Licensed Cannabis Businesses.
Washington Initiative 502, passed by voters in 2012, is administered to require all owners of licensed cannabis businesses to have lawfully resided in Washington for at least six months prior to applying for a cannabis license from the Liquor and Cannabis Board (LCB).? Additionally, no cannabis license may be issued to a person under the age of 21 years, or to a partnership, employee cooperative, association, nonprofit corporation, or corporation unless formed under Washington law and unless all of the members are qualified to obtain a license.? If a manager or agent conducts the business of a licensed cannabis establishment, the manager or agent must possess the same qualifications required of the licensee.
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When an application for a cannabis license is submitted to the LCB, the LCB may inspect the premises proposed to be licensed, and may inquire into all matters in connection with the construction and operation of the premises.? The LCB conducts a financial investigation to determine the source of funds, as well as a fingerprint-based criminal history record information check and a search of public safety administrative violation history records with the LCB.?
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Under the LCB's current rules, a cannabis license must be issued in the names of the true parties of interest, and for a privately held corporation, the true parties of interest include all corporate officers and directors, or persons with equivalent title, and all stockholders.? The LCB is not currently accepting applications for new cannabis producer, processor, or retailer licenses, other than at certain times through the Cannabis Social Equity Program.?
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Employee Stock Ownership Plans.
An employee stock ownership plan (ESOP) is a qualified defined contribution plan under the Internal Revenue Code that is a stock bonus plan or a stock bonus and money purchase plan.? An ESOP must be designed to invest primarily in qualifying employer securities and meet certain federal requirements.? An ESOP trustee serves as the shareholder of record.? An ESOP administrator typically performs day-to-day operating functions.?
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In 2023 the Washington Legislature enacted the Expanding Employee Ownership Act (Act), which created the Washington Employee Ownership Program (Program) at the Department of Commerce to support efforts of businesses considering a sale to an employee structure and established the Washington Employee Ownership Commission to oversee the Program. ?The Act provides a business and occupation tax credit for costs related to converting a qualifying business to an employee ownership structure.
Employee Stock Ownership Plans Authorized for Licensed Cannabis Businesses.
An ESOP is authorized to own up to 100 percent of the stock in a licensed cannabis business or a business that is an owner of a licensed cannabis business.? With respect to any interests held in a business owned by an ESOP, the corporate officers and directors, or persons with an equivalent title, of the business applying for or holding a cannabis license are considered the applicant or owner and must qualify for and be named on the cannabis license.
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Unless a person is also a corporate officer or director, or holds an equivalent title, of the business applying for or holding a cannabis license, or the person holds an interest in the business outside of an ESOP, neither an employee of a cannabis business participating in an ESOP, nor the plan administrator of the ESOP, nor the trustee of the ESOP are: