There are a lot of bad ways to set up a cannabis business, and we like to think that we’ve seen them all. But there’s probably no worse category than 50/50 ownership of a business – a recipe for all sorts of disasters. Let’s look and why that is, and some ways to avoid it.
When I talk about 50/50 ownership, I mean two people or entities who own all of the outstanding voting rights in a business. For example, this would mean two people who each own half of the voting shares in a corporation or half of the membership interest in an LLC. This is an extremely common set-up for smaller companies where two partners may want to have equal control of a business (I may use the term “partner” in this post for ease of reference even though they’d be referred to as shareholders in a corporation or members in an LLC). But we’ve even seen bigger or more established companies try to have 50/50 joint ventures.
50/50 ownership means that any decision that must be put to a vote effectively needs unanimous approval because the vote of one owner doesn’t hit the majority threshold. While at