With the global cannabis sales boom, this
fast-growing industry is predicted to grow to a $2 billion market in consumer
sales by 2020, and reach $3 billion in sales by 2021.
Cannabis legalization is sweeping across the US, and
with that comes the interest in legal cannabis businesses. Today Coca Cola is
in talks with Aurora Cannabis to develop a CBD-infused beverage. That said,
let’s take a look at how to open a legal cannabis business like a marijuana
There are three cannabis business categories right
now, with each having its own specific cannabis laws. The startup process for a
legal cannabis business is certainly more complicated than other businesses
because of its laws.
With laws differing from state to state, you’re
going to have to do some research as to what your state entails. Two common
requirements that you’re going to need are to have a clean criminal record and
to also have state residency for a cannabis business like a medical marijuana dispensary. This also applies to all of the below business
- Product manufacturing of CBD-infused products
for pets and people
- Retail sales like medical marijuana
The most popular cannabis business is medical
marijuana dispensaries or collectives. Not only are these one of the most
expensive to open up, but they are also the most difficult to set up.
With laws constantly changing, and the regulatory
environments being fluid, prospective investors need to keep in mind that
applying for a license may take as long as ten months. Local and county laws
will also come in to play as to where you can have your cannabis business.
Additionally, there are county and city level restrictions prohibiting
cannabis-based businesses. Cannabis businesses need to follow their state’s
regulations and be in compliance with county and local laws.
Business plans need to encompass business partners
and financial investors in their cannabis license applications, which then
needs to be approved. If you already have a cannabis business license, and you
add on a new investor, you’ll need to apply for a new license request.
Staff compliance with all regulatory requirements is
needed, or your business can be shut down. Contracts are also required between
your business and suppliers. A medical marijuana dispensary will need to have
contracts with both product wholesalers and cultivators.
If you’re opening up a marijuana retail store, you
will need to have contracts with the following:
- Edible product manufacturers
- Infused product manufacturers
- In-state cultivators
- Consumption device manufacturers
- Dispensary contract
- Delivery service contracts
- Software contracts for your business
Forget about the banks financing this operation!
Banks are not legally allowed to finance a marijuana business because it’s
illegal under federal law. Approaching private financial investors is what most
cannabis business startups do.
Keep in mind that you’ll also need to set aside a
budget for advertising within trade magazines about your medical marijuana
dispensary, online trade sites, and marijuana trade shows in your state. Most
of the challenges facing the cannabis market in terms of finance will be
continuations of past problems until federal law changes with regards to the
purchase and sales of cannabis.
With the tobacco, alcohol, medical, food and
cosmetic market all wanting a piece of the action, the cannabis industry is
waiting for Congress to lift banking restrictions. Additionally, there also may
be problems regarding intellectual property acquisitions. It looks like for now
that hemp-related products may be the way to go if you’re starting out with a
small online cannabis business!
With marijuana businesses being legal in some
states, and illegal in others, it’s important to understand marijuana business
taxes, most especially for a marijuana medical dispensary. States that have legalized marijuana like Alaska, California, and
Colorado will all tax marijuana sales in some way.
There are also some states like Alaska that will impose an excise tax on marijuana products which includes cultivation, manufacturing, and retail outlets. There is also business and occupation tax, and in some states, you have to have a sales tax license for each type of marijuana.
In California, purchasers of marijuana have to pay a
15% excise tax, and a cultivation tax on harvested cannabis, that is harvested
for retail purposes. Businesses that are involved in the sale of marijuana
cannot take any tax credits or business deductions due to Section 280E of
the Internal Revenue Code that reverts back to a
1982 federal law that bans all deduction and taxes from illegal trafficking of
drugs. This law is still in effect because marijuana is illegal under federal
law. That said, all cannabis business owners have to pay income taxes because
it’s still income. Additionally, when starting up a marijuana business, you
should consult with a cannabis business attorney to get the best legal advice
about how to start up a medical cannabis business.
Apart from the three main cannabis business
categories, there are also business opportunities in the cannabis industry.
These include the following:
- Cannabis testing facilities
- Cannabis research facilities
- Cannabis delivery services
- Consumption devices like vapes and accessories
Following state marijuana business laws is an
important part of having a marijuana business.
Failure to do so could result in punishment for
possession, and imprisonment for the sales and trafficking of marijuana, even
if you have a medical marijuana dispensary.
As with any business startup, there’re plenty of
risks. Marijuana is still considered a Schedule 1 drug via the Federal Controlled Substances Act. That means that no federal agency will back the
use of medical marijuana, not even from a medical marijuana dispensary. Today, more than 50
US cannabis companies are now trading on the Canadian Securities Exchange.
(CSE) With hemp now removed from the U.S Controlled Substances Act, major cannabis
global brands and investors can indulge in this booming cannabinoid market with
CBD creams, edibles, tinctures transdermal patches, and possibly a Coca Cola
CBD-infused beverage! Keep in mind that it’s always best to speak to a cannabis
savvy financial advisor before starting up a cannabis business.