How to Start a Cannabis Business in Michigan
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.
Ancillary Services
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.
