Attorney, The Creekmore Law Firm PC

Cheers!Business competition is the name of the game.  One industry in particular, however, is taking the term “friendly competition” to heart.

Collaborative brewing, in which two or more breweries join forces to create a [new] product, has rapidly swept through the craft brewing industry. While brewery rivalries certainly exist, many brewers have discovered the benefits of teaming up.  It allows brewers to expand their horizons, creating beers outside of brewers’ comfort zones.  Breweries gain exposure to new markets and gain credibility.  Consumers, on the other hand, relish the typically unconventional brews resulting from the pairing. Sometimes it even helps avoid legal battles, such as the case of Avery Brewery and Russian River Brewery’s “Collaboration Not Litigation” ale.

Legally, serious planning needs to go into a brewing collaboration. A collaboration is, after all, a legal partnership. The Virginia Uniform Partnership Act § 50-73.79 defines a partnership as “an association of two or more persons to carry on as co-owners a business for profit.”  It further defines a business as “every trade, occupation, and profession.” As noted in previous posts, a legal partnership requires no official paperwork or documentation, like an LLC or corporation.  Partnerships are a default type of business entity, and for better or for worse, a partnership will form whenever collaboration on a project occurs.*

Brewers, like any other business organization, need to plan their partnership up front.  Some questions to consider include:

  1. Do you want to organize in a limited liability entity?
  2. How are the profits split? How are any debts divided?
  3. Who buys what materials?
  4. Who owns the IP related to the brew? Who is responsible for searching and registering trademarks? And who can license the IP?
  5. Which brewery is in charge of TTB regulatory compliance? Who is the ABC liaison?
  6. Who is liable if something goes wrong? Whose insurance covers situations where an employee is hurt while making the brew?
  7. How much money is each brewery contributing to the project?
  8. What happens if the brew becomes wildly popular— who is authorized to create more product?

And this is just the tip of the iceburg.  Like it or not, collaboration creates a minefield of decisions and considerations. Without well drafted organizational documents, the benefits of brewing collaboration may be replaced by unhappy partners, expensive litigation, and—worst of all—dry taps.

Do you have a favorite collaboration brew? Let us know in the comments!

*Partnerships are default entities, but business owners can choose to structure their business dealings in other ways.


If you’re interested in learning more about how to choose the right type of entity for your business, join us at our next round of Shark Bites this month.

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