Multi-state operators may need to weave a complex web when it comes to corporate structure. Operators entering new jurisdictions must consider many factors, the most significant being tax exposure, licensing restrictions, and potential exit scenarios as they determine which entity structures will best support their expansion and goals. The goal of structuring is to create an efficient model that benefits investors, is attractive to acquirers, and helps maximize gains and control taxes. In most established (fully legalized) industries, the choice is often straightforward. Many start-ups will default to a limited liability company (LLC) that is treated as a partnership and reduces tax liability. In cannabis, however, industry-specific factors, such as restrictions on deductions (Internal Revenue Code 280E) and the likelihood of stock transactions in the event of a sale, make the entity choice less straightforward. Look at tax exposure One of the more straightforward considerations in entity structure when entering a new jurisdiction is the impact on owner/investor income taxes and cash flow. When initially structuring the entity, owners must determine when they anticipate receiving dividends.
Cannabis Business Executive – Cannabis and Marijuana industry news, 04/04/2022 16:38:00