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Choosing the Right Business Structure For Your Cannabis Business
Presented by
Robert Carp, Esq.
Let’s Get Acquainted
• LOOKING BACK
• Business ownership/management experience?
• Cannabis industry experience?
• LOOKING FORWARD
• Silent investment vs. Active participation?
• Ancillary services vs. Direct production/sales?
Choice of Entity - Considerations
• Taxation
• Management & Control
• Funding & Exit Strategy
• Which is right? LLC, C Corp., S Corp., Partnership?
What is everyone bringing to the table?
• Money?
• Services?
• Putting together the deal?
• Ability to obtain financing?
• ***SPELL IT OUT IN THE OPERATING AGREEMENT****
ARE YOU GOING TO SOLICIT FUNDING?
• IS IT DEBT?
• EQUITY?
• CONVERTIBLE WARRANTS?
• SERIES A?
• THINKING ABOUT GOING PUBLIC?
Management/Control Considerations
1. Partners vs. Financiers
2. Majority/Minority Duties
3. Management Companies
• Unified Ownership?
• IRS Considerations
Funding/Exit Strategy Considerations
1. Single Cap vs. Future Rounds
2. Exit by Sale (of what?)
3. Cash Pump (Active vs. Beach)
Expanding State by State
• Franchise Model
• Intellectual Property Licensing
• Management Contracts
• New corporation in each state?
• Master corporation in Delaware?
Example StructureIP – Trademarks, Patents, Licensable Goods Holding
* Considerations – Varied ownership, IRS positions, multiple taxed entities, State and Local regulations
Applications, Responsibility, Liability, Public Facing Licens
eManage
Operate (Retail/Produce), Bank, Payroll
Other Early Phase Considerations
• Target Market Positioning
• Risk Capital (can I get a deduction?)
• Partner Strengths (Producing)
• Future Legal Changes– Competition Caps
– Recreational
DID I MENTION OPERATING AGREEMENT?
DAMN RIGHT I DID