Marijuana Business Magazine November December 2018

P artnership? S Corporation? LLC? Of the countless choices you will make as you expand your cannabis business, few decisions are more critical to your company’s financial future than the legal structure you select at the outset. From taxes to raising money to your own personal liabilities as a founder, your company’s structure can make or break its chances for success. “It’s a decision that’s full of twists and wrinkles, especially considering that regulations are still changing,” said Tatiana Logan, a corporate law attorney with the Harris Bricken law firm in Los Angeles. For example, Logan said, the rules governing cannabis business licenses vary from state to state. In many states, those licenses cannot be transferred from one business entity to another. “The biggest mistake I see is that folks don’t understand what rights they have on licenses,” she said. “People think they can treat their licenses like personal property and transfer or sell them.That is not the case in California.” But a carefully crafted corporate structure, she said, can ensure that busi- ness entities remain intact, even if the founding members are ready to exit. Benton Bodamer, a Columbus, Ohio-based attorney with the law firm Dickinson Wright, agreed. “There are so many circumstances where people with access to financial resources will jump in headfirst with their business plan,” Bodamer said. “And while that is a very entrepreneurial thing to do, it’s a mindset that is often accompanied by a failure to bring the financial and legal opinions into the room as decisions are made.This is a process that comes with a labyrinth of complex issues.” Attorney Tatiana Logan says business licenses aren't always transferable in the cannabis space. Photo courtesy of Harris Bricken By Lisa Bernard-Kuhn EXECUTIVE SUMMARY Selecting the right legal structure for your cannabis venture is critical to your company’s success and ability to grow. But how do you know which business entity is right, especially in the rapidly evolving world of legal cannabis? Experts shared these tips: • Start with the basic question: What is your business, and what do you want to do? • A firm’s corporate structure is very often dictated by its source of funding and tax efficiency. • Keep in mind that the rules governing cannabis business licenses vary from state to state. In many states, those licenses cannot be transferred from one business entity to another. That will affect the structure you choose. • Consider creating a “corporate family of businesses” that will limit your company’s tax liabilities and best protect its assets. Picking the right legal structure for your company can minimize tax liability and protect assets Choosing a BUSINESS STRUCTURE November/December 2018 • Marijuana Business Magazine • 95