Acquiring a Washington Cannabis Business

Acquiring a Washington Cannabis Business

by Neil Juneja

October 27, 2022 — In Washington, cannabis business, whether a producer, processor, or retailer, require a Washington Liquor and Cannabis Board license. These licenses cannot be applied for. They must be purchased from a license holder, except for rare exception such as the Social Equity Program.

1. Purchase of the license only
   1. In this scenario, the license is the only item of value that the purchase is interested in. This is completed through an assumption of the license, filed with Business Licensing Service (BLS). The license can remain at the current location or be placed in a new location through a Change of Location filed with the Washington Department of Revenue.
2. Purchase of the business:
   1. Asset Purchase Agreement
      1. An asset purchase agreement will purchase some or all the business assets, including the license. Often this also includes cannabis, equipment, and sometimes real estate. This has the benefit of reducing liabilities that might otherwise carry over from the previous business.
   2. Membership interest purchase
      1. In this scenario, the equity of the business, often designated in stock or in units, is purchased. This will carry over liabilities, but often will also inherit all assets, accounts payable, contracts, and leases.
   3. Washington Liquor and Cannabis Board process
      1. Any purchase of the license or licensed business begins with the business license application with the Washington State Department of Revenue.
      2. The applications is transferred to the Liquor and Cannabis Board (LCB), where it is assigned an licensing investigator.
      3. The investigator will contact the buyer/acquiring party and schedule an initial interview.
      4. The initial interview is often conducting over the phone, but is sometimes conducted over email. The information requesting includes the purchasing party, the terms of the transaction, and any loans or financing that may be involved.
      5. A Request for Documents PDF is issued and each party representing a True Party of Interest receives a DocuSign packet via email. The relevant documents are uploaded for review of the LCB.
      6. The LCB issues a Local Authority Notice allowing the local jurisdiction 20 days to raise any objections.
      7. Upon successful review of the documentation, the LCB will permit a transfer.
   4. New license fees are paid and the transaction can proceed to closing.

For more information on this issue, please contact one of our attorneys.