How to Start a Cannabis Business in Michigan

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.

 

A Quick Professional Guide to Buying Commercial Property

A Quick Professional Guide to Buying Commercial Property

Here at Northstar Financial, we know that buying commercial property for your business or investment portfolio is all about knowing what you want and building a smart sequence of steps to get there. There are so many different types of commercial property ranging from pocket-sized retail to large manufacturing plants that your priorities and confidence are what make the biggest difference in a successful deal.  For cannabis businesses, you’re likely looking for either a spacious growing area or a modest shop space in town. Both usually fall into the mid-range of local pricing.

Whether this is your first major commercial purchase, you are purchasing on behalf of someone else, or you are branching out from a previous routine of investments, it helps to have a road-map. Today, we’re here to outline a quick buying guide for commercial property. Join us for a step-by-step outline of the right way to investigate, prepare, and purchase commercial property.

Buying and Renovating Commercial Property

 

  • Refine Your Priorities
  • Define Your Price Range
  • Compare All Suitable Properties
  • Secure Your Financing
  • Build Your Buying Team
  • Conduct Negotiations
  • Close the Deal
  • Renovate Your New Space

Refine Your Commercial Property Priorities

 

When planning to buy property, your first step should always be to refine your priorities. What are you looking to accomplish with this purchase? What size and features and qualities should the property possess to be a candidate worthy of consideration?

The best way to tackle this step is with three separate lists:

  1. Needs
  2. Wants
  3. Deal-Breakers

In one list, write everything that a property must absolutely have for you to consider it. This includes size, amenities, location, parking, and anything industry-specific that would be required to make the purchase worthwhile.

In the second list, write everything it would be nice to have, but you won’t insist on it. This might include a nice outdoor space, newly renovated infrastructure, an indoor gym or cafe, or other types of business in the nearby vicinity.

In the final list, write down everything that would cause you to walk away from a deal, no matter how many needs and wants it might also have. This list might include poor plumbing, paid parking, a cracked foundation, or certain types of non-compatible neighbors.

 

Define Your Price Range

 

Next, define how much you can afford to put into the purchase. Remember to break this number down. You may have a lump-sum in mind for your total investment budget, but property purchases always involve a mass of costs in addition to the down-payment and loan. These include inspections, title checks, realtor fees, closing fees, utilities, property tax, renovations, and more.

Use this math to calculate the true cost based on the “Sticker Price” listing cost when calculating how much you can really afford or are willing to invest.

 

Make a List to Compare All Properties Available That Meet Your Needs

 

Now that you have a definition of your needs in a building and the listing price that measures up to your budget, it’s time to collect candidates. Work with your agent to find and explore local opportunities that meet your needs. Put together a list of every property in your search radius that might meet your needs both effectively and financially.

Don’t forget to include buildings that can be renovated to suit your needs. Some locations are diamonds in the rough with considerable office renovation benefits. Their imperfections are opportunities to buy at a lower price and transform the space into your dream-facility instead of buying something finished and workable.

With this list, you can compare properties side-by-side based on price, commercial value, attractiveness, and amenities that might sway your decision one way or another.

 

Secure Your Financing

 

Before you take a serious next step, make sure your financing is 100% in order and ready to bid. Talk to your bank and get the loan processed and pre-approved. Target that pre-approved loan with the amount you’re prepared to put down and the maximum loan amount you’d be willing to take out. This gives you room to breathe so that you can reach to your upper-limit for a great place or scale down if the best option is lower cost than your maximum budget.

 

Build Your Buying Team

 

Now that you’re preparing to make a final decision and buy, it’s time to put together your team. In addition to your agent/broker, you will likely also want to line up your accountant, title-checking service, and your inspectors. For certain properties, it’s a great idea to also bring along your favorite renovation contractor to provide a helpful rough estimate of costs for any updates, improvements, and renovations you may want to do if you buy.

 

Run the Numbers on Each Property Candidate

 

The next step is to get serious about each of your property candidates. Work with your team to run the realistic numbers on what it would cost to purchase, update, renovate, and maintain each property on your list. This will reveal the true details of each purchase option beyond the surface listing price and assumed property tax.

Put together a dossier on each property so you can compare them side-by-side on closing costs, upgrade costs, maintenance costs, and comparative value based on your buying priorities.

 

Conduct Negotiations

 

A Quick Professional Guide to Buying Commercial Property

 

When you’re ready to make a bid on one or more properties, contact the sellers and open negotiations. In this phase, you will most need the assistance of your real estate agent/broker and your lawyer to check and double-check each term proposed. Every negotiation is different, and every seller/property combination will provide a unique negotiation experience.

Sometimes, a seller will point out legitimate extra qualities to the building you hadn’t noticed, and sometimes you will need to bring them down based on discovered maintenance concerns. Be aggressive but fair, willing to give and take. Especially if the seller offers to throw in extras like vehicles, furniture and equipment, ongoing sweetheart deal contracts, and more. Assess the value of everything brought up in negotiations and consider each property you negotiate on based on how the negotiations shake out.

 

Close the Deal

 

Finally, when you reach the best possible cost-for-value on a property, it’s time to close the deal. Closing is a lot more complicated than just shaking hands, but you can rely on your real estate agent/broker to guide you smoothly through the title transfer, closing costs, and final contract signing because they have done it dozens to hundreds of times before.

 

Renovate Your New Space

 

When the papers are signed and the new property is completely yours, it’s time to renovate. Almost any commercial building will have a few things you will want to update or change. Many businesses have an interior style based on brand and company culture or the experience you want to create. Every commercial real estate purchase is different, but your renovation contractor can make your vision of a property’s potential into reality and enjoy the considerable benefits of office renovation. Create your perfect office space, hospitality venue, or industrial work environment with the full freedom of a property owner. No need to worry about putting it all back at the end of the lease. You have the deed and this property is yours to transform to best suit your sense of style and the needs of your business.

 

Learn More About Buying Commercial Property

 

Buying a commercial property is a far more involved and carefully weighed process than buying a home because there are so many more factors to consider. Whether this is your first commercial property purchase or you’re looking to hone your skills after rocky previous experiences, the right financial decisions will help smooth the process. Contact us to explore your financial and legal options for buying commercial property in your state.