An experienced CFO is critical for ensuring compliance with the many rules, laws, and regulations that govern all aspects of legal cannabis.
As the legal cannabis industry continues to grow, so does the demand for professional business-to-business services such as finding an experienced and passionate chief financial officer or a bookkeeper that understands your unique challenges. And in the cannabis space, these services are essential for success.
But the option to hire a full-time business advisor or chief of financial operations isn’t always available. Whether it’s because of budgetary limitations or it’s too early to justify bringing full-time financial professionals into your business, a cannabis company doesn’t always need a full-time CFO.
Fractional CFO for Your Cannabusiness
So, how can cannabis operations obtain the business accounting, strategic planning, long-term CFO partner they need?
Northstar’s Fractional CFO Service for Cannabis
Keep reading to learn more about what we do as fractional CFOs and how we’re accelerating growth for business operators in the cannabis space.
Looking for an extraordinary outsourced CFO firm? Northstar has the financial professionals you need.
Contact us now to learn how our fractional CFO services save your business money while we scale your operation with services specifically for the cannabis space.
Northstar’s Fractional CFO Model
You don’t need to hire a full-time bookkeeper or CFO. In-house CFOs demand high salaries estimated up to $578,054 annually with benefits. And let’s not forget the added cost for overtime.
A fractional Chief Financial Officer will handle your operation’s needs at a fraction of the price. Rather than paying for a bunch of services you don’t need, you get what you need when you need it, with expert precision from Northstar.
You don’t have to spend hours looking for finance professionals. The interview process is long and challenging; in some cases, you might have to try multiple candidates to find the right fit.
With fractional CFOs, you can try before you buy. Rather than going through the entire hiring process, you’ll be able to make a quick hire for the services you need.
If it doesn’t work out, you don’t have to start that long process all over again. Simply move on to the next fractional candidate until you find the right fit.
Scale Up or Down Quickly
It’s easy and affordable to scale your operation with our fractional CFO model. This is the entry point cannabis businesses need to begin scaling.
Some seasons are busy. This is when you’ll want to scale fast with more services.
However, there will be times you’ll need to scale down. For example, your business might have other financial demands it needs to fulfill. By scaling back these services, you can allocate those funds appropriately to support your operation.
Immediacy to Cut Costs
The time spent hiring a new team member costs your business money. With this in mind, the immediate placement we provide saves time and money by limiting the time you devote to hiring.
Your business’s financial needs are critical; you need immediate assistance with business accounting, raising capital, and more.
Through Northstar, you fulfill immediate necessities. For example, if your current CFO leaves suddenly, you can replace them fast and continue operations without delays.
New Perspectives for Your Cannacompany
It’s always ideal to have fresh perspectives for your business. And the experience we have in cannabis will offer ideas that your team might not consider.
Goals and plans can limit the way your team thinks. But someone who isn’t involved in the daily operations will offer a viewpoint only achievable from the outside looking in.
For difficult decisions, this is valuable. Our impartial advice will help you navigate challenges that hinder success, allowing you to scale more easily.
More Expertise & More Knowledge
Expertise and knowledge go a long way in the cannabis space. This is especially the case for operations that don’t want to pay the hefty price tag of a full-time team.
You don’t just get one person working on your business’s success. Instead, you have our entire team with experience operating in the cannabis space.
Fractional CFO Services for this Elevated Space
The right fractional CFO service can provide the niche-specific business expertise your cannabis company needs to grow while keeping your access to these services within financial reality.
A fractional CFO service is just that: a handful of talented professionals who act as “sub-CFOs” for small businesses and startups. They share responsibilities with an outsourced general accounting team, bookkeepers, and other financial experts all while working under one cohesive fractional business consulting service.
Our fractional CFO services are the perfect solution for cannabis companies that do not need a full-time finance advisor or team to run operations. As your fractional CFO partners, our professionals offer experience in assessing business plans, managing virtual teams, and creating actionable strategies for growth.
Fractional CFO vs. Full-Time CFO Services
While a fractional CFO and a full-time CFO focuses on accelerating growth, the fractional CFO model comes with an assortment of benefits.
Full-Time vs. Fractional CFO Cost
Traditional CFO services are more costly on a month-to-month basis when compared to our fractional CFOs. This is because they provide CFO services, even when they might not be needed.
The fractional CFO model allows cannabis operations to overcome financial challenges as they arise. Rather than paying for a full-time CFO, you receive cost savings because you use the services as needed.
Not all cannabis businesses are ready to bring in a full-time team. Thus, hiring one in-house tends to be more expensive than most fractional CFOs.
However, fractional CFOs are ideal for many cannabis operations because these services give the business owner the capacity to scale up or down as needed. This freedom allows cannabusinesses the ability to overcome financial challenges like raising capital and cash management when needed. But it also helps with optimizing resources.
For example, your operation might need assistance from finance experts during the busier time of year. But when your growing business is having cash flow issues, you have the option to scale back the finance and accounting services for the time being.
Fractional CFO FAQ
What is a fractional CFO?
A fractional CFO is a finance professional who partners with small businesses and large-scale operations to offer financial services. In the same manner as a full-time team, fractional CFOs provide business owners accounting expertise and financial guidance.
But because these professionals are only available part-time, they help you pursue growth strategies when your needs arise.
Why should I choose a fractional CFO over a full-time finance team?
By hiring Northstar as your fractional CFO partner, you get access to experienced accounting and financial professionals at a fraction of the cost. But what’s more, the connections we have acquired by working with the cannabis sector are conducive to scaling your operations.
Rather than hiring a freelancer to handle your accounting, you have a team dedicated to your success. Our industry connections make it easy to obtain the financing and other services your growing business needs to scale.
Let’s say your hope is to build your company to the point you can offer stock options. Or perhaps you need help creating and implementing a financial strategy that will work for your operation.
Strategic planning is our bread and butter, and since we’re knowledgeable about cannabis nuances, we can act as your trusted advisor every step of the way!
How much does a fractional CFO make?
You’re probably wondering how much a fractional CFO earns. This varies from industry to industry, as well as how much time they dedicate to each company.
The beauty of the fractional CFO model is that the individual can also work with other businesses. This means that rather than being limited to one company, a fractional CFO can service other businesses on a part-time basis.
Many fractional CFOs will work on a project basis. However, at Northstar, we want to be your long-term CFO partner instead. This means we get to know your company, the people that make it great, and your plans.
Whether you hope to make an exit strategy a few years down the road or want to build something sustainable, we’re here to help with expert accounting and other financial services on a fractional basis. Our mission is to set your company for scaling its operations as your fractional CFO partners.
Why is a CFO a fractional?
So, why is a CFO a fractional CFO as opposed to a full-time accounting and finance expert? Some choose to become freelance CFOs for additional freedom. However, at Northstar, we believe that a fractional CFO stands to help most companies operating in cannabis with the specific challenges this industry presents.
Top companies operating in the cannabis space are overcoming obstacles daily. But what about the small business that’s just starting out? Or the small companies that have highs and lows throughout the year?
This is why we provide high-level fractional CFO services as opposed to full-time or interim CFO services.
Cash management is one of the most significant problems a cannabis business will face. But these operations still need a trusted advisor to lead board meetings, analyze current finances, and ensure exit strategies prioritized are on track in accordance with the company’s financial statements.
We want to make sure every cannabis business has access to a trusted advisor when a company needs a high-end CFO. General accounting is important, too. However, without specialization in the cannabis space, hundreds of millions of dollars can be lost as these organizations implement without the right guidance.
Fractional CFO Financial Strategy for Cannabis
The fractional CFOs at Northstar work exclusively with businesses operating in cannabis. We understand how financial forecasts and financial strategy should work for this space.
Financial modeling for the cannabis sector must consider the specific financial challenges of this industry. This, of course, includes all compliance-related issues that can come up.
Optimizing cash flow is especially important for this space. And for large-scale organizations managing multiple companies in this industry, operational strategies, maximizing shareholder value, and planning for exit strategies are all important considerations for maximizing profitability.
For a privately held company with diverse management projects, private equity funding could be essential to financing real estate and other large purchases. But other diverse management projects within the company might need accounting and other financial services, too.
Northstar’s Fractional CFO Service
As your fractional CFO, we can serve as your interim CFO between hires. But we want to become your strategic planning partners long-term!
As your fractional CFO partners, your success is our priority. Rather than bringing in a full-time Chief Financial Officer, you’ll have our professional team focused on accelerating growth with a proper cannabis-specific financial strategy.
With Northstar, you never have to worry about compliance-related risks. We remain vigilant in our data acquisition, ensuring we always have the right answer at the right time.
Looking for a part-time CFO to help your cannabusiness navigate this space? Northstar is here to guide you!
Contact us now to find out how our services will help your cannabis operation scale in this budding space.
A 2016 bill – the Medical Marijuana Regulation and Safety Act (MMRSA) – allows California to begin regulating the country’s oldest medical marijuana industry, which had been operating in a legal gray area. Now that these provisions are in place, medical marijuana businesses can operate with regulatory best practices in mind. But there’s a lot to understand as a business operator.
The state of California is working to make it easier for people who need medicinal cannabis by creating laws that allow dispensaries and other businesses involved with selling or growing medical cannabis more freedom regarding how they operate their business. These laws are also being passed to maintain some common-sense regulations within the state.
Nearly 20 years after Californians voted “yes” on Proposition 215 (1996) to make the use of pot medically acceptable under certain conditions, Governor Jerry Brown signed this legislation. It’s quite powerful, with a design that regulates an industry with an estimated annual value in the billions.
Between retail sales and related activities like transportation, cultivation, distribution, and testing services within his own jurisdiction. The new law went into effect on January 1, 2016.
But what exactly is the MMRSA?
In this article, we cover the ins and outs of the MMRSA. Everything you should know as medical marijuana business owners operating within state and local laws – including each licensing authority in charge of regulations – will be covered!
Operating a medical cannabis operation in California? Northstar is here to guide your success!
Contact us now to speak with one of our experts to learn how we’ll scale your operation in this budding space.
The Importance of Medical Cannabis in America
Medical marijuana is a treatment that has substantial evidence that shows it works medicinally to improve the quality of life for sick and chronically ill patients.
Unfortunately, the morals of some people have hindered scientific progress. But even with this being the case, states throughout the country have implemented laws to ensure access to marijuana for medical purposes.
At this point, the medical marijuana industry needs more data highlighting the plant’s efficacy in treating various ailments. However, the current research reveals that using the plant can help some patients.
The History, Pharmacology, & Implications of Medical Cannabis
Medical marijuana regulation came long after the plant became commonplace for personal medical treatment. People began using and distributing medical cannabis as far back as 2900 BC when the Chinese emperor Fu Hsi recorded it as a popular treatment for public health that contains both aspects of yin and yang.
Delving into some research on how marijuana is used from a public health aspect, every content – besides Antarctica – possesses a documented history showing its application.
These days, in the United States, commercial medical cannabis activity has become somewhat commonplace. But it wasn’t always this way.
Long before the stigma, Jamestown, Virginia passed a law that required farmers to grow cannabis – without requiring cultivation licenses, of course. One of the founding fathers, Thomas Jefferson, is known to have grown, too. But eventually, Massachusetts became the first state to ban cannabis and cannabis products in 1911.
While there was some concern about controlled substances getting in the wrong hands, some people realized that there was money to be made off of cannabis by making it illegal – even for medical purposes.
Not long after it became illegal, infamous propaganda films were released to instill fear into the American public. But none is more infamous than Reefer Madness.
By 1937, illegal possession was a crime, and the first documented conviction for selling marijuana happened under United States Federal Law.
The propaganda developed a stigma surrounding the plant. But people continued to use it recreationally and for healing purposes, despite the government refusing to permit cultivation and sales.
Fast forward to the present and we see how much progress has been made with medical marijuana regulation and legalization through the Medical Marijuana Regulation and Safety Act.
Medical Cannabis Regulation: Why?
Medical marijuana regulation is essential for this industry. Without these state and local governments’ regulations in place, it’s nearly impossible for law enforcement officers to do their jobs effectively. Ultimately, a local government will have the last say in how these businesses can operate in an area.
Similar to pharmaceuticals, patients need to be assured of the quality and safety of products they’re receiving. A new law, which has just recently gone into effect this year, is set out to ensure that protection.
While a local ordinance can ensure law enforcement handles consumer affairs with a health and safety code in place, localities can still ban medical marijuana cultivation and sales. However, deliveries are usually still permitted to patients.
State and local agencies have been tasked with medical cannabis regulation. But in California, the Medical Marijuana Regulation and Safety Act directs the California department (Department of Cannabis Control) is responsible for handling consumer affairs for personal medical use marijuana products and enforcing the health and safety code.
What is the MMRSA?
The MMRSA is also known as the California Medical Marijuana Regulation and Safety Act (MMRSA). Through this legislation, California’s local government established comprehensive regulations and standards to govern almost all aspects of California’s medical cannabis industry. From taxation to licensing, quality control, packaging, shipping, and standards for cultivation, the MMRSA is the go-to regulation and safety act for insight into how medical cannabis businesses must operate. This, of course, includes manufacturers and distributors of medical cannabis products.
For medical marijuana cultivators, the licensing authority also sets a maximum allowable size for cultivation operations that aligns with the type of license obtained. The law also prevents vertical integration for licensees’ businesses by only allowing operations to hold licenses in up to two separate categories.
The regulatory California department also places quality control restrictions on adult use and medical marijuana. But these restrictions are currently being developed.
The California legislature limits distributors on the content of cannabinoids, contaminants, microbiological impurities, and other compounds. But at this point, the standards have not been fully developed by the California Department of Public Health. The state also includes a provision for a new fee for testing that the distributors must charge to cover any new taxes that might be imposed on these controlled substances in the future.
AB 266 also establishes a set of written laws that highlight which actions performed by licensees are permitted by a state license and local government. This means that these actions are no longer prohibited under state law to offer the licensee protection from legal repercussions. It also offers provisions for older facilities that were in compliance with the laws in place on or before January 1, 2018. This makes it so these facilities can continue their operations until their licenses are either approved or denied.
AB 266 also has rules in place to regulate cannabis deliveries that demand documentation for each delivery. The licensee must maintain a physical copy of their delivery requests during deliveries. This needs to be made available any time a law enforcement officer requests it, as required by the California licensing authority.
Furthermore, all dispensaries offering medical cannabis or medical cannabis product delivery must have their employees carry a copy of the dispensary’s license, as well as their government-issued identification.
Deliveries are only permitted by licensed transporters to qualified patients and dispensaries in cities and counties that do not prohibit deliveries by local ordinances.
However, equally important is the fact that deliveries can be taxed by the local jurisdiction. The law also offers some protection for patient and caregiver privacy, giving them confidentiality for their names and medical conditions.
The California Department of Pesticide Regulation also has the responsibility to develop the standards for pesticide regulation in marijuana cultivation. This California department ensures that anyone with a state license to grow medical marijuana does so without threatening public health.
The DFA also created a track and trace program for all adult-use and medical marijuana plants at cultivation sites. It also put civil penalties in place for cultivation operations that violate any of these provisions. However, qualified patients can be exempt from the track and trace program if they cultivate their own plants in an area that’s less than 100 square feet for personal medical use. A primary caregiver who has five or fewer in their patient collectives is allowed to grow plants in a proposed location of up to 500 square feet, as well.
Thus, primary caregivers must be wary of how many plants they grow under the Compassionate Use Act, particularly if they do not operate a licensed facility.
Senate Bill 643 also outlines qualifications for licensing. This includes proof of local approval. Applicants must also undergo a DOJ background check at a Public Live Scan Site. These qualifications allow for-profit entities to operate.
New cultivation and dispensary facilities cannot be located in school zones. They must be at least 600 feet away from schools.
Senate Bill 643 also includes several provisions regarding attending physician recommendations. However, these provisions do not significantly impact or impair a patient’s ability to access medicinal marijuana. The Medical Board must consult with the California Center for Medicinal Cannabis Research to develop the medical guidelines for medicinal marijuana recommendations, as well.
Physicians are not allowed to make medical recommendations to patients if the physician or a family member has a financial interest in a licensed medical cannabis facility. Physicians also must include a warning notice telling patients that medical marijuana is still a controlled Schedule I substance at the federal level.
Organic Standards for Cannabis Production Through Senate Bill 643
Through the Medical Marijuana Regulation and Safety Act, the following information outlines organic regulations for medical cannabis products:
(a) The CDFA licensing authority for medicinal marijuana was also tasked to make available a certified organic designation and organic certification program for medical marijuana no later than January 1, 2020. However, it must be allowed under federal law, along with the National Organic Program and Article 7 of Chapter 5 of Part 5 of Division 104 of the Health and Safety Code.
(b) The bureau can establish appellations of origin for all cannabis grown in California.
(c) It’s illegal for medical marijuana to be marketed, labeled, or sold as grown in a California county if the medical marijuana wasn’t cultivated in that county in accordance with the local ordinance.
(d) It is unlawful to use the name of a California county in the labeling, marketing, or packaging of medical marijuana products unless the product was grown in that county.
Vertical Integration Under MMRSA
The MMRSA established the Bureau of Medical Marijuana Regulation and formed the state’s system for medicinal marijuana business licensing. Later on, the law was changed through several small bills and renamed the Medical Cannabis Regulation and Safety Act (MCRSA). After the state legalized adult-use marijuana, it combined licensing structures for medicinal and recreational operations through the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA).
Ganjapreneurs interested in operating for-profit medical marijuana businesses in California need to get the right license. The license must be for a specific niche in the cannabis sector. For example, manufacturing, cultivation, testing, distribution, etc.
Some people would like their operations to work at multiple stages in the supply chain. For instance, a dispensary might want to grow and distribute marijuana products themselves. However, specific rules and complex licensing demands in place allow these operations to work at several levels in the distribution chain.
Limitations for Vertical Integration Under MCRSA/MMRSA
The MCRSA allows businesses to apply for 17 types of commercial licenses, as discussed above. The MAUCRSA now permits at least 20 types of licenses with each license focused on a certain stage of production.
Businesses interested in operating at multiple stages of production need to hold all of the right licenses to operate vertically. However, the general rule of the MCRSA is that licensees can only hold licenses in up to two different license categories.
Vertical Integration Under MAUCRSA
As of January 1, 2018, the MAUCRSA changed Cali’s marijuana licensing structure. These alterations combined medicinal and non-medicinal licensing structures to revise various MCRSA provisions. Through the MAUCRSA, some restrictions regarding vertical integration were repealed. Thus, single licensees are now allowed to own multiple licenses with some restrictions still in place.
Even though single individuals are now able to hold more than two licenses, they have to operate as separate and distinct businesses. Furthermore, some combinations are still prohibited.
Since testing sites can’t have other types of licenses, this causes a dilemma for some. Large-scale commercial growers are also not allowed to have a distributor license or a micro-business license. Vertical integration is also something some local city and county ordinances can ban.
How Licensing Works Under MMRSA
Businesses that have both been in operation and in good standing with their localities before 2016 have priority to receive their licenses.
Applicants must obtain a permit from their city or county before obtaining a license from the state of California before they can operate a cannabis business. Both are necessary to comply with the new commercial cannabis laws. For example, state licensure still requires a local permit, just as someone with a locally granted permit must have state licensure.
Even though local jurisdictions can change their ordinances to allow or ban medical marijuana licenses for business operations, all of these localities must still adhere to the minimum standards established by the MMRSA and the state of California.
The law creates seventeen types of commercial licenses. Whether an operation can get one of these licenses depends on if the cannabis is cultivated indoors or outdoors, as well as the size of the operation and the amount of medical cannabis cultivated.
Some limitations exist regarding the types and number of licenses that one licensee can hold. Generally speaking, the new laws allow licensees to only hold a state license in up to two separate license categories. Equally important to consider is the fact that a licensee cannot hold an ownership interest in real property, personal property, or any other assets connected with another license category.
Licensees also cannot be licensed to sell alcoholic beverages as a retailer.
Licenses are valid for a year from the date they’re issued. These licenses must be renewed annually for the licensee to continue lawful commercial cannabis operations.
Businesses that were previously granted permission to cultivate, manufacture, and dispense cannabis or cannabis products under one permit may receive an exception. Also important to note is that there are several requirements in place. The most important of these demands is that the business must have continuously complied with local ordinances without interruption before July 1, 2015.
Safety Act Compliance
Both a state license and local permission are essential for cannabis operations to comply with the MMRSA. But changes to the rules will continue, and it’s essential to remain diligent in how these alterations might impact your operation.
This is why it helps to have a team monitoring the legislative changes throughout California state and the locality in which you operate.
Operating a medical cannabis business in California? Northstar is here to successfully scale your operation!
Contact us now to speak with one of our experts to learn how our financial services will grow your business in this budding sector.
More often than not, cashing in on the cannabis industry can be tricky, especially when you’re new to this type of business. It is also very likely that you’ll need assistance with organizing and filing your taxes if you come from a background in non-cannabis-related businesses.
Keep reading to learn how our experts minimize tax liability and maximize cannabis company profits with the right systems and procedures in place.
Looking for a cannabis CPA in California? Let Northstar lead the way!
Contact us now to speak with one of our tax and accounting experts about how to scale your operation with financial expertise.
What is a Cannabis CPA?
A cannabis CPA offers tax and financial services for the people and companies operating in the legalized medical and recreational cannabis spaces in states throughout the country. These services involve handling taxes, business structuring, and obtaining financial support.
What does a cannabis CPA firm do for cannabis CEOs?
A CPA that exclusively serves cannabis companies understands the industry and the federal and local laws surrounding it. It’s always best to go with a specialized cannabis CPA firm as cannabis companies need more than generalized tax services.
The cannabis industry is a special sector, and as such, it demands industry expertise to ensure compliance. Accounting from public accounting firms has the potential to cause problems, even with something as simple as tax preparation.
While working with a cannabis CPA firm, cannabis CEOs partner with an accounting firm that understands cannabis accounting. From tax services to assurance services, someone who specializes in cannabis accounting will provide the proper guidance to ensure compliance with internal controls and industry-specific professional advice.
How do these ancillary services help cannabis CEOs scale their operations?
Cannabis accounting is a specialized field and should be treated as such. While the federal government has placed various restrictions on our cannabis clients, our mission is to handle all regulatory challenges in place to ensure appropriate tax planning and other services to cannabis companies.
Cannabis CEOs can rest assured that federal-level accounting issues never become a problem. By working with Northstar, CEOs operating in this industry are guaranteed compliance and ensure their businesses are always audit-ready.
The California Board of Accountancy (CBA) on Cannabis
The California Board of Accountancy (CBA) understands that a certified public accountant interested in providing accounting or advisory services to cannabis-related industries will need to understand this space. However, some advisory firms also have an interest in operating with cannabis clients.
At this point, the CBA is not able to issue legal opinions on cannabis accounting services. With this being the case, no position statement is to be issued by the CBA on this topic.
However, the CBA has issued some insight into operating a CPA firm that serves the cannabis industry. Here’s a quick FAQ that answers questions an industry-specific CPA firm might ask:
CBA Cannabis Industry CPA Firm FAQ
What is the new California law about cannabis that just passed?
California Governor signed Assembly Bill (AB) 1525, which took effect January 1, 2021. This bill provides a safe harbor for licensed individuals or firms that practice accounting if they render services to California’s cannabis industry.
The bill states that authorized persons or entities do not commit a crime under California law if they receive deposits or provide transportation and financial services to people licensed in commercial cannabis activity. However, the authorizations can be rescinded by the licensee at any time.
Can we accept a Licensed Cannabis Business as a client?
AB 1525 will take effect on January 1, 2021, and it provides that those who practice as a Certified Public Accountant in California can offer services to cannabis entities without it being considered criminal.
What are the potential risks of providing services to a Licensed Cannabis Business?
While it is legal to use cannabis products from state-licensed businesses in California and more than half the other individual states, they remain illegal federally.
Federal law states that any entity that supports illegal activity or accepts fees from it is engaging in racketeering. This means accounting firms, banks, insurance companies, and financial institutions may be breaking federal laws by doing this. It’s important to consult legal counsel before entering into such an arrangement because of the consequences.
Any other factors to consider when choosing to accept a Cannabis client?
In August 2016, the 9th Circuit Court ruled that medical marijuana laws are legal in accordance with state law. The federal government cannot prosecute people who grow and distribute medicinal marijuana under state laws because it would be unconstitutional to do so.
The decision to allow medical marijuana in the state of Arizona was based on a few factors. One factor is that Congress has passed laws preventing federal agencies from interfering with states’ implementation of their own statutes regarding medical marijuana.
As the differences between states and federal laws persist, Certified Public Accountants (CPA) are becoming more concerned with their professional liability insurance policies. In order to reduce the risk of a lawsuit or claim against them, CPAs should take note that there may be exclusions in their policies.
Cannabis Companies & Federal Law
Cannabis companies must comply with state and federal law. But when it comes to laws at the federal level, cannabis accounting firms must know how to navigate them appropriately.
Business expenses for adult-use and medical marijuana-related operations are the same in both of these spaces. However, when it comes to deductions for expenses, these operations need a crafty accounting method to minimize tax liability.
As mentioned earlier, public accounting firms can cause problems with things as simple as tax preparation or filing returns. Accountants may be unwilling to work with companies working with or selling cannabis due to a lack of education and knowledge about the industry.
Accounting Services for Cannabis Business in Cali
Our cannabis accounting firm has a combined 120+ experience working with cannabis. As a full-service financial firm, we handle everything accounting-related for our clients.
From tax planning and compliance advisory services to ensuring our clients are committed to compliant practices, we’re here to help any legal business operators working in the cannabis industry.
Financial Services for the Cannabis Industry
Bookkeeping & Internal Accounting
We encourage efficiency and increase scalability long-term with our virtual accounting and tax offerings.
Here’s what you can expect:
Comprehensive & up-to-date books to offer the IRS everything they need to see in case of an audit.
Historical financial records cleanup to ensure all taxes and money owed have been handled appropriately.
Monthly reconciliation pack to ensure audit & investor readiness that helps companies bypass potentially critical issues.
Auditable & accurate cost accounting, including payroll management and other aspects of your operation that the IRS wants to see in your documentation.
Present monthly financial statements to keep the focus on your company’s success.
Controllership, Financial Processes, & Controls
The economic impact of COVID-19 has made these business accounting services more important than ever. With these our expertise in the cannabis sector, your business will meet its financial goals through improved governance and due diligence.
Here’s what you can expect:
Optimize financial systems in preparation for tax season.
Create & manage financial policies & procedures.
Internal & external audit preparation to satisfy the IRS and minimize tax liabilities.
ERP and IT system integrations to maintain adequate records of everything from the cost of goods sold to taxes.
Assess & manage financial risks to minimize tax liability and optimize money.
Chief Financial Officer (CFO) & Treasury
Northstar provides value to your business by improving inefficiencies, reduce expenses & enhancing earnings.
Here’s what you can expect:
Accounting and financial oversight for your cannabis business.
Cash-flow planning & management for your business.
Financial modeling & forecasting to set a roadmap for your business.
Key performance indicators & MIS dashboards to keep your business on track for success.
Strategic financial insight & analysis to keep the focus on your goals.
Investor & Board Management
Northstar gives advice and increases confidence for shareholders, board members, and company leadership. This leads to reliable partners that trust in your business as operators incorporate strategies that scale.
Here’s what you can expect:
Annual & interim reporting for sales, pay, distribution, and more.
Quarterly financials & business updates for the account.
Financial interface for board members & investors to focus on the success of the operation.
Board representation for partners.
Business decision support for everything, from costs and payroll to taxation, and more.
Fundraising & Development
Besides tax- and accounting-related services, Northstar will help you meet your short- and long-term capital goals. By structuring beneficial transactions and establishing crucial relationships, your operation will thrive.
The California cannabis industry has not come this far without feeling some growing pains. But, besides state law overregulating this industry, even a business operating with California law in mind has a serious obstacle to overcome.
Of course, we’re talking about the banking situation.
The Cannabis Industry Banking Dilemma
The financial relationship between cannabis operations and the finance industry has been strained. Due to the legal implications put in place at the federal level, banks and credit unions have not been able to provide safe harbor for these operations.
But as legal cannabis has expanded, more banks and credit unions have begun providing services that aim to enhance legal business in this industry. Even without the full support of President Joe Biden, California law has become more progressive for the legal cannabis space.
In this article, we discuss how California state laws regarding the financial industry have changed. While a business operating in cannabis used to have to operate on a cash basis, we see California opening the industry with its bill, the SAFE Act.
Looking for financial services to scale your business in California? Northstar understands that these services are core business necessities!
Stop operating on a cash basis! Contact us now to learn how we can provide a safe harbor for your business in the cannabis space.
Banking Options for Cannabis Businesses
Recently, the House approved a cannabis banking bill that has the potential to expand California’s cannabis industry. This legislation lets banks provide financial services to cannabis businesses in states that have already legalized cannabis.
The bill clarifies that the money earned by legitimate cannabis businesses is not illegal, directing federal regulators to create rules regarding how they will supervise cannabis banking activity.
Historically speaking, many banks have refused to work with cannabis companies. It’s even been a challenge to find a credit union willing to work with cannabis!
These financial institutions justifiably feared they could violate federal laws by working with cannabis operators, despite the existence of the legal cannabis industry.
With this being the case, few options – besides operating on a cash basis – were available for cannabis companies. Only a few financial institutions were willing to offer banking services, which meant many had to conduct business in cash.
What is the Safe Banking Act 2021?
The SAFE Banking Act of 2021 was a bill that the American Bankers Association lobbied aggressively to pass. This group wrote the following to lawmakers:
“Banks find themselves in a difficult situation due to the conflict between state and federal law, with local communities encouraging them to bank cannabis businesses and federal law prohibiting it. Congress must act to resolve this conflict.”
Through the SAFE Banking Act, the cannabis industry obtains access to banking services and other financial services. Financial institutions no longer have to fear that they’ll get penalized for providing these banking services to legitimate cannabis businesses.
Now that the SAFE Banking Act has passed, California cannabis businesses have more options for financial services than ever before. Rather than being limited to a handful of financial institutions and credit unions, those operating in the state’s cannabis industry have more accessible options in the banking industry.
California Cannabis Industry Association on Banking
Giving businesses the ability to access loans and other banking services is essential for any company. But for a cannabis business operator, these services have been hard to come by.
Due to the Controlled Substances Act that the federal government put in place, state financial institutions and credit unions have been hesitant to take on cannabis clients.
Handling marijuana-linked money is scary for other financial institutions, including many California banks. But despite many banking institutions refusing to work with adult-use and medical cannabis business operators, California law has enabled more access to banking services for the marijuana industry.
CCIA Partnership with North Bay Credit Union
The California Cannabis Industry Association has also announced its exclusive partnership with the North Bay Credit Union. Through this partnership, CCIA members have direct access to banking, which has allowed licensed cannabis businesses the opportunity to get the banking services they need.
The struggle to pay staff and vendors without access to financial institutions encouraged this partnership. Even though many cannabis companies operate compliant businesses, they lacked access to banking.
The CCIA, a state and federally registered nonprofit trade association, lost its third bank account in a year during 2017. The association then decided to partner with the NBCU to gain access to the financial services it had been denied.
Through this partnership, members of the CCIA were able to bypass the financial institutions that refused to provide marijuana companies with wire transfers, ACH processing, and other banking services. Now, members of the CCIA have various banking options, including access to:
Online bill payment
Wire transfers and ACH processing
Even the employees of CCIA members have access to these services if they join as individual members of this credit union.
According to the Financial Crimes Enforcement Network (FinCEM), the number of financial institutions banking for licensed cannabis businesses has shown a slight decline since the 1st Quarter FY2020 (December). This began with the release of FinCEN’s guidance for providing financial services to those operating hemp-related businesses.
However, it’s possible that the COVID-19 pandemic is increasing this decline for the following reasons:
Many adult-use cannabis and medical marijuana dispensary operations have ceased operations because of government-imposed quarantine restrictions.
Even though the 90-day window for filing Suspicious Activity Reports is still in place, more financial institutions lack the staffing needed to file these reports efficiently. This has caused delays.
Cannabis Industry Banking FAQ
Can dispensaries in California use banks?
Since financial institutions are at risk while offering services to dispensaries, many choose to avoid working with them.
Thus, many California dispensaries have not been able to use direct deposit, checks, and credit card transactions. But what’s worse is how many dispensaries have had to resort to solely accepting cash or cryptocurrency.
Will banks finance cannabis?
Traditional banks are not willing to lend to Cali cannabis businesses. With this being the case, federal legalization could change this. But with the Safe Banking Act’s passing, cannabis businesses can now find reliable capital sources.
Concluding on Cannabis Banking in California
Whether you operate in Santa Rosa or Los Angeles, banking has likely been an issue for you if you operate a cannabis business. But with the passing of the Safe Banking Act, the industry now has more options than ever before.
Since the passage of this bill, more financial institutions have begun offering services to cannabis companies. But it’s important to be aware that many individuals within these institutions still have mixed feelings about supporting dispensaries.
Nevertheless, California cannabis business owners should keep their eye on the future. With more banks finally willing to work with them, prospects are looking brighter than ever before.
Interested in scaling your California marijuana business? Your experts at Northstar are ready to help!
Contact us now to learn how our financial services will expand your operations and minimize your tax liability in California.
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Consumers and interested business operators in New York are all wondering whether or not marijuana is legal in New York.
The short answer is “yes.”
But what does this mean for consumers and cannabis business operators interested in the state’s newly-formed recreational marijuana space?
This article will serve as a guide for consumers and business operators interested in adult-use marijuana regulation. Let’s go over what’s happening in New York now that New Yorkers can buy, possess, and sell marijuana.
Looking to scale your legal cannabusiness in New York? Let Northstar lead the way!
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Marijuana is Legal in New York, Now What?
According to a statement given by Governor Cuomo, “Legalizing cannabis was the first step in this historic endeavor to right the wrongs of the past.”
Whether you’re a consumer or interested in operating a cannabis business in New York, you’re going to have to wait until 2022 to experience the state’s full-fledged recreational cannabis sector. But equally important to know is that medical cannabis is still legal, and New Yorkers 21 years of age or older are allowed to possess and consume recreational marijuana.
Cuomo’s Signature Effectively Changed New York
Governor Andrew Cuomo signed the Marijuana Regulation and Taxation Act (MRTA) that legalized adult-use marijuana for New Yorkers on March 31, 2021. This expanded New York’s medical marijuana program, effectively adding to the list of medical conditions that qualify New Yorkers for medical marijuana.
At this point, the program does not allow cannabis flower. But this new update might lift flower prohibition.
Most importantly for consumers, possession is no longer a crime. Since legalization, personal possession of cannabis, up to a certain weight, is permitted. So for those who enjoy smoking a bit here and there – or a lot – the new laws aim to decriminalize possession and ensure that personal smoking and consumption are no longer criminal offenses.
How Much Can Consumers Possess?
The laws allow New Yorkers to possess as much as three ounces of cannabis or up to 24 grams of concentrated cannabis. But just because consumers can hold ounces up to 3 ounces of cannabis or 24 grams of concentrated cannabis for personal use doesn’t mean they will.
The law now allows possession. With this being the law that was historically used to target people of color, it’s incredible to see this shift with legalization.
We no longer have to worry about people getting stopped by the police for smoking a joint. This legislation even makes public consumption legal in areas people smoke cigarettes.
People can also make their own concentrated cannabis if they decide to grow up to three mature cannabis plants and three immature cannabis plants as part of the home cultivation allocation.
That’s right. New Yorker natives are even allowed to grow several plants per household as part of home cultivation. While federal law doesn’t allow it, the state allows a certain number of plants per household.
So, if a local decides to grow and make concentrated cannabis, it’s legal at this point. However, once businesses begin operating, it’s likely that most consumers will search for a local dispensary.
Simply put, New York natives can now grow cannabis at home. Delivery services are allowed, and consumption lounges will be a part of New York’s cannabis legalization.
Let’s not forget that criminal records will get expunged. All in all, marijuana-related businesses and consumers have a lot to gain from this new law.
The Marijuana Regulation Mission in NY
With marijuana regulation in New York, the mission is to promote social equity. This is why the law will encourage social equity applicants to obtain 50% of the licenses.
Social equity applicants include New Yorkers who come from communities that have been disproportionately impacted by the War on Drugs, service-disabled veterans, women, and small distressed farmers.
Cannabis products will have a 13% sales tax placed on them. This includes 9% to the state and 4% to the local municipality. There will also be an excise tax aligned with how many milligrams of THC is in the marijuana products.
The new bill also created the state’s Office of Cannabis Management, along with a Cannabis Control Board. These two entities will be in charge of regulating the cannabis space in New York.
New York Office of Cannabis Management
The MRTA established the Office of Cannabis Management. This agency will implement a regulatory framework for the state’s cannabis and hemp space.
So far, the Governor estimates that the agency has taken in $83 million in tax revenue from retail throughout 2021, and he expects this to increase to $300 million by the time its provisions are fully implemented for adults interested in buying the drug in 2023.
OCM Website Launch
The Office of Cannabis Management launched its website in April 2021 to offer resources to consumers and business operators in the cannabis space. This website offers information on the regulatory structure of the Office of Cannabis Management, which, along with the Cannabis Control Board, will handle the licensure, production, distribution, sale, cultivation, and taxation of all adult-use and medicinal weed within the state.
Through this website, New York residents can find medicinal cannabis practitioners, caregivers, and IDs. But what’s more is the fact that retail businesses and other operations looking for licenses to participate in the state’s adult-use, medicinal, and cannabinoid hemp industries can find more information there.
New York Cannabis Control Board
New York’s Cannabis Control Board is still waiting to be formed. At this point, there’s a hunt underway for CCB members.
Once the board is ready, it will start to build out the details of the state’s cannabis space. But for now, we don’t have much to go on.
Here’s a quote from the Deputy Communications Director, Jason Gough:
“The administration is actively working to ensure the OCM and the Cannabis Control Board can begin implementing a safe, equitable, and transparent adult-use cannabis industry as soon as possible. The Governor is committed to appointing individuals with diverse experiences and subject matter expertise, who are representative of communities from across the state.”
Once established, the CCB will handle all areas regarding the state’s cannabis sector, including the packaging, marketing, production, and sale of marijuana.
Employers will also need to understand the legality of marijuana with the state. Recreational use is permitted, meaning the law allows consumers to use cannabis without issue. Gough touches upon this in the following statement:
“Once the Cannabis Control Board is in place, the Office will be officially formed and can begin promulgating regulations to implement the MRTA, including provisions outlining cannabis product requirements, ensuring industry access for small businesses and communities that have been disproportionately impacted by the war on drugs and opportunities for legacy operators and people with past cannabis convictions.”
However, experts believe it may take up to two years to finalize the regulations created by the Board.
NY Marijuana Regulation and Taxation Act (MRTA) Explained
Prohibiting marijuana in New York State has been ineffective, to say the least. Rather than ceasing marijuana use throughout the state, New Yorkers have continued to use marijuana despite its prohibition.
The illicit marijuana industry has thrived in New York under prohibition. But the hope is that with the MRTA, the state will have a profitable recreational cannabis space for New Yorkers who are 21 and older.
Over the years, the illegal nature of cannabis in New York State has hurt people. The growth of this illicit industry has resulted in disproportionately focused adverse impacts on communities of color, as well.
Through the MRTA, the goal is to address the negative impacts of the failed former policy. This act will create a responsible and well-regulated cannabis industry by encouraging licenses and legal dispensary operations.
The industry will generate millions of dollars in tax revenue that will not only strengthen the New York State economy, but support communities that have felt the most significant effects of marijuana prohibition.
MRTA Regulatory Implementations
The taxation act MRTA will implement legalizes the production, use, and distribution of marijuana.
While it’s not federal law, the bill takes cannabis plants and products out of the New York Controlled Substances Act and permits the regulation of marijuana with supervision from the Liquor Authority of New York State.
With this legislation, the distribution and use of cannabis and cannabis products will be regulated in a way that’s comparable to the way tobacco and alcohol are regulated.
Legislative Goals of MRTA Summarized
Here’s a list of what this legislation aims to achieve:
Establish the Office of Cannabis Management
Expand New York’s Existing Medical Program
Establish a Licensing System
Create a Social & Economic Equity Program that Encourages Individuals Disproportionately Impacted by Cannabis Enforcement to Participate in Industry
Tax Collection Projected to Reach or Exceed $350 Million Annually & Potentially Create 30,000 to 60,000 Jobs
Weed Is Legal in New York: What an Opportunity!
If you currently operate a cannabusiness in New York or are considering opening one now that legalization has happened, now is the time to focus. The opportunities are seemingly endless, and as the consumer base grows throughout the state, we can expect legalization to continue encouraging this market to expand.
Whether consumers are smoking cannabis for health purposes or recreationally, dispensaries can expect the formerly illegal drug to bring in the big bucks. Scaling these operations will become even easier once federal legalization passes.
But for now, dispensaries will have to focus on the local market. Scaling in conjunction with state laws is essential, and once the market becomes more mature, we can expect its health to expand.
Since adults no longer need to worry about penalties for using this drug, sales are increasing. And as sales increase, we can expect the health of this market to continue.
Scale Your New York Cannabusiness Now
The opportunities are here, and we’re ready to help. If you’re interested in scaling your New York marijuana business to obtain a larger share of the market, Northstar is here to lead the way!
Contact us now to find out how financial services will expand your operation’s success in this budding market. Our experts are here and ready to help!
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