Entity Selection
Corporate versus pass-through treatment changes how income is taxed, how losses are used and how owners are compensated. In a 280E environment the analysis differs meaningfully from a conventional business, because disallowed expenses can create taxable income even when the business generates little or no economic profit.
- Corporation versus pass-through modeling
- Owner compensation and distribution planning
- Loss utilization and basis considerations
- Investor and capitalization structure
Separating Non-Plant-Touching Activity
Real estate, equipment leasing, intellectual property and management services are sometimes held outside the licensed operating entity. Any such arrangement must reflect real services, arm's-length pricing and proper documentation, and must respect license and ownership rules.
Intercompany Documentation
Management agreements, lease agreements, license agreements and transfer pricing support are the substance behind a group structure. Without them, intercompany charges are difficult to sustain.
Frequently Asked Questions
- Does a management company structure reduce 280E exposure?
- It depends entirely on facts, substance and pricing. Structures without genuine services and arm's-length terms have not fared well under examination. Any structure should be reviewed with tax counsel.
- Can ownership be changed freely?
- No. Ownership and control changes at licensed operators are generally subject to regulatory review and approval requirements. Coordinate with regulatory counsel before executing any transfer.
- Is restructuring worth it for a smaller operator?
- Sometimes the administrative cost outweighs the benefit. We model both before recommending a change.