Cannabis business licensing in New Jersey is one of the fastest-growing topics in the state. With the recent vote legalizing recreational cannabis in the Garden State, it’s safe to say ganjapreneurs are well on their way towards fulfilling their New Jersey cannabusiness dreams.
But what about the licensing? Do you need an NJ cultivation license to grow flower? And what license will you need to open recreational dispensaries in New Jersey?
We’ll answer these questions and more in this article. But let’s first discuss the history of legalization in New Jersey and the current legislation in place.
Interested in obtaining your NJ cultivation license? Contact us today for assistance.
New Jersey Cannabis Legalization: The History
Governor Jon Corzine signed the Compassionate Use Medical Marijuana Act, S. 119 into law on January 18, 2010. This was his last day in office – some might even say this was a goodbye gift.
Through the Compassionate Use Medical Marijuana Act, qualified patients were granted access to medical cannabis through six Alternative Treatment Centers (ATC). These are non-profits that hold legal cannabis licenses from the state to produce and sell medical marijuana.
However, the program’s enrollment wasn’t nearly as high as one might expect; between resistance from former Governor Chris Christie, high prices, and regulatory limitations, the program didn’t sufficiently meet the demand for an accessible way to obtain medical marijuana in New Jersey.
Then, in 2016 and 2017, the law changed to include post-traumatic stress disorder and chronic pain. As a result, 24 new medical marijuana ATC licenses were put on hold because of a lawsuit.
By December 15, 2019, adult-use legalization was put on the voters’ 2020 ballot after the state legislature passed a cannabis referendum bill. The vote amended the state constitution, thereby legalizing the cultivation, processing, and retail sale of cannabis for adults over 21 years of age. This constitutional amendment took effect on January 1, 2021.
Looking at the New Jersey Cannabis Market’s Metrics
So many people are looking into the cannabis business licensing New Jersey process, and it’s not hard to imagine why. There’s a lot of potential for the cannabis sector in this state.
New Jersey is ripe for the cannabis sector’s expansion. With an impressive population of 8.9 million and 6 licensed cannabis businesses in place, we can expect growth. At this point, the Garden State has 6 companies that are allowed to have up to 3 dispensaries operating. The state has 12 licensed dispensaries. However, only nine are currently open.
The state has around 95,000 medical marijuana patients. These products’ taxes are currently at 4% of sales until June 30, 2021, 2% from July 1, 2021 to June 20, 2022, and will drop to 0% after July 1, 2022. What’s unique about New Jersey’s adult-use cannabis market is that, so far, the state hasn’t implemented an excise tax on marijuana. Thus, regular sales tax will apply, and the local governments could demand a tax of up to 2% on retail sales.
Cannabis Business Licensing in New Jersey
At this point, cannabis Grower, Wholesaler, Distributor, Processor, Retailer, and Delivery licenses have not been made available. The state is waiting until it adopts a set of rules to govern these cannabis licensing.
For the first 18 months, the state’s restrictions against vertical integration will be established to prevent premature monopolies from developing. Thus, cannabis businesses will not obtain licenses for growing and distributing.
For the first two years of legal cannabis sales in New Jersey, the marijuana grower licenses available will be capped at 37 licenses. This limit will not apply to micro-licenses (businesses with ten or fewer team members).
At this point, the state has 12 licensed Alternative Treatment Centers (ATCs). These are all vertically-integrated non-profit medical license holders. Currently, 9 of these ATCs are in operation. The state will offer adult-use licenses to these organizations first.
A legal case is still holding up the 2019 medical licensing round. There’s a chance that these licenses will be given prior to the state adopting its final rules. If this happens, these license holders will also be given initial access to the adult-use licenses.
New Jersey is also incorporating a social equity program as part of the bill. The state will have an office within the CRC to ensure social equity. Many of these licenses will be granted to women, disabled veterans, minorities, and lower-income applicants. Once the legislation passes, the newly-formed Cannabis Regulatory Commission (CRC) has 180 days to implement its regulatory rules.
How to Start a Cannabis Business in New Jersey: Step-by-Step
You’ll need to do several things before you apply for cannabis business licensing in New Jersey. While not all are essential, they’ll make the entire process easier.
First, you’ll look over S. 21. This is the foundation of the state’s adult-use program. So, if you’re planning to participate in this program, it’s essential to understand it.
Wait for the draft rules from the CRC. Once these rules are released, we’ll have a better idea regarding what we’ll have to do to remain compliant.
Look for cannabis real estate in New Jersey. High-traffic areas that are currently zoned for medical cannabis may allow adult-use cannabis operations to operate within these borders, as well.
Work on preliminary plans comparable to medical cannabis license applications. Minimally speaking, you’ll want to have the following for your New Jersey cannabis license application, depending on which apply to your situation:
Environmental impact plan
Background of principals, board members, & owners
Quality control & quality assurance plan
Community engagement plan
Labor compliance plan
Workforce and job-creation plan
Minority-owned, veteran-owned, or women-owned business certification
Considering Cannabis Business Licensing in New Jersey?
Interested in getting a cannabis business license in New Jersey? Contact us today for expert financial assistance.
Wondering how to start a legal cannabis business in Michigan? You’ve come to the right place.
The Great Lake State officially legalized marijuana, and as more progress is made, entering the Michigan cannabis industry is becoming an option for many. This is one of the fastest-growing sectors in the state, so it makes sense that you want to get in on it now.
Before you begin, it’s vital to learn about the laws governing legal cannabis businesses in Michigan. At this point, we must follow three marijuana laws; the Michigan Medical Marihuana Act, or “MMMA,” the Medical Marihuana Facilities Licensing Act, or MMFLA, and the Michigan Regulation and Taxation of Marijuana Act, or “MRTMA.”
Marijuana Business Laws in Michigan
Michigan Medical Marihuana Act
The MMMA is the cannabis legislation in Michigan that permits medical marijuana use in the state. This document outlines the protections offered to medical marijuana users, as well as provides a system of registry identification cards for qualifying patients and primary caregivers.
Furthermore, this legislation allows “caregivers” to grow up to 12 plants for each registered MMJ patient. The maximum number of plants these “caregivers” can grow is 72. However, the only people allowed to purchase this marijuana are the caregiver’s registered patients.
Medical Marihuana Facilities Licensing Act
Through the MMFLA, medical marijuana businesses can become licensed. This legislation lets dispensaries sell cannabis products to registered patients. In some cases, the dispensaries can even sell to out-of-state patients.
Michigan Regulation and Taxation of Marijuana Act
The MRTMA is the adult-use cannabis licensing law. This legislation lets licensed recreational marijuana businesses operate in the state. Now that the MRTMA is in place, recreational marijuana businesses in Michigan can sell these products to anyone 21 years and older.
Interested in starting a cannabis business in Michigan? Contact us today to learn more about how we can help.
How to Start a Cannabis Business in Michigan: Step-by-Step In-Depth
Knowing how to start a marijuana company in Michigan means understanding what it takes to make it happen. Here are the steps to take and things to consider as you set out on your endeavor:
Step 1: Finding a Niche
Before establishing a cannabis business in Michigan, you’ll need to decide what you’ll do in the sector. Would you like to begin cultivating cannabis in Michigan? Or perhaps you have some other existing business or skill you’d like to pivot to support cannabusinesses. The industry opportunities include – but aren’t limited to – branding and licensing, ancillary companies, and plant-touching.
Branding & Licensing
Now that cannabis companies can operate in Michigan, you’re allowed to sell your own branded marijuana flower and infused products. If you’ve ever been to a Michigan dispensary, many of the brands you’ll observe aren’t licensed cannabis companies. Instead, these businesses have licensing/white labeling agreements with a Michigan licensed cannabis processor to manufacture these products. The majority of these brands are offering products produced by one of several cannabis processing facilities in Michigan.
This translates to the ability to start a cannabis brand without paying the costly start-up fees of getting a Michigan cannabis license under the MMFLA or MRTMA. So, suppose you’re looking to launch a brand selling flower, edibles, cartridges, or another infused product. If that’s the case, you’ll need some start-up capital, a clear business plan or pitch deck, and a legal professional who has experience negotiating cannabis licensing and white label deals.
The first businesses that come to mind when wondering how to start a cannabis business in Michigan’ are usually “plant-touching” businesses. However, some of the most profitable opportunities are in the ancillary business sector.
You might have an existing skill, business, or service that you could pivot to serve the cannabis industry. Perhaps you’re a digital marketer, real estate broker, general contractor, insurance agent, or excel in another career that could help cannabis business operators.
Regardless of whether you have a directly translatable professional skill, there are other opportunities to become involved in the cannabis ancillary services or products market. With so many ways to participate in the Michigan marijuana industry, you’ll need to choose a route to take.
For example, software developers can develop apps to serve the industry. Or manufacturers can pivot towards creating smoking accessories. As with the licensing and branding idea, you won’t have to pay licensing fees or spend time getting a cannabis license.
Plant-Touching Cannabis Businesses in Michigan
Starting a plant-touching marijuana business in Michigan involves establishing a business that actually handles the plant itself. These types of companies cultivate, dispense, process, test, and transport plant matter. Cannabis lounges and cannabis events also are included in this category because Michigan demands these businesses get an MRTMA license to operate.
Even though plant-touching cannabis businesses in the Great Lakes State are costly to start and involve an extensive and time-consuming licensing process, these can be quite profitable. If you’re considering starting a plant-touching marijuana business in Michigan, feel free to contact us for assistance at any time.
Step 2: Creating a Marijuana Business Plan, Including a Budget & Pro Forma
A solid cannabis business plan goes a long way. This should include a start-up budget and pro forma numbers. While you might self-fund your business to bypass investors or financing, a marijuana business plan will give you the framework for your business model and facilitate growth.
The Michigan cannabis industry can be cruel to business owners who don’t appropriately budget their operations. Cannabis endeavors, especially cultivation facilities, almost always go over budget. With this in mind, we suggest adding at least a 15% contingency to your budget to account for potential cost overruns.
Keep in mind; your business likely will not be profitable from the state. Most of the time, you’ll need to establish and grow your customer base. Or, if you’re a cultivator, you might need time to grow your first crop and perfect your cultivation system. Financially speaking, you’ll need to plan for the operating capital your business needs to reach profitability.
Step 3: Structuring Your Michigan Cannabis Business & Building Your Team
Once you’ve chosen your niche and created a business plan, you’ll want to form a Michigan cannabis company and build out your team. Selecting your business structure can involve forming LLCs and corporations. But choosing the right team will include finding people who bring value.
Minimally speaking, you’ll need a cannabis CPA and a cannabis business attorney. This can involve setting up several consultations with professionals specializing in cannabis to find the right fit.
As you’re choosing a cannabis business attorney, look for someone who has experience in cannabis and business law. While cannabis attorneys with criminal law backgrounds
After hiring someone for either position, you might also be able to utilize their network to find other team members. For instance, at Northstar, we’ve culminated a network of cannabis professionals to support businesses across all niches. This, of course, includes cannabis attorneys.
Professionals with expertise in cannabis will ensure your business’s structuring is right from the beginning, protecting it long-term from the industry’s most common woes. It might be worth bringing in additional partners, cannabis business consultants, and employees to complement your skills in some instances.
For example, if you’re working on a Michigan cultivation facility, you might need to find a master grower. On the other hand, if you’re in cannabis safety testing, you might need someone who has experience running a lab.
As you’re structuring your cannabis business, you’ll need to draft an operating agreement or set up your company’s bylaws. This is where you’ll determine how your business runs. Consider the following:
Will you need investors?
Who is responsible for what in the company?
How will decisions be made?
What tax status will work best for your cannabis business?
Your answers here should guide your company structuring, as well as how you’ll manage the business and which tax selections you’ll make. This step is essential as improper cannabis company structuring can cause issues, profit losses, and litigation in the future.
If you’re not operating a plant-touching company, you won’t need to think about the next few steps. Feel free to skip ahead to Step 7 as the next steps solely apply to plant-touching cannabis businesses in Michigan. But, if you’re a plant-touching company, you’ll have to use the following steps to get the right licensing with the Michigan Marijuana Regulatory Agency (MRA).
Step 4: Qualifying for a State Cannabis License in Michigan
While some states like Florida and Illinois limit the number of state cannabis licenses issued, Michigan doesn’t. If you can pass the state’s background check and get a municipally licensed property, you can obtain an MRTMA or MMFLA cannabis license.
The qualifications for owning a Michigan cannabis business are becoming more lenient. Financial statements, three years of taxes, and real estate deeds are no longer required. We’re also seeing less focus on criminal issues.
Now the MRA focuses primarily on business litigation, regulatory history, bankruptcy, and taxes. This means if you’ve been paying your taxes, don’t have outstanding tax liens or deficiencies, haven’t had problems with other governmental licenses, and haven’t been involved in unethical business practices, you should be able to acquire a cannabis business license in Michigan.
Step 5: Identifying and Municipally Licensing Your Cannabis Real Estate in Michigan
After starting your prequalification process, it’s time to begin searching for cannabis real estate in Michigan. As a plant-touching operation, you’ll need a cannabis facility under the MMFLA and MRTMA. This is also up to each individual municipality as to whether you can set up a shop in the area. Since most Michigan municipalities aren’t allowing licensed cannabis companies to operate, it can be challenging to find the right location.
Regardless of such, many Michigan municipalities allow legal cannabis business operations. These include Detroit, Lansing, Grand Rapids, Warren, Pontiac, Traverse City, Flint, and others.
If you’re looking to obtain a municipally licensed cannabis property, you have several options to consider. Will you buy the property or lease it? If you decide to buy, will you do so on a land contract? This is also known as “terms.” Land contracts are standard throughout the cannabis industry because the lack of banking and lending services for cannabis businesses makes it appealing.
In some cases, you might be able to find a property with a municipal cannabis license or existing cannabis business. There’s also the option to get your own license, of course. But if you find a property that already has a license attached, you can expect to pay a premium for it. If that’s not in your budget, the best option could be to find a property in Michigan eligible for cannabis licensure.
If the property doesn’t come with a cannabis license, you can establish a purchase agreement or contingent lease to save the property as you work on getting your municipal license. Without this action, you might be forced to pay a premium for a property that won’t work for your operation.
Keep in mind; some municipalities cap how many licenses they allow for certain types of facilities. This being the case, there could be a limited application window to obtain one of these municipal licenses. Dispensary licenses, in particular, are usually capped. But some municipalities will limit the number of processors, growers, and other license types for the area, too. This is why it’s vital to check if the municipality is accepting applications for your license type before getting a property.
Step 6: Getting a State Facility License in Michigan
Since you have your prequalification and municipal license in order, it’s time to fully build out your facility and apply for a state operating license. The MRA recommends applying once you’re sixty days from completing your operation’s build-out before applying for Step 2 cannabis facility licensing.
To apply for your final state operating license in Michigan, you’ll need to have your complete plans and submit them to the MRA. This should include your plans for recordkeeping, security, advertising, staffing, and others.
Furthermore, you’ll have to submit to an MRA inspection, along with an inspection from the Bureau of Fire Services (BFS). After you’ve gotten approval for your Step 2 packet and you’ve passed your MRA and BFS inspections, you’ll need to pay the licensing assessment fee. This will vary by license type, but once you pay this fee, you’ll receive an MMFLA or MRTMA license from the MRA – and then, you’ll be ready to start operating.
Step 7: Operating a Cannabis Business & Staying Compliant in Michigan
You’re no longer wondering about the process to legally start up a cannabis business in Michigan – and you’re ready to operate! You have a business plan, and now it’s time to put that plan to use.
At this point, you have funding and a team ready to contribute to your success in the Michigan cannabis industry. But you’ll still have some cannabis compliance-related obstacles to overcome.
Need Financial Help Starting a Cannabis Business in Michigan?
At Northstar Financial, we’re experts in cannabis. Contact us today for expert financial services and guidance.
Now that the January 31, 2021 deadline for the medical Annual Financial Statement reports (AFS) has passed, we have some additional insight for cannabis business operators in Michigan. The requirement per the AFS’s section 701 of the Medical Marihuana Facilities Licensing Act (MMFLA) has made our jobs more challenging but certainly not impossible.
Even as many licensees missed the deadline, the MRA has continued to accept reports without officially granting extensions. As such, while we believe the MRA understands the challenges, we doubt the grace period will extend for another year.
So far, many licensees have received notices regarding their adult-use licenses. They’ve been told that they will need an AFS by June 30, 2021. As the deadline for these filings grows nearer, we’re listing some of the most common deficiencies we’ve observed from the MRA that demand more clarification and/or action below.
Need assistance with your Annual Financial Statement? Contact us today to learn more about how we can help.
What is the Annual Financial Statement (AFS)?
As outlined in the AFS’s section 701, the MMFLA now requires licensees to submit to the Marijuana Regulatory Agency (MRA) financial statements outlining the licensee’s entire operations per the manner and form outlined by the MRA.
The MRA has developed its annual financial statement form report that licensees must use. The agency will not accept any other report formats. Furthermore, the Annual Financial Statement (AFS) Contact Authorization form will need to be submitted with the AFS.
Here are some links to additional essential resources for filing the Annual Financial Statement in Michigan:
Who Can Prepare the Annual Financial Statement (AFS) Report?
The AFS report must be conducted by an independent certified public accountant (CPA) licensed in Michigan. But does this CPA need to be located in Michigan to prepare the AFS report?
Can an out-of-state CPA firm registered in Michigan prepare the Annual Financial Statement report? Yes, as long as the CPA is licensed in the State of Michigan.
For CPA firms registered in Michigan, the individual CPA handling your report must be licensed in the state. If the CPA is not licensed in Michigan, this person cannot prepare the report on your behalf. This information is under Section 701 of the Medical Marijuana Facilities Licensing Act and MCL 339.722.
Requirements for the Annual Financial Statement (AFS)
Reporting periods and annual requirements are announced by bulletin like the one found here. The bulletin was issued on June 3, 2020, which announced that the Annual Financial Statements requirements for all businesses and individuals with marijuana licenses on or before December 31, 2019 include the following:
Licenses obtained prior to October 1, 2019 must deport by October 31, 2020. However, the initial licenses acquired from October 1, 2019 to December 31, 2019 should report by January 31, 2021.
Any marijuana licensee who has acquired a license on or before December 31, 2019 needs to file their report for 2020. This report should include information regarding all licenses held at any point during the applicable reporting period.
The report outlines an agreed-upon procedures engagement that has to be handled by an independent certified public accountant (CPA).
CPAs have to communicate all findings using the report structure created and implemented by the MRA designed explicitly for the marijuana industry. License holders are responsible for filing these reports with the MRA – the agency will not accept other reports.
Without compliance with these reporting requirements, licensees operating in the State of Michigan could be opening themselves up to liability. Filing a late report forwards licensee names to the MRA Enforcement Division, which could result in disciplinary action, such as potential license suspension.
Need assistance with your Annual Financial Statement? Contact us today to have a CPA handle your AFS for you.
Common Annual Financial Statement Deficiencies from the MRA
Preparing a Michigan AFS per the MRA’s demands can be challenging. Here’s a list of the most common deficiencies to consider:
Entities structured with multiple licensees and a centralized corporate management function don’t clearly outline their allocation of expenses with each corresponding license tested.
Payroll found in the general ledger isn’t reconciled with payroll tax returns.
Transactions don’t include properly-maintained supporting documentation.
Customers and vendors recorded in the general ledger don’t use the legal entity names.
Revenue found in the general ledger was not reconciled with the POS or METRC.
Individual sales transactions from METRC do not align with the underlying support observed in the general ledger.
Ownership tables are not aligned with the documents offered to the MRA.
Lease agreements are matching the information offered to the MRA.
Initial licensure dates offered were not accurate, which impacted the reporting periods.
Tips to Prepare for Michigan Marijuana Regulatory Agency Financial Report
As we prepare for the next round of adult-use AFS reports, it’s essential to prepare cannabis companies for the testing. This will involve reviewing and reconciling 2020 record keeping.
Here are some tips to ensure you’re prepared for this testing:
Properly identify your ownership structure and make sure it agrees to all underlying agreements on file with the MRA.
Maintain the right documentation for your license approval dates.
Perform wage reconciliation of the 941s to the general ledger quarterly.
Check all of the supporting documentation for revenue and expense transactions to ensure they’re all properly maintained. Include this as a component of your accounting process and controls.
Get form W-9 for every vendor and check the information recorded in the general ledger to ensure it includes the full legal entity name vendor. Maintain caregiver numbers and license numbers for all vendors where applicable.
Reconcile sales to METRC and, if applicable, to the POS, each month. Make sure to document reasons for any discrepancies.
Check all agreements to ensure they’re appropriately executed by all parties and are documented with the MRA. For revisions, regardless of whether written or verbal, must be documented.
Check all legal documents, including but not limited to licensing agreements, leases, and other agreements, to ensure they’re all readily available with all transactions in the general ledger properly recorded in accordance with the agreements.
Need an expert CPA to handle your Annual Financial Statement? Contact us today to learn more about how we can help.
Cannabis legalization in the United States didn’t begin until the 1990s. Over the years, the legality of cannabis evolved, and the laws continue to change.
In an industry characterized by ever-evolving regulations and compliance restrictions, it’s vital to know how far we’ve come as a whole. From the past to the present, these changes define the industry and the way society views it.
As cannabis is still somewhat taboo in some circles, this is changing with each new law passed. While the plant, its derivatives, and the people participating in this industry become more widely-accepted, we expect the cannabis stigma to continue fading into the past.
Even as the stigma fades, it’s crucial to understand how legality has progressed over the years. So here’s everything you ever may have wanted to know about cannabis’s legality in the United States.
Timeline of Cannabis Legality in the United States
Cannabis Legality: Essential Long Before Pandemic Essential
Even though cannabis was deemed essential during the COVID-19 pandemic, this wasn’t the first time the government demanded this plant be accessible; there was a time that American farmers were required to grow hemp.
In 1619, the Virginia Assembly passed legislation that would require all farmers to grow hemp. People could even exchange hemp as legal tender throughout Maryland, Pennsylvania, and Virginia. President George Washington was even known to have cultivated hemp at Mount Vernon.
Hemp production was strongly encouraged by the American government during the 17th century. It was a valuable crop as an essential raw material for producing sails, clothing, rope, and various other products.
After the Civil War, hemp production slowed. Other domestic materials like cotton and paper replaced hemp for use in many products.
Cannabis was also a medicinal product. The United States Pharmacopeia even had it listed as such from 1850 throughout 1937 – until the attitude towards the herb shifted.
State-Level to Federal-Level Cannabis Prohibition
State-level prohibition of cannabis began in the early 20th century. As racist ideas caught on like wildfire, many started thinking cannabis – and its rumored dangers – were the byproduct of immigrants.
The Pure Food and Drug Act was passed in 1906. This legislation demanded labeling for over-the-counter remedies containing cannabis.
Following the Mexican Revolution of 1910, the U.S. experienced an influx of Mexican immigrants. In turn, recreational cannabis use was introduced to American culture. Once it became associated with these immigrants, fear and prejudice drove the taboo against it.
Cannabis became known as “marijuana,” the Spanish word for cannabis. Many Americans believed terrible crimes were connected to the drug and the Mexicans who used it recreationally, encouraging mass fear over it.
Federal limitations on cannabis began in the 1930s. The government started using propaganda and conspiracy to terrify the masses, raising public fear and destroying the positive views of cannabis and its consumers. This was during the Great Depression, a time in which mass unemployment drove public resentment and fear of the Spanish-speaking immigrants.
America’s public and governmental concern over the marijuana issue ignited research to smear its name. The research connected the drug with violence, crime, and other socially problematic behaviors. By 1931, 29 states had made cannabis illegal.
In 1936, the propaganda film “Reefer Madness” was produced and distributed. This is also around the time that the Motion Pictures Association of America began prohibiting the showing of narcotics in films.
Eight years later, in 1944, the New York Academy of Medicine reported an extensive study showing that the previous cannabis research was false. Cannabis use was not inducing violence, sex crimes, or insanity, nor was it leading to addiction or other drug use. Thus, they uncovered that the popular belief was incorrect.
Even in light of this new information, this wasn’t the end of public discrimination against cannabis.
Legislation & Federal Prohibition
The U.S. government put the Marihuana Tax Act in place in 1937. This prohibited cannabis at the federal level, and even though medical use was still allowed, the new fees and regulatory requirements minimized its consumption.
Stricter sentencing laws were put in place from 1951 throughout 1956 – these set mandatory sentences for drug-related offenses, including cannabis. First-time offense cannabis possession demanded a minimum sentence of 2 to 10 years, as well as fines of as much as $20,000.
But the movement towards federal cannabis prohibition was not accepted by everyone. During the 1960s, changes in the political and cultural environment encouraged more lenience towards cannabis. It became popular throughout the white upper-middle-class, as well.
Presidents Kennedy and Johnson both commissioned reports that found cannabis was not the violence-inducing addiction-encouraging drug others claimed – this was when the policy shifted towards offering treatment along with criminal penalties.
By 1969, Leary v. The United Statesresulted in the ruling that the Marihuana Tax Act violates the protection that the Fifth Amendment offers against self-incrimination.
The year after, in 1970, The Controlled Substances Act was implemented. This law classified cannabis as a Schedule I drug. Congress also repealed most of the mandatory penalties for drug-related offenses as they didn’t work to eliminate the drug culture and were typically unusually severe.
With this Schedule I categorization, the government ruled that cannabis had a high potential for abuse with no accepted medical value. Thus, federal cannabis prohibition began.
More Action from Both Sides
President Nixon officially announced drug abuse as “public enemy number one” after declaring a “War on Drugs.” With the rise in recreational drug use during the 1960s, Nixon increased federal funding for drug-control agencies while proposing stricter measures.
The Shafer Commission considered cannabis laws in 1972, determining that personal use should be decriminalized. While Nixon rejected this recommendation, eleven states decriminalized throughout the 1970s, and most others reduced the penalties in place.
The U.S. Drug Enforcement Agency (DEA) was created in 1973. This was a merger between the Bureau of Narcotics and Dangerous Drugs (BNND) and the Office of Drug Abuse Law Enforcement (ODALE). The initial budget was less than $75 million, with 1,470 special agents granted to the DEA.
Within a year of the DEA’s founding, one of the most iconic cannabis publications around, High Times, was founded as well.
It’s crucial to note that years later, during a 1994 interview, John Ehrlichman, President Nixon’s domestic policy chief, suggested that the War on Drugs campaign was mainly promoted to help Nixon maintain his presidency. The Nixon campaign had made antiwar and black people its enemies, with its advocation for drug reform being partially fueled by racism.
We knew we couldn’t make it illegal to be either against the war or black, but by getting the public to associate the hippies with marijuana and blacks with heroin, and then criminalizing both heavily, we could disrupt those communities. We could arrest their leaders, raid their homes, break up their meetings, and vilify them night after night on the evening news. Did we know we were lying about the drugs? Of course, we did.
Looking back at 1976, the parents’ movement against marijuana began. This was a nationwide movement involving conservative parents’ groups lobbying to demand stricter regulation for marijuana to prevent teenage use.
Some of the groups gained power fast, acquiring support from the DEA and the National Institute on Drug Abuse (NIDA). These groups shifted public attitudes against cannabis, ultimately contributing to the War on Drugs in the 1980s.
In 1990, the Solomon–Lautenberg amendment was enacted. The federal government threatened to reduce highway funding, causing many states to enact these laws. In turn, at least 30 states, the District of Columbia, and Puerto Rico implemented legislature imposing harsher punishments.
Smoking cannabis became an illicit act that would result in a mandatory six-month driver’s license suspension. But other laws came into existence during this era.
Radical prohibitionists in the federal government wanted to penalize small-scale cannabis offenders further. After decades of small fines and up to six months of prison time for personal use cannabis possession, the tension led to the War on Drugs.
The War on Drugs
The War on Drugs began with Nixon, but it continued long after he was out of office. Jimmy Carter became president in 1977 following his campaign focused on decriminalizing cannabis. His first year in office had the Senate Judiciary Committee vote to decriminalize up to an ounce.
After President Carter’s step forward, President Ronald Reagan reinforced and expanded upon some of Nixon’s War on Drugs policies in the 1980s. The Washington Post reported that President Reagan pronounced in 1982, “Drugs are bad, and we’re going after them . . . And we’re going to win the war on drugs.”
The “Just Say No” campaign was launched in 1984 by Nancy Reagan to educate people about the dangers of drug use. President Reagan implemented severe penalties for drug offenders, which led to more incarcerations for nonviolent drug crimes.
Congress passed the Anti-Drug Abuse Act in 1986. This brought back the minimum prison sentences for some drug offenses. However, the law received a lot of criticism as it had racist ramifications that targeted African Americans.
President George H.W. Bush also declared a new War on Drugs during a nationally televised speech in 1989. He brandished a bag of crack cocaine and didn’t mention cannabis. However, the federal drug control budget rose from around $5 billion to $12 billion by the time he left office, ultimately impacting cannabis.
Data also showed that people of color were targeted and arrested on suspicion of drug use at higher rates than whites. The policies increased incarcerations for nonviolent drug offenses from 50,000 in 1980 to 400,000 in 1997. By 2014, almost half of the 186,000 federal prisoners in the U.S. were there for drug-related crimes.
What Could a Democratic-Controlled Senate Do for Cannabis Legalization in 2021
Between Joe Biden’s presidential win and the democratic-controlled Senate, federal cannabis policy change could happen for the 117th Congress. Even though the new president hasn’t embraced recreational legalization, he’s said he’d like to reform cannabis through decriminalization and past record expungement.
The House and Senate Democratic leaders have pledged to push cannabis reform. However, they also might encourage comprehensive changes for cannabis advocates. This, of course, could include the advancement of a federal cannabis descheduling bill that recently cleared the House.
Now that the Democrats have reclaimed control of the chamber, their chances of success advancing cannabis reform have increased. Senate leaders in the 116th Congress did not take the opportunities given to vote on cannabis reform legislation, purposefully excluding cannabis banking language from coronavirus relief legislation. But this Congress could promote positive change for the industry.
Sen. Chuck Schumer (D-NY) is the current top Democrat in the Senate. In October, he said he would put his descheduling bill “on the floor,” and he believes they’ll “have a good chance to pass it.”
Schumer is expected to become majority leader, and he recently said that if he does, a legalization bill will pass with “Democratic and Republican votes.”
However, we’re still waiting to see how the Democratic leader will encourage more moderate members to side with cannabis reform. Voters in some conservative states have approved legalization ballot initiatives, so we know there’s support for the movement.
The House is now in Democratic control. It has already claimed that it’s considering federal cannabis policy change. The question now is, “How much will cannabis policy change under Democratic control?”
Justin Strekal, political director of NORML, explained the situation. “Reform advocates have established over the past two years that we possess both sufficient allies and votes in the House of Representatives to substantively reform America’s failed marijuana laws, specifically to remove the cannabis plant from its Schedule I status under the Controlled Substances Act.”
“Unfortunately, under GOP Senate leadership, these and many other important reform bills were dead on arrival. By contrast, Democratic leaders in the upper chamber have already pledged publicly to debate and advance most all of these important reforms, including legislation to end federal marijuana prohibition via descheduling,” he continued. “We look forward to working with soon-to-be Senate Majority Leader Schumer to advance legislation with haste.”
While it’s probably that cannabis reform will move in the 117th Congress, we still must wait to see what the Biden administration’s role will be in promoting reform. The president has been known for pushing punitive anti-drug legislation while in the Senate. However, he now says this was a mistake.
Biden nominated Judge Merrick Garland to serve as his attorney general. But some advocates have concerns regarding some statements Garland made in a 2013 federal appeals case regarding cannabis scheduling. He said that the science determining cannabis’s federal classification should be deferred to the DEA.
A Democratic Congress seems as though it’s willing to pursue legalization. However, the pressure will be on Biden’s nominee for secretary of health and human services (HHS). Even though the Justice Department will participate in deciding cannabis’s federal scheduling, the HHS’s medical and scientific review will have the most influence on the attorney general’s classification decision.
We also must consider Vice President Kamala Harris’s participation in the legalization movement. While she has been the lead sponsor of the companion Senate version of the MORE Act, she hasn’t spoken out about encouraging Biden to act on the issue.
New York Governor Andrew Cuomo spoke about a plan to legalize and tax recreational cannabis in the state’s budget proposal for 2020. This came within weeks of his vow to legalize cannabis during his annual State of the State address. The following month, the governor announced his plans to tour states that have already legalized to supplement his efforts allocated towards New York’s cannabis legalization.
Once the coronavirus pandemic began, these plans were put off. The governor cut the legalization proposal from the budget before the April 1 deadline, explaining that there was “too little time” to handle everything and include marijuana legalization for New York.
During an October interview, Axel Bernabe, Cuomo’s assistant counsel, said that Cuomo plans to renew his efforts to legalize cannabis in New York in 2021. Bernabe explained that Cuomo would likely add the recreational push to New York’s 2021-2022 budget. This is especially important following legalization passing in New Jersey in 2020.
Connecticut Cannabis Legalization 2021
Ned Lamont, governor of Connecticut, introduced a cannabis legalization bill that would have legalized for adults 21 and older. However, the proposal stalled following an immediate halt to the legislative session resulting from the pandemic.
Rev. Tommie Jackson, a pastor at Rehoboth Fellowship Church in Stamford, assisted the governor in drafting the legalization bill. He told WSHU that he believes the bill will pass in 2021, saying it “must be done to ensure the full and fair cooperation of all people, especially people of color.” He was referring to the inequality promoted by the War on Drugs, of course.
Governor Lamont spoke out at a news conference. He said that with New Jersey’s vote in favor of legalizing recreationally and a Democratic majority in both Connecticut’s state House and Senate, he plans to try passing the bill again in 2021.
Pennsylvania Cannabis Legalization in 2021
Pennsylvania could legalize cannabis in 2021, especially when considering the effect the pandemic has had on the state’s economy. Governor Tom Wolf has already requested state legislators legalize recreational marijuana. He has a plan involving funding grants for small businesses using some of the revenue obtained from cannabis sales. Fifty percent of this funding would be reserved to aid historically disadvantaged businesses.
Wolf claims that he’d allocate other tax revenue for “restorative justice programs” that would prioritize reparations for crime victims and communities impacted most by marijuana criminalization. However, Wolf isn’t the only one in Pennsylvania who supports legalization.
Lt. Gov. John Fetterman has also spoken about his preference for legalization. Responding to reports of Pennsylvania’s $3.2 billion deficit, Fetterman tweeted, “If only there was a widely-consumed unregulated cash crop, wholly confined to the black market, that could generate billions of dollars + 1000’s of jobs + help PA farms.”
Even with support coming from Pennsylvania’s top officials, we’re unsure whether a cannabis legalization bill would pass due to Pennsylvania’s Republican-led legislature. But we’re hopeful for this progress.
New Mexico Marijuana Legalization in 2021
During the beginning of 2020, Governor Michelle Lujan Grisham proclaimed support for adult-use cannabis legalization in New Mexico. She explained that it’s “an economic development driver that would create thousands of jobs and hundreds of millions in revenue for needed public services all across the state.”
Furthermore, she proposed the Cannabis Regulation Act, House Bill 160, in the same month. This received approval from the state’s Senate Public Affairs Committee with a 4-3 vote. However, in February, the Senate Judiciary Committee’s vote tabled the bill. This left legalization efforts stagnant until 2021.
After the vote, Democratic Den. Gerald Ortiz y Pino, the bill’s sponsor, highlighted that some proponents of the bill would be up for a vote in 2021.
During a February statement, Grisham explained her disappointment over the committee’s motion to block the legislation’s advance. However, she said legislators plan to continue working to pass the bill.
Virginia Marijuana Legalization in 2021
The governor of Virginia, Ralph Northam, said he plans to introduce legislation that could legalize recreational cannabis in the state. This came during a news conference that followed the completion of a state study highlighting Virginia’s ability to generate $300 million in taxes through legalization. Northam claims he will work with the General Assembly to create legislation.
Northam’s public support of legalization came following the legislature passing a bill in 2020 to decriminalize marijuana possession. Possession of up to one ounce of cannabis was reclassified to a civil penalty.
Members in the House of Delegates claim that legislation to legalize recreational-use cannabis is likely to pass the chamber. However, the state Senate Majority Leader, Dick Saslaw, said he believes these odds are “slightly better than 50-50.”
Texas Marijuana Legalization 2021
Texas marijuana legalization has been something on everyone’s minds after Governor Greg Abbott signed House Bill 1325. This legalized production, manufacturing, retail selling, and inspection for industrial hemp crops and products. Texas lawmakers have also pushed several marijuana bills ahead of the 87th Texas Legislative session.
House Bill 447, would permit residents over the age of 21 years old to consume, transport, and grow marijuana. Few limitations would be imposed as the bill would offer guidelines for businesses, licensure, and distribution for the marijuana industry in Texas.
State Senator-elect Roland Gutierrez introduced her bill to authorize cannabis medically and recreationally if passed.
Gutierrez knows that Texans will face severe budgetary challenges. Her bill [SB 140] would create 30,000 new jobs for the state and produce $3.2 billion in new revenue, all without raising taxes for Texans.
Rhode Island Cannabis Legalization 2021
The Governor of Rhode Island, Gina Raimondo, has also proposed that legalizing recreational marijuana is the right move. She wants to set up a system of state-controlled dispensaries. However, Senate leaders opposed her proposal, believing it would harm the state’s youth.
After the coronavirus pandemic caused state budget deficits, the idea of the economic benefits became appealing to state lawmakers. Senate leaders claim that they’re now more interested in the proposal being a part of Rhode Island’s 2021 budget plan.
So who else will legalize cannabis in 2021? We’ll have to wait and see. But all in all, this year should be great for the cannabis industry as it continues its expansions into other states interested in becoming a part of the sector.
While some might suggest attending a business school, learning how to start a cannabis company can take some additional insight.
The cannabis sector is budding. Since it’s a developing market, it’s safe to say that while some business courses will relate to these operations, this niche’s specialized nature demands more research.
Here’s what we’re covering in this guide:
Cannabis startup costs and what to expect
How to write a business plan for a cannabis business
How to get financing for a cannabis company
How to start a cannabis business (step-by-step)
Looking for additional guidance to budget and plan for your new cannabis operation? Contact us today to learn how we can help.
How to Determine Initial Cannabis Startup Costs
Cannabis business startup costs are essential to consider before investing time, energy, and resources into starting a cannabis business. Thus, it’s crucial to look over the potential initial startup costs.
Cannabis endeavors are usually more capital-intensive than other operations. Here’s what you should expect to pay for your initial cannabis startup costs:
Cannabis Licensing Fees
Cannabis licensing fees aren’t cheap. These costs vary at the state level, as well as the municipality.
For instance, cannabis licensing regulation in California has non-fundable fees between $1,000 and $5,000 per application. These fees can range in price depending on which license you’ll need, as well as which jurisdiction(s) you operate. For all local licensing or permit fees, you can expect the licensing fees to range from $10,000 to $12,000.
Cannabis Consultant Fees
Hiring a cannabis consultant is equally essential for new entrants to the industry. Cannabis consultants offer expert advice that facilitates structuring and operations.
Between licensing, company structuring, compliance, security, accounting, and other cannabis-specific needs, it’s crucial to have a trustworthy cannabis consultant on-hand.
While cannabis consulting companies exist, in some cases, it’s best to shop around for the best option for you. Whether you’re worried about excessive consulting rates or wondering about cannabis consultant pay, feel free to contact us at any time for a free consultation.
Cannabis Insurance Cost
Every business has insurance needs per state demands. There’s a short list of cannabis insurance carriers, and they tend to charge a premium on account of the industry’s Federal status. However, a quick check of a cannabis insurance directory can be helpful.
Two cannabis insurance directories, Cannabis Business Executive and Ganjapreneur, are the go-to’s for canna-business operators. Each site offers a cannabis insurance directory where you can find the best cannabis insurance carriers and, hopefully, one that will fit your needs.
Cannabis insurance for supplemental purposes isn’t always an option. For instance, in California, canna-businesses must have at least $2,000,000 in commercial general liability insurance. The monthly premiums for insurance like this are usually from $1,2000 to $2,200.
Cannabis Business Operating Costs
Cannabis business operating costs can add up quickly. Between rent, security, marketing, interior, equipment, salaries, and other expenses, it’s best to know what to expect.
Your operating expenses will depend on what type of canna-business you’re starting. These could include:
Cannabis Real Estate Rental Costs
Cannabis real estate rentals, also known as green zone properties, are usually charged by the square footage. The price per square foot depends on the location and size of the cannabis facility. If you’re renting cannabis real estate in a less populated area, the expense drops significantly. But if you’re looking for a green zone rental in a city with high competition for these kinds of spaces, you should expect to pay exorbitant fees.
Green-zoned real estate is somewhat limited. With this being the case, many landlords charge premium rental fees for cannabis endeavors.
If you’re planning to open a dispensary in a large city like Los Angeles, the rent will likely cost between $7,000 and $9,000 per month. However, you can expect to pay more if you’re looking for a specialized location, such as a property on a well-known street.
Cannabis cultivation facility rentals tend to be even more expensive due to the additional square footage. For instance, if you’re looking for a 25,000 square foot facility in a city that’s close to a metropolitan area, you can expect to pay between $15,000 and $20,000 per month.
Cannabis manufacturing facility rentals don’t demand as much square footage. Since these are typically only allowed to operate in cities located away from densely-populated cities. With this in mind, you can expect rent to cost significantly less–likely between $3,000 and $5,000 per month.
Cannabis Staff Salaries
Cannabis staff salaries are essential to keep the business operating fully. Each canna-business requires specific skills depending on the operations. Some staff might need a GED and some certifications. But other positions could require Bachelor’s degrees or a Ph.D. With this being the case, salaries for cannabis staff usually fall into these ranges:
Bud Tenders: Bud Tenders usually earn just above minimum wage, ranging from $12 to $14 per hour.
Dispensary Managers: Dispensary Manager salaries generally have them earning between $50,000 and $60,000 annually.
Master Extractors: Master Extractors can usually demand between $60,000 and $70,000 per year.
Cannabis Business Marketing Costs
All successful endeavors have marketing costs, and cannabis is no different. In fact, many cities demand an outline of your cannabis branding and marketing plan when you submit your cannabis business license application.
Cannabis business marketing budgets ultimately depend on your business. If you have a smaller company, you might spend around $2,500 or more per month. However, larger cannabis business marketing budgets can demand millions of dollars.
Regardless of what you allocate towards your marketing budget, it’s crucial to remember that these expenses aren’t tax-deductible. We can thank Section 280E for that.
Cannabis Business Equipment Costs
The cost of your cannabis business interiors and equipment depends on the business you operate. For example, the costs of the equipment used for a massive indoor cannabis cultivation operation will be significantly higher than the price one would pay to build-out a dispensary. Extraction equipment can also be rather expensive. Ultimately, the price you’ll pay for your cannabis equipment will depend on two factors: what your operation does and it’s size.
Cannabis Business Security Costs
Cannabis business security costs should be considered too. All cannabis businesses are required to have security watching over the operation. This industry operates primarily on a cash-basis.
With this in mind, the amount of cash that’s dealt with on-site means it’s ideal to invest in security. This means your operation should have a plethora of security equipment (including but not limited to video cameras and safes) and a security team on-site.
For a specialized security agency, you can expect to pay between $20,000 and $30,000. But this could increase if you have special needs or a massive operation.
Community Outreach Costs
Community outreach is a crucial part of operating a cannabis company. This is how you can make your organization stand out from the rest.
While many canna-business operators tend to overlook outreach, states and localities usually prefer organizations that make it their initiative to improve the community. This means if you have plans to help the community, your organization is more likely to receive the appropriate licensing.
Consider creating a budget for local law enforcement programs and endowments, community programs, schools, and other community initiatives to show your organization is worth supporting.
All businesses should have emergency funds on-hand for unexpected expenses. This is especially the case for cannabis operations as an emergency could cost hundreds of thousands of dollars.
How to Write a Business Plan for Cannabis Company Financing
Should you know how to write a business plan for a cannabis company? Only if you plan to start one.
But a cannabis business plan does more than keep your company on-track to succeed. It can be used to find funding for your operation, helping to cover the expenses we just discussed.
As you begin writing your cannabis business plan, keep these considerations in mind:
1. Provide Evidence You’ll Fulfill Your Cannabis Business Plan’s Claims.
Investors and anyone reviewing your cannabis license application will have to believe that you will fulfill your business plan claims. With this in mind, your plan should include proof. Include quantifiable evidence with verifiable data showing it’s legitimate. Conduct research, collect data, and communicate its relevance in your business plan.
2. Instill Trust in Your Cannabis Business Plan.
Establishing trust is a vital component of a marijuana business plan. The people reviewing your plan will have to trust that your canna-business is a solid investment. With this being the case, provide a clear explanation of what makes you the right person to operate this business and what will contribute to its success.
3. Incorporate Visuals in Your Marijuana Business Plan.
Visuals enhance a cannabis business plan by captivating peoples’ attention. This is how you should tell your story and get them interested in learning more. Include graphs, images, tables, and other visuals in your presentation.
4. Exhibit Professionalism as You Craft Your Cannabis Business Plan.
Regardless of the industry, investors expect a certain level of professionalism. Investors care about business and money, both of which are serious matters. Write and design your business plan to appeal to your audience with the professionalism they expect.
5. Make Promises You’ll Keep
Your cannabis license application reviewers and potential investors don’t want to see claims you can’t deliver. All of your promises in your cannabis business plan should be realistic. Between your goals, milestones, projections, and request for funding, everything should be substantiated by giving proof that you achieve goals and keep promises.
Cannabis business plans should include the following:
Your executive summary should outline the contents of your business plan. Keep this section short, and make sure to highlight the key points that will matter most to your audience.
Your problem-solution statement will explain what problem your business aims to solve and how. This will offer insight into the unmet or under-met needs in the market that your company plans to fill.
Market Opportunity Statement
Your market opportunity statement should include data showing the market size, growth potential, target customer segments, trends, competitors, and regulatory landscape. This section should also provide proof of the marketplace opportunity that will ensure your business grows and thrives.
Strategic Execution Statement
Your strategic execution statement will provide detailed plans for how you plan to take advantage of the opportunities you’ve already described. This should include timelines, milestones, and the metrics you plan to use to show your success in relation to your goals.
Here’s what your cannabis business marketing plan should cover:
Position: What makes your brand different from and preferable to the competition?
Product: What will you offer to solve the needs and problems mentioned earlier?
Price: How much will you charge for these products to dominate the market?
Promotion: How do you plan to promote your business to generate sales and revenue?
Place: Where will you sell your products and services?
Your operations outline should offer insight to your facilities, technology, security, sales, distribution, staff, and equipment. You’ll explain the business’s physical space necessities to operate, including the specific property address if you’ve already obtained it.
Compliance Fulfillment for the Cannabis Industry
The compliance fulfillment section will outline how your business will remain compliant to operate legally in the cannabis sector. This segment must show you understand the regulations and explain how you will use proper standard operating procedures and staffing to remain compliant.
Company & Team Biographies
A winning team contributes to the success of a canna-company. With this being the case, this section should include all of the people who will participate in the business’s daily operations. List the biographies of your owners, team leaders, advisors, and key team members contributing to the expertise you need for successful execution.
Since this plan might be used to secure financing, this is likely the most important section. Outline a detailed financial plan to include revenue forecasts, sources of capital, operating costs, budgets, projected balance sheets, projected cash flow statement, break-even analysis, and projected profit and loss statement.
Your appendix should include more detailed spreadsheets and charts to cover additional financial information.
How to Get Financing for a Cannabis Business
Need help getting financing for a cannabis business? Contact us today to learn more about how we can help.