Marijuana Business Magazine November December 2018

S CORPORATION What is it? S corporations are like C corporations but can have no more than 100 shareholders and may have only one class of stock. What are the pros? • These entities can attract more capital because they allow shareholders to invest in the business. • S corporations can avoid double taxation because income and losses are passed to shareholders for them to include on their individual tax returns. What are the possible pitfalls? • The number of shareholders is limited to 100, curbing the ability to raise capital in the same way as a C corporation. • These entities have higher legal and tax service costs and must hold regular director and shareholder meetings and allow shareholders to vote on company decisions. Source: IRS.gov C CORPORATION What is it? Most large, publicly held businesses are set up as C corporations be- cause this structure allows shareholders to own the business entity. Shareholders elect a board of directors, which manages the business and makes all major decisions. What are the pros? • A C corporation allows more funding opportunities through public stock offerings. • Typically, shareholders, directors and officers do not assume personal liability for the business obligations. What are the possible pitfalls? • These entities are costly to create and maintain because they face increased regulatory oversight from the U.S. Securities and Exchange Commission, among other entities. That comes on top of all the other regulatory scrutiny MJ companies face. • As a taxable entity, C corporations face double taxation: The business entity is taxed, and income earned by shareholders is taxed. 100 • Marijuana Business Magazine • November/December 2018