Sticky Icky Legal counsels cannabis clients on selecting, registering, and forming the proper business entity type.
Choosing the Correct Business Entity
Choosing the correct business entity is a crucial first step to ensure future success in your entrepreneurial endeavor. California recognizes a number of different business entity types including corporations, LLCs, and non-profits, among others. The type of cannabusiness you are starting will determine the proper type of business entity to form. To properly register a California business, you must file the correct forms and fees with the California Secretary of State.
The most common corporate types are S corporations, and C corporations. Both provide limited liability to shareholders, but may differ on tax treatment and outside investment opportunity.
A limited liability companies provides its members with limited liability, the option to be taxed as a partnership or a corporation, and fewer formalities than a corporation.
The type of non-profit activity you engage in will determine which form of non-profit entity to register with the Secretary of State. Options include a tax exempt 501(c)(3), and mutual benefit corporations, among others.