Dear Pot Lawyer,
How can I get into the cannabis industry? I don’t have any money.
It’s certainly easy to sympathize with this reader. With inflated rent prices for cannabis-friendly properties, expensive security requirements, and the long wait for a license, the barriers to entry into the cannabis industry in Oregon are high at the moment. One way or another, you’ll need significant start-up capital to get your operation up and running. Some lucky few are able to find angel investors, but even this dream scenario is fraught with peril.
You might not be able to bring any money to the table yourself, but if you’re serious about getting into the biz, you more than likely have the skills and connections to make the company a success. We call this sweat equity—but even setting aside the challenge of a sweat equity partner maintaining ownership control of the company, you might end up losing it all to the IRS if you’re not careful.
The core problem is sometimes referred to as “phantom income.” It’s a silly name for a very serious issue. Here’s how it works.