The cannabis industry is in dire straits, perhaps even in a recession. Cannabis businesses cannot seek standard bankruptcy protections and are looking for creative ways to deal with the distressed market. As companies look to shake off unproductive assets, our cannabis group has fielded tons of inquiries about how to deal with depressions in the industry – so much so that we’ll be doing a free webinar on these issues next Tuesday, February 28.
One of the more common inquiries we’ve gotten concerns how to dissolve cannabis entities and what the effects of dissolution would be. So today, I’ll look at some of the high-level issues related to winding up and dissolving a cannabis entity, and post-dissolution consequences.
The first issue may seem obvious, but it’s surprising how often it gets overlooked: simply “abandoning” a cannabis entity is not a great idea. Instead, they should actually go through the dissolution process. A business that is simply “abandoned” (i.e., the owners don’t go through the formal dissolution process and just do nothing with the business) may still accrue outstanding taxes and other liabilities. It may be administratively dissolved (depending on the state) or even fined. There are a lot of unknowns
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