The document discusses important considerations for choosing the right business structure for a cannabis business. It addresses factors like taxation, management and control, funding and exit strategy. It suggests evaluating which entity structure is best like LLC, C Corp, S Corp or partnership. It emphasizes clearly spelling out roles and responsibilities in an operating agreement. The document also covers management/control, funding/exit strategy considerations and expanding to other states.

1. Choosing the Right Business Structure
For Your Cannabis Business
Presented by
Robert Carp, Esq.
rcarp@post.harvard.edu

2. 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?

3. Choice of Entity - Considerations
• Taxation
• Management & Control
• Funding & Exit Strategy
• Which is right? LLC, C Corp., S Corp.,
Partnership?

4. What is everyone bringing to the table?
• Money?
• Services?
• Putting together the deal?
• Ability to obtain financing?
• ***SPELL IT OUT IN THE OPERATING
AGREEMENT****

5. ARE YOU GOING TO SOLICIT FUNDING?
• IS IT DEBT?
• EQUITY?
• CONVERTIBLE WARRANTS?
• SERIES A?
• THINKING ABOUT GOING PUBLIC?

6. Management/Control Considerations
1. Partners vs. Financiers
2. Majority/Minority Duties
3. Management Companies
• Unified Ownership?
• IRS Considerations

7. Funding/Exit Strategy Considerations
1. Single Cap vs. Future Rounds
2. Exit by Sale (of what?)
3. Cash Pump (Active vs. Beach)

8. Expanding State by State
• Franchise Model
• Intellectual Property Licensing
• Management Contracts
• New corporation in each state?
• Master corporation in Delaware?

9. Example Structure
IP – Trademarks,
Patents,
Licensable Goods Holding
* Considerations – Varied
ownership, IRS positions, multiple
taxed entities, State and Local
regulations
Applications,
Responsibility,
Liability,
Public Facing Licens
e
Manage
Operate
(Retail/Produce),
Bank, Payroll

10. 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