This is the second part of a two-part series of frequently asked questions that KVK receives from new clients seeking to enter the commercial cannabis industry. The commercial cannabis industry is growing exponentially. As of January 2021, the three State cannabis licensing authorities have issued over 10,000 commercial cannabis licenses to cannabis businesses throughout California. Here is what you need to know to begin the journey of owning a licensed commercial cannabis business.  

Q: On average, how much will it cost to start a cannabis business?

A: The best response to this question is: “It depends.” This question is almost impossible to answer because of the many various factors associated with owning a commercial cannabis business, such as the type of cannabis activity, whether you own or lease the property, construction and build-out of the facility, equipment necessary for the cannabis activity, security, inventory, insurance, application fees, license fees…the list goes on. Please reach out to one of our cannabis attorneys to set up a consultation where the costs and fees associated with your cannabis business can be discussed in detail.

Q: How can KVK help me obtain a commercial cannabis business license?

A: Think of KVK as your legal project manager. Whether you want to apply for a new cannabis business license or purchase an existing business, we can assist you from start to finish. The starting point may be wherever you are in the process, whether it be forming the entity that will hold the license, negotiating a lease for the property that will house your operations, or assisting with the application process for the local permit. 

If you want to purchase a business entity with an active commercial cannabis license, KVK can assist you by conducting due diligence on the licensed cannabis business, negotiating and drafting purchase agreements, and seeing the ownership transfer process through with each local and State regulatory agency involved with the license.

Q: How can KVK help me maintain my commercial cannabis business license?

A: KVK can assist with all aspects of maintaining your license. Our services include, but are not limited to: 

• corporate management – maintain corporate minutes, filings with the Secretary of State, act as agent for service of process, drafting purchase agreements; 

• licensing – act as the liaison between you and the regulatory agencies, organize and submit annual renewal applications, draft standard operating procedures, request modifications to the license, assist with any compliance issues; 

• regulatory compliance – audit packaging and labeling for new products, conduct inspections of the facility, handle issues or complaints from a regulatory agency, keep you informed of any changes to regulations. 

KVK also handles other aspects of maintaining a commercial cannabis business, such as: 

• negotiating and drafting all documents pertaining to any type of transaction, such as brand licensing agreements, vendor agreements, management agreements, and supply agreements; 

• handling any type of dispute or litigation, such as ownership disputes, employment matters, debt collection demands, Americans with Disabilities Act (ADA) violations. 

Q: I want to sell my cannabis business. Can KVK assist with the process?

YES! The process begins by researching and understanding the regulations regarding ownership transfers for the local jurisdiction where your business is located. Then, KVK will work with you and the purchaser to negotiate the terms of the sale and draft the purchase agreement and any other documents and/or agreements related to the sale. Next, KVK will assist with ownership transfer process by working with the purchaser and the local and State regulatory agencies to remove you as an owner and add the purchaser as the owner of the license(s). Finally, KVK will see the transaction through by maintaining timely collection of all payments related to the sale of your business.

These questions cover only the tip of the iceberg regarding the commercial cannabis licensing process. Please reach out to our cannabis team to set up a consultation so that we can answer any and all questions you may have about the licensing process, maintaining a commercial cannabis business license, and selling your business.  

Read more Cannabis Q&A’s with our partner Yelena Katchko here.

By: Nellie Niakossary, May 7, 2021