With commercial cannabis permits coming online throughout California, farmers across the state are interested in forming entities to protect their farms and personal assets. Before rushing in, it is wise to first critically assess the different entity choices when making their decision.
First, know your options. That is, know each entity structure available to you. Second, understand the benefits and burdens of each option. While the old cannabis rules required cannabis companies to operate as nonprofits, the new rules have NO requirement that your company be a nonprofit moving forward. Given this change, most companies elect a traditional “startup” structure for their businesses, which generally involves operating through either a limited liability company (“LLC”) or Corporation.
While farmers are encouraged to fully consider creative corporations like benefit corporations (“b corps”), social purpose corporations, and the new cannabis cooperative model, this blog will focus on the taxing and legal differences between the two primary choices, (1) LLCs and (2) Corporations.
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