Two people standing in a liquor store, picking out a bottle of wine
ComplianceMarch 08, 2022

How to open a liquor store

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Interested in opening a liquor store? This recession-proof business is a good fit for hands-on entrepreneurs, especially those who have an interest in regional or specialty wines, beers, and liquors. Today, there are over 44,000 liquor store businesses in the U.S.

If you’re interested in getting into the business, here are the key steps to opening a liquor store business.

Write your liquor store business plan

To ensure your liquor store business is a success, you need a business plan. A well-thought-out plan can guide your strategy, identify risks, and help you secure funding to expand and grow your liquor store enterprise.

Here’s a suggested outline for your liquor store business plan:

  • Executive summary: A brief overview of your business and why it will be successful.
  • Company description: Include detailed information about your business and explain your competitive advantages. For example, will your liquor store business provide any services, such as free delivery, online ordering and payment, tastings, mixology classes, and so on?
  • Organization and management: Outline how your company will be structured and who will run it. For example, will it be a partnership, LLC, S-Corporation? Who will be responsible for day-to-day management?
  • Market analysis: What is the industry outlook? Who are your target customers? What competition are you up against? How will you compete against warehouses or online delivery services?
  • Financial plan: Include a description of your funding requirements, your detailed financial statements, a financial statement analysis, and your profit and loss projections for the next five years.
  • Marketing strategy: Outline your strategies for reaching the right people, communicating your value differentiator(s), and selling your services.

Pick a business structure

Your choice of business structure — whether it’s a limited liability company (LLC), corporation, or partnership — will impact your daily operations, taxes, and the amount of risk you’re willing to take with your personal assets. Choose a structure that balances legal protections and benefits.

The four most common are:

  • Sole proprietorship: This means that the business is owned and run by one person with no legal distinction between the owner and the business.
  • General partnership: A general partnership is the simplest type of partnership and is created automatically when two or more persons engage in a business enterprise for profit. No state filing is required.
  • Limited liability company (LLC): This is one of the most popular forms of business entity for small businesses. An LLC offers limited liability protection (shielding your personal assets by protecting them from debts and liabilities associated with the company) and pass-through taxation.
  • Corporation: A corporation is a separate legal entity owned by its shareholders, thereby protecting owners from personal liability for corporate debts and obligations.

For more information on business entity structures, read Comparing company types.

Choose a business name

Naming your liquor store business may not be as simple as it seems. When selecting a name, try to make the name short, easy to remember, descriptive of the business, and capable of drawing attention. Depending on the business form you choose, you may have to register and/or receive approval from the local or state government where your business is formed.

For more information on naming rules for different entity types, read Naming your startup business.

Register your business

Depending on the location and business structure of your liquor store business, you may need to register your new business with your state and/or local government.

To do this, LLCs, corporations, and general partnerships must register (online or through the mail) with the Secretary of State or business agency where they conduct business.

Importantly, if you choose to operate your business under a name other than your personal name (even if you are a sole proprietor), you will need to register that business name with state and/or local governments a process known as filing a “doing business as” (DBA) name.

Get federal and state tax IDs

Before you can pay business taxes, you may need to register your business with the IRS and obtain an employee identification number (EIN). An EIN is the equivalent of a social security number for your business and is required on your state and federal tax filings. (Note: If you’re a sole proprietor without employees, then you don’t need an EIN. Instead, you will file your taxes using your social security number.)

An EIN is also needed to open a business bank account and ensure the separation of your business and personal finances.

You may also require a state tax ID. Typically, you’ll need to get an EIN before you apply for your state tax ID. Check with your state or a business lawyer, as the process will vary by state.

Open a business bank account and credit card

A business bank account and credit card keep your personal and business transactions separate and afford certain legal protections. For example, if you operate your liquor store as an LLC or corporation, maintaining a business bank account helps you maintain liability protection and the security of your personal assets in the event your business is sued or found liable.

A bank account and credit card also help build business credit — something that suppliers and vendors will verify before transacting business with you. For this reason, consider opening your business accounts as soon as you start incurring business expenses or accepting money.

Find a location for your liquor store

The right location will ensure that you capture foot traffic and market share. Make sure there is ample parking and accessibility from roadways or streets. If you plan to offer curbside pickup or encourage sidewalk traffic, factor these into your search.

You must also be aware of zoning laws. Some cities or counties limit the number of liquor stores in a particular location or city. You may also need approval from your local government or through a public hearing.

Get licenses and permits for your liquor store

Retail liquor licensing requirements and regulations differ by state. Typically, the state agency that regulates, approves, and enforces your liquor store license is known as the Department of Alcoholic Beverage Control (ABC).

Your county or city may also require you to obtain a retail liquor license — a process that can involve multiple steps. For instance, your authority may require a preliminary application, followed by a screening appointment with an official. You may also be asked to provide detailed personal information for each officer or member of your business entity, including a criminal and background check.

Some authorities limit the number of licenses based on population and the number of licenses already issued. Expect to pay anywhere from $500 to $10,000 in liquor license fees. And be prepared to maintain and manage renewals.

Other licenses and permits you may need include:

  • Basic business operation license: This is a license from the city in which your business will operate, or from the local county (if the business will be operated outside of the city's legal boundaries).
  • Zoning and land use permits: Local government zoning laws may prohibit certain business activities in designated areas (such as near a school or place of worship).
  • Building permit: If you plan on remodeling or building a commercial space, you'll need to get a building permit.
  • Sales tax license/sellers permit/resellers permit: This license/permit has many names and those names vary by state, but it is required for the selling of almost all products and services.
  • Certificate of occupancy: This certificate outlines what your building structure is used for and ensures it complies with building codes.
  • Health department permit: This permit is required primarily if your business involves the preparation and/or sale of food.

Get insurance for your liquor store business

It’s critical that you obtain business insurance for your liquor store. This can protect you if something happens to your store, inventory, customers, and employees. Typically, you will need to obtain commercial property insurance, general liability insurance, worker’s compensation, and liquor liability insurance.

Financing your liquor store

Starting a liquor store business involves a degree of upfront investment and may require you to obtain financing. A business bank loan or SBA-backed loan are common sources of small business financing. These funds can be used to procure equipment and other capital expenses.

Use your business plan to help increase your chances of securing funding. Include your budget, projected profit and losses, and financial projections. With these tools, you’ll have a good sense of how much funding you need and your plan to repay the loan.

Market your business

Think about how you will get the word out about your liquor store business. Here are some tips:

  • Launch a website: Create a website that is optimized for search engines, this will ensure your store ranks high when someone searches for a local or specialty liquor store. Use key search words and phrases in your body copy, headers, and metadata. Finally, be sure your website is designed with desktop and mobile users in mind and make it easy for anyone to book an appointment online. Read Top 3 Tips for building a company website.
  • Create social media and review site profiles: Set up business pages and accounts on Facebook, Yelp, Instagram, Google My Business, and Twitter. Ask customers to tag you in their pictures and post reviews. And regularly post updates, news, and specials.
  • Host tastings and events.
  • Foster customer loyalty: Use email newsletters and offers to keep in touch with customers. Include incentives for repeat customers — such as free tastings — or create a reward program. And don’t forget the basics. Make sure your store is a comfortable, clean, and pleasurable place to visit.

Frequently asked questions to opening a liquor store

How much does it cost to open a liquor store?

The costs to open a liquor store can vary greatly based on your location and state. For instance, starting a liquor store business in Colorado Springs, CO, could cost $30,000. However, opening a store in an affluent neighborhood in Washington, DC, may run close to $2 million (source).

What are the ongoing expenses for a liquor store?

In addition to upfront costs, like license fees, your ongoing expenses will include rent or mortgage payments, utilities, inventory, business taxes, wages and benefits, marketing and advertising, liquor license renewals, and other permits.

Is owning a liquor store profitable?

If your liquor store is situated in the right location and has consistent business, it can be profitable. However, expenses can be high, so turning a profit can be challenging — especially during the startup phase.

Profitability is also impacted by marketing and competitive pricing. If you choose to open a large store with a wide range of discounted merchandise your path to profitability will be different to a smaller store with specialty merchandise, hands-on customer service, and a loyal customer base.

How do you determine what to charge?

What you charge for your merchandise depends on how your business is regulated:

  • ABC or state stores: The price of liquor sold in ABC or state stores is set by the state government and is consistent across that state. However, the markup can vary from state to state and ranges from 25% to 50%. State sales promotions can also reduce that markup.
  • Privately-owned liquor stores: If you have a state-issued license you can set your own prices. However, you can’t sell liquor for less than the wholesale price. Typical markup for liquor is in the region of 25% to 50% while wine is marked up to 50% (although many stores offer discounts for case purchases).

Don’t forget! When you consider your pricing, always take into account competing stores.

Learn more

BizFilings is dedicated to making starting a business easier so you can focus on doing what you love. For more information, check out our state guides for LLCs and corporations.

 

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