280E Avoidance + MMJ/Hemp Separation Accounting Question

We are a startup that begins operations in two weeks. Several questions - hoping there are some savvy business owners in here

  1. My accountant is advising a two company setup to avoid 280E. The MMJ business wouldn’t make much money or possibly lose money. A holding company would bill the MMJ company a management fee that would count as cost of goods sold. The holding company then, not affected by 280E, can deduct all expenses associated with the business. Anyone have a similar setup? Can you explain in detail how it works?

  2. I think I could make it so the “holding” company is the hemp company. It’s not subject to 280E. But would I still have trouble getting a normal bank account? I don’t want to pay another 1000/month (I already pay 1000/month for the MMJ business). Why is it beneficial to separate MMJ and hemp companies?

  3. I’m considering starting a nonprofit Hemp Alliance that would have a side benefit as us as a processor. We’d get to know all the hemp growers in the state.

  4. Company A has the MMJ licenses, will be subject to 280E, has the DBA we want to use in the market, and has around 200k in real estate profit this year that helped buy all the processing equipment to get started.

My proposed plan:
Company A (S Corp taxation) becomes the holding company, transfer the processing and growing licenses to company B, transfer the DBA to company B, sign building lease, keep all expenses here, has a normal bank account, normal taxation, employees have company credit cards, employees get paid from here
Company B (S Corp taxation) - the DBA becomes the company name, receives management fee from Company A to do business, has the MMJ bank account, subject to 280E taxation, procures biomass, sells to dispensaries
Hemp company - run operations in Company B, we’re avoiding 280E anyways
Company C - nonprofit for Hemp Alliance, normal bank account, normal taxation

Could company C be a DBA for Company A? Would prefer it to be in Company A, just manage it as a department. One less tax filing, monthly payment for tax software, bank account, credit card account

Bonus: Can you provide a sample chart of accounts for a processing and soon to be growing operation? Anything more specific than the generic things you find in books from the library. Would be nice to be able to measure the profitability of processing/growing departments on their own as much as reasonably possible.

1 Like

i don’t know, my understanding is that some tax advisors recommend against the structure outlined in 1, as per a recent ruling outlined here https://www.ustaxcourt.gov/UstcInOp/OpinionViewer.aspx?ID=11855
and
FEINBERG v. COMMISSIONER OF INTERNAL REVENUE (2015) | FindLaw

please someone say I’m wrong