Marijuana Business Magazine November December 2018

LIMITED LIABILITY CORPORATION (LLC) What is it? This is a business structure allowed by state statute, and each state has its own regulations to consider. Most states do not restrict ownership, which means members may include individuals, corporations or other LLCs. There is no maximum number of members, and most states also permit “single-member” LLCs, or those having only one owner, according to the IRS. What are the pros? • There’s no limitation on the number of members, and members may have a full role in business operations. • The personal liability of members is limited. What are the possible pitfalls? • Members must pay a self-employment tax for Social Security and Medicare. • Many states have rules that require the LLC to dissolve if a member goes bankrupt or dies. PARTNERSHIP What is it? If more than one person has a stake in your firm’s ownership, a partnership could be a structure to consider. Partnerships come in two forms: general and limited. • In a general partnership, the owners run the company and carry business liability – meaning they are personally responsible for the business’ prof- its, losses and debts. • In a limited partnership, the general partners run the company and as- sume the business liabilities, while the limited partners serve only as investors. Limited partners have no say in how the business is run. What are the pros? • A partnership allows more fundraising options for the business entity. • There is no double taxation because taxes are not paid on income at the corporate level. Instead, the business is treated as a pass-through entity, in which taxes are calculated on profits or losses. What are the possible pitfalls? • A partnership is costlier to set up than a sole proprietorship because it must comply with more regulations and tax requirements. • General partners are personally liable for the company’s obligations. 98 • Marijuana Business Magazine • November/December 2018