Choosing the Right Business Structure For Your Cannabis Business

Presented by

Robert Carp, Esq.

rcarp@post.harvard.edu

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