Purchasing and operating a cannabis business comes with complexities, and legislations vary from one jurisdiction to another. Hiring a cannabis business attorney can lessen the effort. It also ensures the proper legal process. Here are some things to consider when purchasing an existing cannabis company.
Involve a Cannabis Business Attorney
Purchasing a cannabis business involves reviewing several things, including the taxes, licensing, non-transferability, and associated costs. Working with an experienced cannabis business lawyer can help clarify the process and prevent mistakes.
The priority is to involve a business lawyer with experience in the cannabis industry. Attorneys are conversant with local and state laws and know the state law procedures required to complete business ownership transfer.
Review Licensing Authorities and Requirements
Most states don’t permit transferring of cannabis licenses. New owners of a cannabis business must obtain their license, and each state has unique licensing entities. In New York, companies looking to sell cannabinoid hemp products manufactured in the state must acquire a Cannabinoid Hemp Retail License from the Department of Health.
Companies selling cannabis products manufactured outside New York can do so indirectly by selling to retailers with the NY Cannabinoid Help Retail License. Such companies must also acquire a Cannabinoid Hemp Distributor Permit. When purchasing a cannabis business, reviewing the different authorities and licensing requirements is crucial.
Typical licensing considerations include background checks, surety bonds, inspections, and environmental reviews. The company must also provide a summary of the type of product sold, source of the cannabis, proof from the department of taxation, and attestation of compliance with all rules. NY also charges a $300 fee for permit submission.
Consider the Business Type and Required Workforce
Cannabis companies operate under unique business laws depending on their scope. Businesses growing cannabis have different requirements from those manufacturing, selling, or distributing cannabis products. The type of business determines compliance and the licensing authority.
Cannabis businesses also have different operations. Companies growing cannabis are subject to most regulations, while those manufacturing edibles may have to set up a commercial kitchen and cover additional workforce expenses.
Examine Real Property and Financial Liabilities
Purchasing a cannabis business involves buying all the company assets. Buyers should review real estate property and leases and determine if there’s a long-term lease contract. If there’s a lease, the buyer should know its terms and decide if they can follow them.
Financial liabilities are other top considerations when buying an existing business. Some cannabis companies conduct handshake deals with consultants, investors, and service providers. The buyer should know everyone the business is financially obligated to.
Compare the State and Local Legal Considerations
NY municipalities and local governments have varying regulations for the cannabis industry. Some don’t allow cannabis businesses and impose stricter laws to govern licensing and operations. Others have less demanding requirements modeled after state laws.
Buyers should compare state versus local legal considerations to identify and determine if they can comply with all requirements. The buyer should also analyze the cannabis business for existing tax liabilities, including federal, state, and local tax obligations.
Cannabis Business Law Services in New York
Buying a cannabis business is a legal undertaking with unique procedures and requirements. At Khader Law, we offer industry-experienced business attorney services in NY and are dedicated to client success. We are the team to call for business legal counsel and representation.