Starting up a new business takes a lot of time, money, and planning. There are many steps that need to be taken to ensure that your new company runs smoothly, especially in regulated industries like the marijuana industry. Creating a commercial cannabis business operating agreement to meet your company’s unique and specific needs is one of the most important steps your cannabis business should take.
However, failing to have an operating agreement can jeopardize everything you’ve been working for.
If the LLC members don’t adopt an operating agreement, or if the agreement fails to cover every essential area, then the default provisions of Michigan LLC law will take effect.
These provisions will control how the LLC is structured and operates, which may not be in the manner that the members envisioned when the company was created.
An example of a default rule used in a lot of states is the requirement for any profits or losses to be divided equally among the owners without considering how much each member has invested in the business.
Most businesses wouldn’t like to see this happen, especially if some owners had invested more than others.
For these reasons, a thorough operating agreement is a practical necessity for your cannabis business, even if it’s not a legal requirement in Michigan.
It lays out and defines, in concrete terms, exactly what the expectations and obligations of all of the involved parties are, as well as putting financial protections in place.
Need help drafting a commercial cannabis business operating agreement? Do you require other cannabis corporate legal services? Request a consultation now.