2 Important Things to Keep In Mind Before You Start Your Own Weed Business


Recreational marijuana has been legalized in nine states and D.C, resulting in new marijuana businesses sprouting each year. Before you start your own weed business, here is what you should know:

Entry & Operation Is Expensive

Every upcoming entrepreneur has to face the reality of the startup cost. For those looking to venture in the marijuana business, though, these initial costs tend to be a lot higher than in other industries.

In states where marijuana is legal for medicinal purposes, marijuana businesses such as dispensaries need to have licenses for selling medical marijuana.  This requires an approximate $5,000 application fee that is non-refundable for getting the business started. For most aspiring weed business owners, getting past this first application process can be quite difficult.

After having paid the application and licensing fees, there are also equipment, marketing, and startup costs businesses need to keep track of. Not to mention, taxes for those in the marijuana industry are quite steep due to the 280E clause.

Weed Business

Whiles legal businesses can generally deduct a number of different businesses expenses, marijuana businesses are barred from this under 280E. This means that cannabis businesses are unable to qualify for the various tax credits and deductions, and lose out considerably on their return profits.

Thus, after the taxes imposed during the various instances of the business between the grower, processor, retailer and consumer; and further implementation of the sales tax, city tax, and federal tax, only about 1 to 5% of the product value is left for actually running the marijuana business.

Regulation Compliance Is Essential

Like all small businesses, marijuana businesses too need to keep up with regulations. What makes this an even taxing process is the fact that under the federal law, recreational marijuana still isn’t legal. However, cannabis businesses can usually get by without facing federal prosecution as long as they follow local and state regulations very carefully.

Since marijuana businesses are legal in various states, they are subject to state specific laws and regulations. Therefore, licensing and documentation may vary in each state.

It is imperative that you know exactly what licensing, documentation, and regulatory bodies you need to be in compliance with before starting your own marijuana business. Neglect toward understanding state and federal rules and regulations will result in the business facing unexpected turns along the way, which can seriously dent their progress.

If you want your marijuana business to grow, consult a cannabis CPAs firm to know how to maximize your profits along the way. The Canna CPAs helps clients in understanding tax laws and regulations and developing strategies to maximize deductions.

Get in touch with our cannabis accountants before you start your own business!

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