As of the writing of this post twenty-one states in the United States have taken action to legalize the recreational use of marijuana. If you are a savvy business person you understand that there is money to be made in the fairly new, booming cannabis industry. Before you get started, it is important to become familiar with the right way to get started in the cannabis business world.
Keep reading to learn the steps you have to take to start a cannabis business.
1. Choose the Type of Cannabis Business
There are a few different types of cannabis businesses to choose from. The first thing you need to do is decide what kind of marijuana business you wish to start. You can opt to deliver cannabis, open a dispensary to sell cannabis, or you can choose to grow cannabis.
Some people choose to do all three, in order to take advantage of the profits they can make in each area of the cannabis industry. We highly recommend taking cannabis classes, so that you can make a more informed decision on which business would be best for you to own and run. You really can’t move forward with starting a cannabis business until you are 100% clear on the type of cannabis business you want to open.
2. Business Plan
Because of the nature of starting a cannabis business, you will need to be a lot more detailed when you create a business plan. You will need to make sure that you are following every single law in your state such as where you are opening your cannabis business to who will be supplying your product.
There is a lot of regulation in the world of marijuana, so you need to really take your time creating your business plan so that everything is in line with the state laws. Keep in mind that laws are constantly changing in the marijuana world, so your business plan will more than likely evolve with time as the laws change.
Make sure you include key points in your business plan such as your business costs, when you project to turn a profit, how your business will stand out from the competition, who your competition is, how you will attract new customers, how you will keep customers, who your suppliers will be, and if you have legal counsel.
3. Entity and Name
Next, you will need to choose the best business entity because this will affect the taxes that you will pay and also the level of risk that you will be exposed to. The two most popular options are a corporation or a limited liability company (LLC). Either option will shield your personal assets in the event of any legal issues in the future.
You also need to choose a name for your cannabis business. Take your time doing research to make sure that the name is not taken. Once you are set on a name and you are sure it is available in your state make sure you can also buy the domain name for it.
When you have decided which entity type you will go with and nailed down your name, then you can register your business with your state.
Uncle Sam will also want a cut, which means you also have to register to pay taxes. The amount of taxes you will have to pay will all depend on the state your business is in. Make sure you apply for an EIN or employer identification number directly from the IRS. You will use this EIN when tax season comes and also when you’re paying your income taxes and payroll taxes for your business.
An EIN is also necessary when you are trying to open a credit card or a bank account for the business.
5. Licenses and Permits
Depending on the state you live in there are different types of business licenses and permits needed. Here you will have to do your homework and if possible hire a legal professional in your state so that you can sort out everything you need in order to register your business and obtain the proper permits.
We recommend learning exactly what documentation you will need for the type of cannabis business you are planning on starting. You also need to keep in mind that being a cannabis dispensary owner or a retailer will have different rules and regulations than a cannabis business that is growing or delivering marijuana.
There are plenty of business startup costs associated with starting a marijuana business. Unless you have plenty of money lying around you more than likely need to look for funding in order to start your business. This is where your business plan will come in handy, so that you can share your vision and plan with potential lenders and investors.
The clearer your plan is the easier it will be to acquire funding. The cannabis business can be an expensive endeavor because there are not only startup costs but also license costs, marketing costs, high rents, etc.
Keep in mind that financing options for marijuana businesses are limited because funding small loans for a cannabis business is riskier for banks because they are subject to federal banking laws. The reason is that on a federal level, cannabis businesses are considered illegal, so the government can come in at any time and shut down the business with zero warning. This can not only lead to losses, but it can also come with large fines for the business owner.
Ready to Open Your Own Cannabis Business?
We hope you are now feeling confident about opening your own cannabis business. The cannabis industry can be a very lucrative career choice if you approach it correctly so that you don’t make any legal mistakes. Keep in mind that sales in the cannabis world are projected to reach around $50 billion by the year 2026.
We have more helpful blog posts to help you out, so make sure you keep browsing our business section for our latest reads.