The cannabis industry is rapidly evolving, and with that comes new challenges and opportunities for businesses and investors. As the industry matures, it is becoming more important than ever for businesses to have a clear understanding of the rules and regulations surrounding cannabis transactions.
At Indiva Advisors, we are a team of accountants and business advisors who are passionate about helping businesses navigate the complex world of cannabis transactions. We have extensive experience working with businesses in the cannabis industry, and we are here to help you navigate the challenges and opportunities of this rapidly growing industry.
In the latest video from our Buzzkillas series, Mia Getlin of Lotus Law Group discusses the complexities of cannabis transactions.
"We do a lot of cannabis transactions that are relatively small transactions, sometimes just a license being bought or sold for a single location for a business without the real estate, possibly just a lease coming along or the buyers moving the business. And those are fairly formulaic and we can typically get them done relatively inexpensively for the client, which is always the goal.
"Of course it gets more interesting when we're doing much larger transactions. We often will have bigger clients that are chains or are public companies that are buying up a number of businesses whether from a smaller chain or from a number of different individual sellers.
"Either way, these the transactions are typically fairly similar. The bigger transactions will be more complex. There are more moving pieces, and more ways we need to protect our client. More things we need to be concerned about, more due diligence, but the mechanics are typically fairly similar. We'll sometimes work on mergers. Mergers tend to be less common in the cannabis industry. But we've done mergers, some where that was the intent from the beginning and some where the structure was driven by tax needs.
"My background before going to law school was in public accounting, and I was a CPA license in two states. However, the main thing that my public accounting experience and licensing gave me is the ability to issue spot for accounting and tax issues. And we had one transaction that was a fairly large dollar value transaction for the cannabis industry. And there was something about it, something I came across that made some warning bells go off for me, tax warning bells.
"I am not a tax attorney. I was not the professional to analyze the tax issue, but I knew there was a tax issue. So we brought in a tax attorney and sure enough, we saved the client, I believe it was mid mid six figures. I believe just a little bit above half a million dollars in taxes by changing the structure of this transaction. We turned it into a merger. We increased legal fees some doing that but I believe on both sides the increase in legal fees was significantly less than $10,000, and again a far greater tax savings."
Partner With Indiva Advisors For Your Cannabis Transactions
Businesses that are considering entering the cannabis industry need to be aware of the unique challenges that come with cannabis transactions. Because cannabis is still illegal at the federal level, banks are reluctant to provide financing for cannabis businesses. This can make it difficult to find funding for acquisitions and mergers. In addition, the process of due diligence is more complicated with cannabis businesses since there is no publicly-available information.
Indiva Advisors has a team of experts that is ready to help overcome these challenges. If you are thinking about starting a cannabis business or investing in the industry, contact us today. We can help you understand the complexities of the industry and make sure you are in compliance with all applicable regulations.