Before you consult with a lawyer or hire a consultant, you may want to do some of the work yourself. One of your first decisions as a cannabis growing biz owner is what form of biz you are going to choose. This decision is very important because it can affect how much you pay in taxes, the amount of paperwork your cannabis growing biz is required to do, the personal liability you face and your ability to borrow money. cannabis growing biz formation is controlled by the law of the state where your cannabis growing biz is organized.

The most common forms of cannabis growing biz’s should be: Corporations (C Corp)Limited Liability Companies (LLC) S (Sub chapter) Corporations (S Corp)

The two forms of cannabis growing biz’s should not be:Sole Proprietorship Partnerships

All cannabis growing biz's must file an annual return regardless of biz form.

Of course, regardless of industry, the question "What structure makes the most sense for my growing cannabis?" answer really is dependent on the individual circumstances of each cannabis growing biz owner. LL C’s are a common choice for small to mid size growers. You can even set up an LLC to pretend to be a corporation which is a good approach for cannabis growing biz owners who are disabled. Each cannabis growing biz owner must assess their own needs.

A sole proprietorship is the most common form of cannabis growing biz industry. It's easy to form and offers complete control to the owner. But as a cannabis growing biz owner, I wouldn't want to also be personally liable for all financial obligations, debts, and legal of the cannabis growing biz.

As a sole proprietor you can operate any kind of cannabis growing biz as long as you are the only owner. It can be full-time or part-time work. But it's only you. This includes operating a: Trade show cannabis growing biz Home-based cannabis growing biz One-person on-site consulting

Sole proprietors do not have taxes withheld from their cannabis growing biz income so you may need to make quarterly estimated tax payments. You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax.

Every sole proprietor is required to keep sufficient records to comply with federal tax requirements regarding cannabis growing biz records. Your net cannabis growing biz income or loss is combined with your other income (other income could be your salary if you also work for someone else, or your investments) and deductions and taxed at individual rates on your personal tax return.

A partnership is the relationship existing between two or more persons who join to carry on a trade of a cannabis growing biz. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the cannabis growing biz.

Each partner reports his share of the partnership net profit or loss on his personal tax return. Partners must report their share of partnership income even if a distribution is not made.

Partners are not employees of the partnership and so taxes are not withheld from any distributions. Like sole proprietors, they generally need to make quarterly estimated tax payments if they expect to make a profit. Also just like sole proprietors, the cannabis growing biz partners share personally liable for all financial obligations and debts of the biz in general.

The corporation becomes an entity that handles the responsibilities of the cannabis growing biz. Like a person, the corporation can be taxed and can be held legally liable for its actions. If you organize your cannabis growing biz as a corporation, you are generally not personally liable for the debts of the corporation. (Exceptions may exist under state law.)

Note: You can also set up an LLC to be a corporation for this purpose.

A corporate structure is more complex than other cannabis growing biz structures. It requires complying with more regulations and tax requirements.

Corporations are formed under the laws of each state and are subject to corporate income tax at the federal and state level. In addition, any earnings distributed to shareholders in the form of dividends are taxed at the individual tax rates on their personal annual tax returns.

LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LL Cs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LL Cs and foreign entities. Most states also permit "single member" Ll Cs, those having only one owner.

The Sub-chapter S Corporation is a variation of the standard corporation. The S corporation allows income or losses to be passed through to individual tax returns, similar to a partnership.

Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income.