Multiple EINs for Adult Use Applicants Can be a Real Pain in the Bud

December 3rd, 2019, Adult-use, Business & Corporate, State

Post by Doug Ginn

As business owners entering the adult use industry prepare corporate structures aimed to reduce tax impact and facilitate capital raises, they should be keeping one tedious fact in mind: Maine is currently requiring that each licensee-applicant have its own Employer Identification Number (EIN), and that an EIN only be used for one adult use application.

By way of background, an EIN (also known as Tax Identification Number or TIN) is essentially a Social Security Number for a business entity; it is a unique nine-digit number assigned to a business entity by the Internal Revenue Service in order to identify such business.  Under certain circumstances multiple companies can share one EIN, for instance, generally, a wholly owned subsidiary can use the EIN of the holding company that owns it. But, in no instance can one company have multiple EINs.

The effect of Maine requiring that each adult-use applicant have a separate EIN is twofold.  First, no single entity can apply for multiple licenses because no single entity can have multiple EINs. Second, if a business is formed around the traditional holding company structure where one company wholly owns multiple companies each applying for separate licenses, each such subsidiary will need its own EIN.

EINs are not difficult to get, but adult use applicants need to be aware that they must have separate EINs for each license they intend to apply for prior to preparing applications. Otherwise, businesses could end up being forced to reorganize on the fly.

Doug is a member of Drummond Woodsum’s Business Services Group. He practices a broad range of business matters, including contract review and drafting, mergers and acquisitions, commercial financing, securities law, corporate and nonprofit formation and corporate transactions.  Doug has extensive experience counseling start-up businesses, particularly businesses in Maine’s budding cannabis and cannabinoid industry, guiding such businesses through their corporate formation and early investment stages.