describe the change of stock or interest ownership, or any major changes in the officers or directors which could result in a change in the actual control of the corporation.

An Operating Permit issued under the IRC, or a Basic Permit issued under the FAA Act, is not transferable by reason of a change in actual or legal control of the company. The proprietor’s permit(s) will automatic terminate unless within 30 days of the change an application for new permit is filed with TTB. If an application is filed within the required 30-day period, the outstanding permit(s) will remain in effect until TTB takes final action on the new application.

In addition, if a new LLC member or stockholder holds more than 10 percent stock or interest, and is not already on record, a Personnel Questionnaire, TTB Form 5000.9, must be filed.