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Understanding New Jersey’s Proposed Cannabis Laws

While medical marijuana is currently permitted for approved patients in New Jersey, recreational use remains illegal. However, that is about to change.

On November 26, a state senate committee took a major step toward legalizing recreational marijuana by voting in favor a bill that would legalize and regulate cannabis businesses. It would create a licensing structure that would allow approved businesses to open grow facilities, processing, wholesaling and retail sales.

The bill faces several more hurdles before it becomes law, but proponents are optimistic. Once the bill passes, it will open up vast opportunities for businesses in the cannabis industry. But with that opportunity comes risk.

Applicants for licensees would be subject to a thorough approval process that includes background checks, residency requirements, and other requirements. Once licensed, businesses would be required to meet strict regulatory requirements.

The prospect of navigating such regulations at the state level can be daunting. The federal government’s classification of marijuana as a Schedule 1 Controlled Substance further complicates the task. And the unique challenges posed by federal taxation of cannabis business adds yet another layer of uncertainty.

However the success of the cannabis industry in other states serves as a reminder that with proper planning and an understanding of the issues, such businesses will not only survive. They will thrive. In 2017, dispensaries in Colorado reported over $1 billion in sales.

Preparing to enter the legal cannabis business in New Jersey requires meticulous planning and an understanding of the challenges presented by this new and quickly changing industry.

Robert W. Ratish practices business law in New Jersey and is a member of the New Jersey State Bar Association Cannabis Law Committee. To schedule a consultation, call 973-415-6400.

Cannabis is classified as a Schedule 1 controlled substance under the federal Controlled Substances Act. Although the sale and use of cannabis may be legal in some states, it is currently illegal in New Jersey and under federal law. The Law Office of Robert W. Ratish works with clients to understand current and proposed state regulation of the sale of cannabis with the understanding that any such sale or use remains illegal under federal law.

Buying or Selling a Business

Buying or selling an existing business can be extremely stressful for both parties. The buyer is making a large investment and potentially taking on a great deal of exposure to liability. Meanwhile, the seller wants to get the best possible deal. In some cases, the deal can become adversarial. But that does not have to be the case.

Developing a plan to buy or sell a business can help both parties feel assured that they are making an informed decision, that the deal is fair, and that both sides can feel confident that they are minimizing exposure to liability. The end result can be an amicable deal in which the buyer and the seller can each sleep soundly at night knowing all their questions were answered and all their goals achieved.

Coming up with a framework for the anticipated agreement from the outset not only lets both parties know they are serious about negotiating a deal, but helps establish a roadmap going forward. The parties can agree to provide access to information about the business, while also protecting the parties in case the deal falls through by committing to keep information confidential.

The due dilligence period allows an inspection of the business records and other documents so that the buyer can enter into the agreement with eyes wide open. Any liens, violations, pending litigation, contracts or employment agreements would come to light and could be factored into the sale price. This also gives the buyer an opportunity to examine tax records, regulatory filings, and other documents that can indicate the health of the business.

Finally, prior to the closing, the state Division of Taxation will receive notice of the sale and notify the parties how much tax is due from the seller. That amount can be placed in escrow at the closing to satisfy any taxes that are due, protecting the buyer from taking on any tax liability.

With a thorough and well thought out plan, the purchase and sale of a business can be a transparent, smooth process that benefits both the buyer and seller.