The proper corporate structure provides a solid foundation for future growth, appropriate taxation, and the framework to withstand and resolve partner disputes and protect shareholders from personal liability.
At Manzuri Law, our dedicated California cannabis corporate and business law attorneys have assisted scores of new cannabis business owners with establishing the proper corporate structure that protects their complete interests from the start.
Here is what new and existing California cannabis business owners need to know about their formation options.
What are the Most Common Corporate Structures For California Cannabis Businesses?
There are three basic types of corporate structures for cannabis business owners in California.
- C-Corporation Business Structure
A C-Corporation, or C-Corp, establishes that shareholders are not personally on the hook for business liabilities, but provides less management flexibility, as the company must have a board of directors. That means strict rules regarding annual meetings and record-keeping requirements.
From a tax standpoint, the business pays at the corporate level, and shareholders also pay on income received. There is no limit to the number of shareholders allowed by a C-Corp.
- S-Corporation Business Structure
An S-Corporation, or S-Corp, also establishes that shareholders are not personally on the hook for business liabilities, requires a board of directors, and has strict rules regarding annual meetings and record-keeping requirements.
From a tax standpoint, the business is only taxed once, when shareholders pay on profits received. S-Corp businesses are limited to 100 shareholders, and all must be U.S. citizens or residents.
- Limited Liability Company Business Structure
A Limited Liability Company, or LLC, is typically the most flexible corporate structure for managing and running a cannabis business, as no board of directors is required, and owners are not personally on the hook for business liabilities.
From a tax standpoint, the owners can elect their tax treatment — whether they are taxed once or twice — to help minimize taxes.
Which Corporate Structure is Best for My California Cannabis Business?
Whether your California cannabis or hemp business is run by just you or includes partners or shareholders, the corporate structure has a direct impact on both tax liability and legal liability.
If you anticipate growth, or are simply happy with your existing operations, you will need to protect your business and personal property from liability from the start by organizing your corporate structure properly.
At Manzuri Law we can help you determine which corporate structure is right for your unique entity selection and business formation needs and manage each aspect of your cannabis company’s foundation, pivoting structure, and growth.
Contact Our Trusted Cannabis Attorneys in California at Manzuri Law for Help Today
Whether you are starting a new cannabis business or are streamlining an existing cannabis business operation, contact one of our California cannabis law firm specialists today by phone at (310) 912-2960 or online to ensure your business is established and functioning optimally.