You Realize You Can't Sell Yourself... Right?
Welcome to the Daily Blunt, Today is Friday, August 25th and likely will be all day.
Today's Daily Blunt pairs well with "I want you to want me" by Cheap Trick.
Trying to sell a sole proprietor? Then, you'd better find someone who really wants you.
Do you realize you can’t sell yourself?
It seems a lot of our clients don't even think about this once they stumble in to it.
Since the beginning, there have always been sellers in the cannabis market that try to operate as a sole proprietor instead of forming a limited liability company or corporation of some sort.
We understand this strategy was convenient and was a really easy way to get your foot in the door during the application phase a few years ago…. It just doesn’t work once you hit the moment you talk about selling or partners or anything else that involves more than just yourself.
So, here’s the problem.
A sole proprietor is you operating as yourself. That’s it. You don’t have employees. You don’t have a separate tax return to file. You don’t have any shield from liability. It is just you standing alone in a field with your crops and nowhere to turn.
Do you know what else you don’t have?
The ability to sell yourself to another buyer.
What we have told our clients from the beginning… and what we are still telling them today, is that if you are a sole proprietor and want to sell your license (which is a piece of paper tied to you), then you need to either:
- Go to your previous LCB investigator or officer and get permission from them to sell your sole proprietor business to a buyer who will then convert it to another entity for closing.
- Convert your sole proprietor to a limited liability company or other entity that can then be sold and transferred.
It’s really that simple. Since we need LCB approval to do anything, you are in the strongest position if you get an email or something in writing from your officer that gives you permission to make the switch.
And if you think this permission is easy to get... you might be right. It really depends on your relationship with the LCB and their temperament that day for processing files. Sometimes they tell us "no problem!". Other times they tell us the seller had better start doing their homework because it will cost them a few thousand dollars more to convert first.
Let's take a look at a slightly more complex scenario.
What happens if you are a sole prop who is selling their license at and the very end you are assigned to someone else throughout the process and the next officer doesn’t agree with your request? If you don’t have anything in writing that gives you permission, it’s a really hard argument to make and it's likely that you'll have to go back to the beginning and convert to a company prior to sale.
Trust me, no one likes to go back to the beginning of the line after a few months of waiting. Don't be that guy.
We just want to make sure you are prepared before you start down the path. It's a long journey from start to finish in the cannabis business world. There is no reason to make it harder than it needs to be.
The CannaLocations Team