California Cannabis Licensing
& DCC Defense
& DCC Defense
We get operators licensed — and defend those licenses when the state takes action.
Buying / Selling Your Business
Buying or Selling a California Cannabis Business
Buying or selling a licensed cannabis business is unlike any ordinary business transaction. California cannabis licenses are not freely transferable, ownership changes must be reported to and approved by regulators, and a deal that overlooks compliance history can leave the buyer holding a license in jeopardy. Baghoomian Law guides buyers and sellers through cannabis mergers, acquisitions, and sales — structuring transactions that satisfy the California Department of Cannabis Control (DCC) and local jurisdictions, and that actually close.
Why Cannabis Transactions Are Different
In most industries you can buy a business and simply transfer its permits. In cannabis, the license attaches to specific owners and a specific premises. You generally cannot “sell” a license outright. Instead, deals are structured as a change in ownership of the licensed entity, which requires disclosing the new owners to the DCC and, in most jurisdictions, obtaining separate local approval. Getting the structure right at the outset is what keeps a transaction from unraveling.
Asset Purchases vs. Entity Purchases
Cannabis deals are typically structured as either an asset purchase or an equity (entity) purchase, and the choice carries significant regulatory and tax consequences. In an entity purchase, the buyer acquires ownership of the licensed company and steps into its compliance history — good and bad. In an asset purchase, the parties must carefully address how the license and premises will be handled, because the license does not automatically follow the assets. We help clients choose and paper the structure that best protects them.
California Change-of-Ownership Rules
California limits how ownership can change without triggering additional review. New owners must be disclosed to the DCC, and every person who qualifies as an owner — generally those holding an aggregate ownership interest of 20% or more, plus those with certain control over the business — must be identified and vetted, including background checks. We manage these disclosures and their timing so the deal complies with both state and local requirements.
Compliance-Focused Due Diligence
The value of a cannabis business is only as solid as its compliance. Our due diligence looks past the balance sheet to the regulatory risks that can sink a deal, including:
- License status, conditions, and any history of citations, accusations, or discipline
- Track-and-trace (Metrc) accuracy and inventory reconciliation
- Local permit status and compliance with the jurisdiction’s ordinance
- Outstanding state and local tax liabilities, including cannabis excise tax and IRC §280E exposure
- Real property, lease terms, and the legal right to occupy the licensed premises
- Contracts, financing arrangements, and undisclosed financial interest holders
- Employment matters, labor peace agreements, and pending disputes
Structuring, Escrow, and Closing
We prepare and negotiate the purchase agreement, representations and warranties, and indemnification terms that allocate regulatory risk between buyer and seller. We coordinate the regulatory approvals and premises documentation the DCC and local agency require, and we structure closing so that money and ownership change hands only when the regulatory conditions are met.
Frequently Asked Questions About Cannabis Business Sales
Can I buy a cannabis license in California?
Not directly. Licenses are not freely transferable. Instead, you acquire ownership of the licensed business through a regulated change-of-ownership process that must be disclosed to the DCC and, in most cases, approved by the local jurisdiction.
Do I need local government approval to buy a cannabis business?
Usually. Most cities and counties require their own approval or a new local permit when ownership changes. The specific requirements depend on the jurisdiction’s ordinance, which is why local due diligence is essential.
What is IRC §280E and why does it matter in a cannabis deal?
Internal Revenue Code §280E limits the deductions cannabis businesses can take, which affects a company’s true profitability and tax exposure. Buyers should understand a target’s §280E position and tax history before agreeing on a price.
How long does a cannabis acquisition take?
It depends on the license type and jurisdiction, but the regulatory approval process for ownership changes typically adds weeks or months beyond a conventional business sale. Building that timeline into the deal is essential.
Considering buying or selling a cannabis business? Call Baghoomian Law at (818) 514-9272 or contact us online to protect your investment.