Overview
Your cannabis ownership structure is reviewed before your application is scored, and it is reviewed again every time ownership changes. Regulators look past the cap table to anyone with a financial interest or control, which most states call a true party of interest. Investors, lenders, landlords with percentage rent, managers and brand licensors can all count. Get it wrong and you face delays, a denied change of ownership or a license at risk.
We have structured ownership for our own licenses and lived with the consequences, including license caps that limit how many stores one person can hold an interest in. We work alongside your attorney to design a structure that fits the rules, raises the money you need and keeps decisions where the regulator expects them to be.
Who this is for
- Applicants raising money from investors or family
- Social equity and CAURD licensees who must keep majority ownership and control
- Owners approaching a state's cap on the number of licenses one person can hold an interest in
- Landlords, lenders and managers who need to know if their deal makes them a true party of interest
- Licensees planning a sale, merger or new investor
Problems we solve
Investors who count as owners
Profit shares, loans with conversion rights, vetoes and board seats can make an investor a true party of interest who must be disclosed and approved.
Control that sits in the wrong place
Management agreements and side letters can hand over control the regulator says must stay with the licensee, especially in social equity programs.
License caps
A stake in one licensee can count against your limit in the same state, which blocks the next deal.
Documents that do not match
Operating agreements, disclosures and the application tell different stories, which invites deficiency notices.
How we approach ownership
We start by drawing the whole picture: every person and entity with money, control or a share of revenue, including people who do not think of themselves as owners. Then we test each relationship against the state's definitions and thresholds and mark which ones must be disclosed, approved or restructured.
We have lived with these rules ourselves, including caps on how many licenses one person can hold an interest in, so we design for the deal after this one too. The goal is a structure your investors understand, your attorney can document and the regulator can approve without a long back-and-forth.
What is included
Structure design
- Map of every owner, investor, lender, landlord and service provider
- True party of interest analysis for each relationship
- Entity and holding company options with pros and cons
- Cap and threshold checks against state rules
Investor and partner terms
- Term sheet support for equity, debt and revenue arrangements
- Control and decision rights that match program rules
- Flat-fee management and services structures
- Exit, buyout and transfer provisions
Regulatory filings
- Ownership and disclosure sections of the application
- Change of ownership and control filings
- Consistency review across all documents
- Responses to deficiency notices about ownership
How the engagement runs
Discovery call
We learn the deal, the people involved, the state and your timeline.
Ownership map
We chart every person and entity with money or control in the business.
Options memo
We set out two or three structures with the regulatory risk and business tradeoffs of each.
Documents with counsel
Your attorney drafts the legal documents; we review them against the rules and the application.
Filing and follow-up
We prepare the disclosures and filings and help answer regulator questions.
Typical timeline
| Phase | Typical timing |
|---|---|
| Ownership map and options | Weeks 1 to 3 |
| Documents with counsel | Weeks 3 to 6 |
| Filings and responses | Weeks 5 to 8, then as the regulator requests |
Regulator review of ownership changes runs on the regulator's schedule and can take months.
What you provide
- Draft or current operating agreements and cap table
- Investor, loan, lease and service agreements, including drafts
- Background information the regulator requires for each owner
- Access to your attorney and accountant
Frequently asked questions
What is a true party of interest?
A true party of interest is anyone the regulator treats as having a financial interest in or control over a licensee, even without owning equity. Definitions differ by state, but they often reach investors, lenders, managers, landlords and licensors. Our glossary and New York guide explain the details.
Are you a law firm?
No. We are operators and consultants. We design and review structures from the regulatory and operating side and work alongside your attorney, who drafts and advises on the legal documents.
Can a social equity licensee take outside investment?
Usually yes, within limits on ownership share, profit share and control that vary by state. The structure has to keep the qualifying owners in charge in substance, not just on paper.
Will a management agreement make you an owner?
It can, depending on how it is paid and what control it gives. We use flat-fee agreements where the licensee keeps decision rights, and we check each agreement against the state's rules before it is signed.
Can you fix a structure that is already filed?
Often. We review what was filed, identify the risks and help you and counsel decide whether to amend, restructure or disclose.
How is this priced?
Engagements are scoped and quoted after a discovery call, based on the number of parties, the states involved and the filings needed.
Does a landlord count as a true party of interest?
A landlord charging a fixed, market-rate rent usually does not. A landlord taking a percentage of sales or profit, holding a loan or having decision rights may. The answer depends on the state's rule and the lease terms.