Which Green Is It?
Well, we have identified a problem that we were not expecting, let’s call it the case of Which Green Is It? We are not thrilled about it, but some of you may enjoy it ever since the BCC issued the first licenses. Perhaps this is caused by my spending WAY TOO MUCH Time reading articles that seem to repeat the same information about the legalization of cannabis for recreational use. Well the situation we have identified is quite a bit like those articles, but somewhat different. If we start from the beginning, it appears that a bunch of
leprechauns managed to get hoodwinked by a couple of evil characters that convinced them that cannabis was a new type of clover.
We learned of the situation when we almost tripped over this gentleman, who was just laying on the front lawn stoned out of his mind. I would introduce him properly, but he couldn’t even remember his name. He kept mumbling something about having made a batch of infused soda bread with some oil he bought from two guys that were working as disposal and maintenance techs for a local dispensary. He said that the two of them were looking for someone who could help them
apply for a license to be a delivery only dispensary so they could stop having to spend their night clean out the garbage from the dispensary and the extraction lab in the building next door.
Perhaps, the way people look doesn’t prove anything, but my bet is that we could probably perform a lobotomy on these two, and they would never realize what was going on. However, as we later discovered, the two of them happen to be very shrewd businessmen. Well, maybe a mongrel mix of stoners, grifters, and businessmen. Anyway, back to the story. It seems that the passage of Proposition 64 was seen by a long time, cannabis chemist who had been running a volatile extraction operation “under the radar” for many years, that the time was ripe to “come out of the darkness” and create a legal operation.
The extractor, let’s call him the “Weed Wizard” was referred to us by an attorney we have worked with on a number of matters over a long period of time. After meeting with the Weed Wizard, we recommended that he form a new limited liability company which would be taxed as a partnership. After seeing his operation, we decided that he would file for a “Micro-Business License” choosing to be a Manufacturer, Distributor, and Retail Delivery Only licensee.
In a subsequent post, we will take you through the step by step process we followed with the Weed Wizard so could apply for a Temporary License with the Bureau of Cannabis Control [“BCC”], the California Dept. of Public Health [“CDPH”] Manufactured Cannabis Product division, and obtain the required tax permits from the California Dept. of Tax and Fee Administration [“CDTFA”] and environmental.
The process for the Weed Wizard was a nightmare, particularly because he was as truthful with us as we would have hoped. He had told us that he was going to be bringing in a partner for his operation. He would qualify as the “Owner” because he was going to keep 51% of the equity in the new LLC and be its sole Managing Member. So Which Green Is It?
The Money Guy had initially stated that his bank would make the loan so that it would qualify for an exception in the Regulation which would have let him not be identified on the license applications. As it turns out, his bosses at the bank found out what he was doing and fired him, which resulted in his receiving a large severance package [or so he said at the time], and he would become a 25% partner in the business with no say in its management. He later learned that meant that he had a “financial interest in the Wicked Wizard’s cannabis business. It turns out that the actual source of the funds that the Money Guy was going to invest came from his brother, some Really Evil Dude who brought a machine guy everywhere he went. The Really Evil Dude was a career criminal with multiple violent felony convictions, and that made him a “prohibited person” who was neither permitted to own firearms nor could he have a financial interest in a cannabis business in California. He was essentially seeking to use his brother, the Money Guy as a strawman for his investment. So Which Green Is It?
Suffice it to say, when the Really Evil Dude’s involvement was discovered halfway through the licensing process, it caused us no end of anxiety, and the Weed Wizard almost choked when we told him what our fees were going to be. Luckily for the Weed Wizard, we were able to identify a Dim-Witted Investor who was foaming at the mouth to be able to “invest in cannabis”, partially because the Delivery Guys had told him absurdly wild stories about how much money he could make in cannabis. The day he met the Weed Wizard in our office, he brought two shopping bags full of cash, ask us Which Green Is It? and signed the investment paperwork without reading any of it. [Spoiler: Things did not end well for the Dim-Witted Investor, DON’T BE a Dim-Witted Investor, the cannabis market is going to be a rough ride. If you can’t afford what you are thinking about investing, just don’t do it.
BACK TO REALITY
If you are interested in how the accounting, tax, licensing and regulatory compliance for commercial cannabis in California actually work feel free to follow the adventures of the Weed Wizard. We intend to walk everyone through the process that every single one of the characters in the narrative above went through. Obviously, we can’t reveal the identities of the Leprechauns [unlike the Bureau of Cannabis Control’s public disclosure requirements. Just to encourage participation in this adventure, individuals that register, and comment regularly will be eligible for a drawing on St. Patrick’s Day where the Weed Wizard is going to give someone, not gold, and not cannabis, but a $500 Gift Card from amazon.com. Keep checking back in with us to get more information, and follow our story. I asked the Weed Wizard what he would say to anyone that wasn’t interested in his adventure, and he gave us a very clear response.