馃攳
Cap Table Mistakes That Can End Your Cannabis Business - YouTube
Channel: GreenGrowth CPAs
[0]
[Music]
[3]
as a cannabis business operator you need
[5]
to know that something as basic as a cap
[6]
table in the state can kill your company
[8]
before it ever has a chance to raise
[10]
private or public funding and when going
[12]
public your business is going to be
[14]
under extreme financial scrutiny
[15]
including your cap table so in this
[18]
video we will review some of the most
[19]
common mistakes that owners make by
[21]
relying on inaccurate information around
[23]
the equity allocations in their cap
[25]
table at its core if your cap table is
[27]
messy or split in abnormal ways then
[30]
who's going to want to invest in your
[31]
business a clear-cut cap table provides
[34]
transparency for investors to understand
[36]
who they're getting involved with and
[37]
how those people previously manage their
[39]
business now if you need help with
[41]
managing your cap table or performing an
[43]
audit on your cannabis business then
[45]
please schedule a free consultation with
[47]
our team by visiting our website at
[49]
greengrowcpas.com or give us a call
[57]
the first 800-674-9050 to ask yourself
[58]
is who's managing your cap table or who
[61]
should be managing your cap table well
[63]
typically cat tables are kept up to date
[65]
with specialized software and a
[67]
knowledgeable business professional such
[69]
as a cfo now if you don't have a cfo
[72]
already it may be time to hire one or
[74]
you can save on their salary by
[76]
outsourcing this role to a trusted firm
[78]
like green growth cpas because while
[80]
failing to seek professional advice may
[82]
save you time and money immediately the
[84]
future costs could be incredibly high
[86]
and why you ask well it's simply because
[88]
non-compliance with tax filings due to
[91]
wrong allocations inaccurate profit
[93]
distributions and the inability to raise
[95]
more capital can stop your business
[97]
growth dead in the water so managing a
[99]
cap table to accurately depict ownership
[102]
is of incredible importance here next
[104]
you need to understand the story of the
[106]
cap table and how others are
[108]
interpreting it and to fully comprehend
[110]
how the cap table works let's first look
[112]
at what the cap table tells the reader
[114]
now they are more than just percentages
[116]
on a piece of paper or spreadsheet they
[118]
are encoded stories of a company's past
[121]
the allocation of equity can explain a
[123]
lot about what a company can do the
[125]
distribution of the ownership and who's
[127]
responsible for making major company
[129]
decisions we recommend understanding how
[131]
specific changes can impact the
[133]
enterprise from the start of your
[134]
business all the way through finalizing
[136]
your exit and since your business story
[139]
is constantly evolving periodically
[141]
updating the cap table is essential
[143]
typical recommendations include
[144]
evaluating when there is a new round of
[146]
financing or when there's additional
[148]
shares being granted or when reconciling
[150]
vesting schedules and one of the most
[152]
significant mistakes that founders make
[154]
is using spreadsheets to manage their
[156]
cap table this can cause nuanced matters
[158]
to become disorganized and complicated
[160]
because of the mechanics of how equity
[162]
positions evolve over time
[165]
next let's discuss the extreme
[167]
importance of data and record keeping
[169]
yes managing your cap table can seem
[171]
tedious but it is a vital part of
[174]
financial operations of the business in
[176]
addition you can make better decisions
[178]
by acknowledging the intricacies of your
[180]
equity information for example a
[183]
thorough understanding is critical since
[184]
you'll want to know what portion of the
[186]
company is available to give when
[188]
raising capital from outside investors
[190]
and how that affects the current
[192]
shareholders you don't want to give away
[194]
too much or not have enough to give once
[196]
negotiations start to move quickly and
[198]
also investors want to see who has
[200]
control of the company by way of
[202]
ownership another example is in the case
[205]
of an audit where a cap table that is
[206]
periodically maintained helps your legal
[208]
team accurately review all the company's
[211]
financial history they can easily
[212]
identify changes in ownership and
[214]
quickly provide detailed and accurate
[216]
advice to their clients
[219]
next let's discuss the types of
[220]
compliance issues that come from an
[222]
outdated cap table now the biggest
[224]
headache is going to come from
[225]
compliance with the irs and taxes it
[228]
hurts the company and you can also
[229]
adversely impact the employees who own
[232]
shares as well so getting compliance
[234]
wrong can cost the founders shareholders
[236]
and even the employees a lot of money
[240]
two common compliance issues are first
[242]
an 83b election which concerns the
[244]
treatment of restricted stock awards and
[246]
it's critical to have it filed within 30
[248]
days of the grant and many people miss
[251]
the deadline without even knowing that
[252]
it exists in second irc 409a laws
[256]
require an independent valuation of a
[258]
private company's common stock which
[260]
helps determine the cost to purchase a
[262]
share also known as a strike price for
[264]
options
[265]
aside from these you also have to worry
[267]
about rule 701 and asc 718 in regards to
[271]
the cap table maintenance compliance
[272]
issues are very easy to avoid if you
[275]
take the steps to work with an
[276]
experienced financial professional
[279]
now thank you for taking the time to
[280]
watch this video and i hope it's brought
[281]
you some value and understanding around
[283]
the importance of managing your cap
[285]
table and equity allocations now if you
[288]
need help with managing your cap table
[290]
or performing an audit on your cannabis
[291]
business then please schedule a free
[293]
consultation with our team by visiting
[295]
our website at greengrowcpas.com
[298]
or give us a call at 800-674-9050
[302]
have a great day and we'll talk to you
[304]
soon
[314]
[Music]
[319]
please note that the information
[320]
contained in this presentation is meant
[322]
for guidance purposes only and not as
[324]
professional legal or tax advice and
[326]
further does not give any personalized
[327]
legal tax investment or any business
[330]
advice in general
Most Recent Videos:
You can go back to the homepage right here: Homepage