Co-founder and partner agreements for a brewery

Why breweries need this more than most start-ups

A brewery ties up a lot of money in steel, a lease and licences that are slow to obtain and hard to move. Partners often bring very different things: one has the capital, one has the brewing skill, one has the site or the hospitality experience. When those contributions are not written down, each partner remembers the deal in their own favour.

An agreement does not mean you distrust each other. It means you agreed while you still could. This guide covers the questions to settle. It is not legal advice. The final document should be drafted by a lawyer who knows company law and the excise rules in your state.

Choose the structure first

Whether you run as a private limited company, an LLP or a partnership firm changes which document you need, how liability works and how easily a partner can leave or a new investor can join. Many founders who expect to raise money later choose a private limited company and sign a shareholders' agreement alongside the articles of association. Take advice on this from a chartered accountant and a lawyer before you register anything.

Money and equity

• Who puts in what, by when? Cash, equipment, a site, brewing know-how or unpaid time. Put a value on each.
• How is equity split? If one partner brings cash and another brings work, consider vesting so that equity for work is earned over time rather than handed over on day one.
• What happens when more money is needed? A brewery almost always needs more than the plan says. Decide now whether partners must contribute in proportion, whether a partner who cannot pay is diluted. Also decide whether loans from partners carry interest.
• Salaries and drawings. Is the working partner paid a salary before profits are shared? How much? Who can change it?

Our guide to brewery funding options helps here, because outside investors will want to read this document.

Roles and decisions

Write down who runs what. The head brewer partner controls recipes, brew schedules and quality release. The operations partner controls staff, suppliers and the floor. Then list the reserved matters that need everyone's agreement: taking on debt, signing or renewing the lease, buying major equipment, adding a new partner, selling the business or changing the brand.

A practical example: who decides that a batch is not fit to sell? A tank of beer with a fault is money down the drain. The partner who did not brew it may not want to pour it away. Settle in advance that the brewing lead makes the quality call.

The licence and the name on it

Brewery and bar licences in India are issued to a named entity and often list named individuals too. If a partner whose name is on the licence leaves, falls out or dies, the business may face paperwork, delay or worse. Ask your licensing consultant whose names appear on each licence and approval, how a change is made in your state and how long it usually takes. Rules vary by state and change, so check the current position. Then make sure the agreement obliges every partner to co-operate with any transfer.

Trademarks and recipes deserve the same care. Register the brand in the company's name, not a partner's. State that recipes developed for the business belong to the business.

Exits and deadlock

Every partnership ends one day. The agreement should say what happens when a partner wants to leave, is asked to leave, stops working in the business or dies. Common tools include:

• a right of first refusal for the remaining partners to buy the shares before an outsider can
• a method for valuing the shares, agreed now rather than argued later
• good leaver and bad leaver terms, so someone who walks away early or breaches the agreement gets less
• a non-compete and non-solicitation clause, within what the law allows
• a deadlock process for two equal partners, such as mediation first and a buy-sell mechanism after

Two partners at 50:50 with no deadlock clause is the arrangement we would most want to talk a founder out of.

Have the hard conversation now

Sit down together with a blank page before you see a lawyer. Go through every question above and write down what you each expect. Where you disagree, you have found the clause that matters most. Many of the stories in our guide to why breweries fail start with partners who never had this conversation.

Then let the lawyer turn your notes into a document. You will pay less in fees. You will also understand what you signed.

Common questions

Do brewery co-founders really need a written agreement?

Yes. Breweries tie up capital, leases and licences that are hard to unwind. A written agreement agreed early prevents most of the disputes that end partnerships.

What happens if the partner named on the licence leaves?

It depends on your state and the licence type. A change may need fresh approvals and take time, so ask your licensing consultant before you sign anything.

Should equity for a brewing partner vest over time?

Many founders use vesting when one partner contributes work rather than cash. It means equity is earned as the work is done, which protects everyone if that partner leaves early.

Is this guide legal advice?

No. It lists the questions to settle. Have a lawyer draft the agreement for your structure and state.