Corporate structure and contracts

What cannabis businesses need to know:

• Although Kentucky’s Senate Bill 47 won’t allow cannabis businesses to operate until 2025, owners should be proactive in their business planning efforts, such as:
  • Determining the form of entity (corporation, LLC, or general partnership) and ownership structure (classes of shares or units);
  • Clearly defining management roles (e.g., whether owners also serve as directors, officers, or managers, how officers/managers are removed and replaced); and
  • Addressing financial matters (e.g., whether additional capital contributions are mandatory, how are dividends and distributions determined and when are they paid).
• When preparing governing documents (e.g., operating agreements, shareholders’ agreements), owners should plan for possible changes and adverse events, such as:
  • Transfers of ownership, both voluntary (e.g., selling to a third party) and involuntary (e.g., death or divorce); and
  • An owner’s failure to comply with applicable regulations, which may jeopardize the business’s licenses.