Get It In Writing
If you're setting up a business, it's tempting to take the easy route and not draft formal documents or just use form documents that you find online. That's a bad idea. Here's why.
1. Being in the cannabis business is unique because cannabis is illegal under federal law. Your business documents need to be carefully structured so that they are binding and so that they address the conflicts between state and local law. This applies to business formation documents such as LLC operating agreements. It is crucial in documents such as leases and investor agreements.
2. Maine, just like every other state, has statutes that govern how companies and corporations operate. These statutes provide default rules that you may not like, such as provisions for what happens when a company is dissolved, the duties that business members or owners owe to each other, and how certain decisions get made. Sometimes people are surprised to learn that the default rules give all members equal management rights or require unanimous votes for some decisions. Your business documents can override almost all these rules so that your business structure is tailored to your company's unique needs.
3. Disputes invariably arise when people go into business together. Without proper documents in place you end up falling back on fuzzy memories or email snippets. I like to call carefully crafted business documentation the pre-nups for businesses. You lay out ahead of time what happens when certain situations arise. Then there is no dispute.
I call well-crafted business documents the pre-nups for businesses.
I know that many start-ups are trying to minimize their costs and that the legal jargon in business documents can be confusing and even intimidating. However, properly setting up a business may not be as expensive as you think -- I charge a $750 flat fee to set up an LLC -- and it will save you money down the road when issues come up. I also take great care to draft documents that use as little legal jargon as possible and to clearly explain the process to my clients.
If you're operating a cannabis business without clearly documented agreements in place, you're putting your business at risk for conflict and unintended consequences.
Get it in writing.