Cannabis Start-up Advice: Hiring the Smart Way

Cannabis Start-up Advice: Hiring the Smart Way

Smart hiring is not only a good business practice, it’s a necessity. And for a start-up cannabis business, in particular, hiring the right way is critical. With obstacles such as raising capital, staying current with state laws, countless regulations to abide by, and complicated tax compliance, a cannabis business has a lot to focus on. 

Needless to say, a cannabis business can’t afford to have a sub-par team of employees working for them. On the same token, hiring is difficult – all the more reason to take this responsibility seriously. We, at Northstar, have some tips to help make hiring less stressful.

First, having a blend of personalities on your team could make a world of difference in your company’s performance, innovation, and success. Below are some personalities to consider when vetting through your candidates.  

 

Target Your Search Based on Personality Type

  • Creative thinkers: This personality type generates a lot of great ideas and is an exceptional problem solver.
  • Top-performers: This personality type is able to quickly and skillfully execute on ideas. They are an expert in a given field and deliver prolific results.
  • Salesperson: This personality type has unshakable confidence and excellent communication skills. They are charismatic and know how to put their ego in check.
  • People pleaser: This personality type is personable and has outstanding customer service skills. They often put the needs of the company, the team, and the customer first.  

When conducting interviews, try to keep these four personalities in mind, and consider hiring a healthy mix of each type. This way, you’ll improve your chances of building a strong, proficient, capable team.  

Another recommendation we have is to seek outside guidance from a professional who specializes in human behavior. This could be a business or life coach, or a psychologist. They could evaluate your strongest candidates and assess whether they could be a good fit for your company’s mission and vision.

Besides focusing on the personality make-up of your team, think about some intangible factors as well. Some important ones are mutual trust, confidence, and faith in one’s abilities. Finding employees with these attributes can lead to more fluid and honest communication while putting ego-related conflict aside. 

Furthermore, look for people who aren’t afraid to become a leader in their realm of expertise. Allowing independence and open-communication to flow can help employees achieve their full potential.  

 

Other Reasons Why Smart Hiring Matters

Hiring the smart way is critical to your brand. First hires hold a more significant place in a start-up company than say, an established business. From the very first hour they log, your employee is helping to build your brand. 

Other traits to give special attention to include positive energy, optimism, ambition, team players, and passionate supporters of the company’s mission. 

These traits can signify that an employee wants to go the extra mile and help take the company from humble beginnings to a major player in the cannabis space. 

Final Considerations 

 Here are some of our final suggestions:

  • Save money by developing an innovative and efficient supply chain. This can include leveraging existing infrastructure.  
  • Hire virtual employees. Because good talent exists everywhere, not just the city in which your business is based. For a cannabis business, you could hire a virtual bookkeeper, financial advisor, web developer, content writer, graphic designer, etc. 
  • Prioritise candidates who understand your business. Especially if you are in the cannabis business, which is subject to many unique laws, it is important to hire a financial advisor who specializes in cannabis and tax code 280E.
  • And finally, hire slowly! One way to fail off the bat is to make terrible hiring decisions. Only hire the best and brightest, even if this takes a considerable amount of time. 

 For more hiring tips, or financial and tax advice from cannabis experts, you can contact Northstar at 424.274.3188 or info@nstarfinance.com.  

Historic U.S. Tax Court Decision That Will Save the Cannabis Industry Millions

Historic U.S. Tax Court Decision That Will Save the Cannabis Industry Millions

Historic U.S. Tax Court Decision That Will Save the Cannabis Industry Millions

Harborside is an Oakland, California cannabis dispensary that has been in operation since 2006. A few years ago, they faced a major IRS audit of their 2007 to 2012 tax returns. Once the audit concluded, the IRS found that Harborside underpaid their taxes by tens of millions of dollars.

Reasons for the IRS’ findings  

Two primary reasons contributed to these findings. The first reason was related to improper application of deducting business-related expenses. The second reason was related to an incorrect calculation of Cost of Goods Sold (COGS). These errors drove down their tax liability, much lower than it should have been. Based on these two errors and other evidence presented, the U.S. Tax Court sided in favor of the IRS.

Harborside Appeals the U.S. Tax Court

 Harborside appealed the court’s decision and by the end of 2018, the court changed part of their ruling. The court no longer held Harborside liable for accuracy-related 280E penalties. This landmark decision helped save the dispensary millions of dollars. And it can help other companies in the cannabis industry save as well. The court overturned their original ruling because they found that Harborside acted “reasonably and in good faith.” Not only did Harborside file their tax returns on time, but they also kept accurate financial records.   

Even though this was a significant overturn, the court maintained its original ruling about 280E. Since Cannabis is a Schedule 1 drug under the Controlled Substances Act, Harborside must follow the provisions of 280E. This tax code states that cannabis businesses are not eligible to deduct ordinary business expenses on their tax returns. Yet, 280E does permit them to deduct COGS, when calculated correctly.   

Comments from Harborside’s Founder

Steve DeAngelo, the founder of Harborside, put out a statement about the court’s ruling. “We’re still working on knocking out 280E entirely, but at least for now we have established that cannabis businesses who operate in reasonable, good faith compliance with existing law will not suffer from additional unjust penalties.” DeAngelo continued, “what we are asking for is simple and fair. For the IRS to treat us like every other legal, tax-paying business in the United States. Since the IRS has made it clear they are unwilling to do that on their own, Congress should step in and pass clear 280E reform legislation.” 

Although Harborside, along with other cannabis businesses, must adhere to 280E, the U.S. Tax Court decision was still monumental because it saved Harborside from paying severe tax penalties. Rather than proclaiming tax fraud, the judge simply found Harborside’s returns inaccurate since they didn’t follow 280E. Ultimately, what saved Harborside from receiving a harsher ruling, was the fact that Harborside maintained impeccable accounting records and filed their tax returns timely.  

The Importance of Working with Cannabis Industry Financial Experts 

Cannabis businesses can learn a lot from the Harborside case. The outcome of their case made one point very clear: without strong, capable accountants, Harborside could have faced high tax penalties.  

To reduce your company’s risk of getting audited, or to ensure that you’ll pass an audit and avoid severe penalties, it’s important to seek help from experienced cannabis professionals. The Northstar Financial Consulting Group has helped numerous companies, and can help your cannabis business with finances as well. 

For one, we can accurately maximize your COGS calculation, which in turn lowers your tax liability. Plus, we advise on how to keep proper and accurate accounting records. In the event an audit did take place, your company would have defensible books.  

Reach out to Northstar today if you’d like to learn more about our specific services.