A Pennsylvania medical cannabis company earlier this month ditched traditional ownership in favor of an employee stock ownership plan (ESOP).
Organic Remedies’ July 6 transition to an employee-owned business is believed to be the first of its kind for a cannabis operator in MMJ-only Pennsylvania, according to a news release from the law firm representing the company.
“Organic Remedies has created a model that rewards employees who helped build the company while positioning the business for continued success,” said Jim Carlisle, a partner in the law firm Dinsmore & Shohl, which advised Organic Remedies through the transaction.
How can an ESOP help a cannabis business?
An ESOP gives employees ownership in the company they help build, but the structure does more than reward the staff, according to finance and tax experts who have studied Internal Revenue Code Section 280E.
ESOPs can offer meaningful tax advantages that support long-term business sustainability and succession planning. That makes them an appealing option for owners who want to preserve a company’s mission rather than sell to an outside buyer.
CEO Mark Toigo will continue to lead the company following the transaction.
“Transitioning to an employee-owned organization ensures that our mission and service continue, while rewarding the employees who helped us build this special organization,” Toigo said in a statement, as reported by Central Penn Business Journal.
Have other cannabis businesses formed ESOPs?
Cannabis businesses in other states have been using ESOPs as a tool since 2023, when Massachusetts-based Theory Wellness put its program into place. Another Massachusetts cannabis company – The Vault – followed a few days later.
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“An ESOP is just another way to sell your company,” Darren Gleeman, managing partner of New York-headquartered ESOP investment bank MBO Ventures, told MJBizDaily last year.
“You can sell to a private equity firm, a strategic buyer or to employees via an ESOP.”
