Corporate governance is a basic requirement of any business. So of course, cannabis businesses often just ignore it. Some of them may pay a lawyer to put together a simple set of bylaws and an organizational resolution (or operating agreement for an LLC), and then basically close their files until something “big” comes up. This is an absolutely terrible plan and leads to tons of mistakes – many of which are easily avoidable.
In 2021, I wrote a post about why corporate governance is important. Today I want to revisit that post and hopefully hammer home again why this is so important.
What is corporate governance?
First of all, let’s break down what corporate governance even is. As I wrote back in 2021: “a strong corporate governance program is one in which a cannabis business (1) adopts procedures for running the cannabis business, and then – and this is the hard part- (2) actually follows them.”
To break this down even further, lets imagine a cannabis business is formed as a multi-member LLC. This is done by filing articles (or in some states certificates) of organization with the state’s secretary of state. The articles often have barely any information in
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