The employee stock ownership plan (ESOP) will also create additional value by making the company tax exempt.

December 31, 2023

Massachusetts-based Theory Wellness is becoming the largest employee-owned cannabis company and the timing with the holidays is a bonus.

In addition to bringing the employees on as owners, the restructuring will put “millions” back into the company each year – a benefit for both the organization and its new employee owners – by bypassing the onerous 280E tax provision, according to one of the business’s founders.

Co-founder and Chief Strategy Officer Nick Friedman told Green Market Report that the business on Wednesday closed a transition into an employee stock ownership plan (ESOP), which is a government program that Friedman said is structured similarly to 401k retirement plans.

“It essentially is a much more robust retirement plan for employees,” he said. “Over time, your employees vest into ownership based on tenure. It’s done in a democratic way, in the sense that simply your ownership is based on your payroll. It avoids executives getting paid at multiples from your entry-level worker; everyone is getting an ownership stake in the company.”

The structure, Friedman said, creates more incentive for employees to perform better and stick with the company longer. And, he said, it’s an “alignment of values” between management and staff.

“The restructure preserves the core of what made Theory successful — its people. It’s a decision we made with a clear vision for our team, and creates a sustainable future that rewards those who have been so committed to our mission,” Friedman said.

One of the ancillary benefits to such a transition is the company becomes completely tax-exempt at both the state and federal levels, Friedman said, which means Theory could become the first legal marijuana company to be unburdened of 280E, the federal tax provision that excludes companies dealing in Schedule I substances from claiming standard business deductions.