Alcohol Surety Bonds and Liquor Licenses: 3 Things You Need to Know

Alcohol Surety Bonds and Liquor Licenses: 3 Things You Need to Know

When prohibition was repealed in 1933, governments permitted alcohol sales again, but only within a strict regulatory structure. As a legacy of the era, anyone who produces, distributes, or sells alcohol must have a liquor license issued by the state they operate in. Penalties for operating without a license range from hefty fines to lengthy jail sentences, so it’s essential to have an active liquor license in good standing at all times. To do that, you must understand the role of alcohol surety bonds – also known as a liquor bond or alcohol tax bond. If you’re involved with the alcohol industry in any way, learn about three ways your bond affects your license:

1 – You Need Alcohol Surety Bonds to Obtain a Liquor License

Every state creates its own rules for granting liquor licenses. Some are quite strict while others are more lenient. In all cases, every business involved with alcohol – bars, wineries, liquor stores, warehouses, and others – must have a bond that meets the state’s requirements. Bonds are considered so important because they ensure that any business that fails to pay state alcohol taxes or follow rules regulating alcohol sales can be held financially responsible. When this happens, the state files a claim against the bond. The surety company that issued the bond pays the claim, then collects the same amount from the business that triggered the claim. States tax alcohol as a way to curb its harmful effects. Many states also depend on alcohol taxes to fund state programs. Therefore, it’s impossible to get a liquor license and open up an alcohol-related business without first obtaining an alcohol surety bond. It’s not the only requirement to get started, but it’s one of the most important, so you should be proactive about securing a bond early in the business-planning process.

2 – You Need Alcohol Surety Bonds to Maintain a Liquor License

It bears repeating that every state has separate liquor laws, including different requirements for how big bonds must be and how long they are active for. In most states, liquor licenses are active for 1-3 years, after which they must be renewed. As part of the renewal process, you must be able to prove you have an active bond, meaning it must be renewed as well. Without this proof, your license will be revoked and your business will have to suspend operations or face significant penalties. Considering how much depends on getting your license renewed, you need to be alert about keeping your liquor bonds renewed. Quality surety companies will send you notification long before the bond expires. Keep in mind that bonds and liquor licenses may not renew on the same schedule, which can create confusion. Stay aware of the expiration date, and submit your renewal application early. When you submit, your credit will be reevaluated and your premium will be adjusted accordingly, so the price could go up or down over time. Once the new premium is paid, you will receive a document proving you have an active bond that meets the state’s requirements. Renewing the liquor license becomes much simpler at that point.

Getting Alcohol Surety Bonds is Easier Than You Expect

Having a bond may be a strict requirement, but obtaining one is not a huge burden. To start, find a surety company that issues the type of bond you need, tailored to the state where you do business. Applying involves submitting information about your personal and professional finances, plus the same details from any partners you have. After receiving this information, underwriters will calculate your credit risk. Basically, they’re trying to determine how likely you are to pay the surety company back for any claims it compensates. Higher-risk applicants pay higher premiums than others, but with the right surety company they’re not denied a bond, and the premium doesn’t have to be exorbitant either. Even on the high end, it’s only around 5% of the bond total. Ideally, you receive the bond quote back within 1-2 business days. The bond is active once the premium is paid. Beginning to end, this process may only take a few minutes of your time, several hundred dollars, and day or two of waiting. Compared to everything else you’re doing to get your business off the ground, getting the liquor bond is quite easy.

Discover just how easy it can be by working with Viking Bond Service. We are a nationwide surety company that issues bonds in all 50 states to entrepreneurs involved with all aspects of the alcohol industry. People choose us because we have an easy application process, quick underwriting capabilities, and quotes to offer all applicants regardless of their credit. We also have a team of bond experts on hand to answer all your questions about surety bonds. Start getting the information you need now from this comprehensive, free resource all about surety bonds.