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.