Can I buy a business with a Private Club permit? If so, can I keep the permit?

We field a lot of phone calls from potential clients looking to acquire an existing bar, restaurant or club that’s home to a Private Club permit.  The number one question is whether or not they can keep the existing permit to avoid the hassle of applying for a new one.

First, a little about Private Club permits.  This permit was created to license non-profit entities such as lodges (Veterans of Foreign Wars, etc.) that want to serve alcohol to its members in the club house and charge a service fee by the glass to prevent club members from drinking the club’s bank account dry.

This arrangement became a handy loophole that for profit businesses (such as restaurants in dry counties) learned to exploit.  The restaurant owners form a non-profit club and sign up members that vote to use the restaurant as its club house for alcoholic beverage service.  When a customer comes into the restaurant to dine and wants to order a drink, he/she must become a member of the club to obtain the alcoholic beverage service.  When the new member is charged for that drink, the charge is not for the liquor, beer or wine in the glass as all club members jointly own the inventory of alcohol. They are paying a charge for the set up and service of the drink. See our blog post about private clubs for more information on the ins and outs.

If you decide to buy a restaurant, bar or night club operating with a Private Club permit, can you take over the existing permit to save you the hassle of applying for a new one?  Anyone at TABC will tell you that you cannot “buy” a private club, which is true. The private club is not an entity that can be owned by anyone, it’s controlled by the members.  What you are typically buying in a transaction like this are the assets of the business (kitchen equipment, dining room furniture, the POS system, etc.) and, of course, an opportunity to take over a pre-existing cash flow.  Again, for more about the ins and outs of operating a “private club” see our blog post.

When a business that’s home to a private club permit is sold to new owners, the private club doesn’t have to be dissolved. The club members have the opportunity to elect new leadership. The new business owners may be elected as the new club officers and the club can continue to operate using the same permit.

Texas Liquor License assists private clubs all over the state, not only with new permit applications and club formations, but also with change of officer applications.  If you’re planning to purchase a business that’s home to a Private Club permit, feel free to contact us with any questions about the transition to new ownership.

(C) 2015, Texas Liquor License.

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