Most enterprises are required to get numerous licenses, permits, and registrations. These are put in place for a variety of purposes, including public safety, taxation, and so on.
Licensing for cannabis firms is particularly difficult due to the extremely regulated nature of the cannabis industry. Compliance standards differ not only from state to state but also depending on your company sector (for example, cultivation vs. retail) and the city or county in which you plan to operate.
It is critical to meet the relevant business license, permission, registration, and other requirements in order to operate legally. Here are some licensing fundamentals to be aware of when starting a cannabis business.
Legal criteria that are fundamental
There are basic legal standards that must be followed regardless of the type of business you want to start. Here are some common requirements, which may vary depending on your area and industry.
Incorporating your firm or registering an LLC with the state safeguards your personal assets from any potential obligations and liabilities arising from your business.
Your federal tax identification number, often known as an employer identification number, is your tax ID number (EIN). This number is used by the IRS to identify your company for tax purposes.
This license, which must be renewed every year, allows you to legally operate in your city or county. (Please note that this license does not grant you permission to start a cannabis business.)
DBA (Doing Business As) Filing: Your DBA (Doing Business As) allows you to do business under a name other than the one shown in your incorporation papers.
Retailers of physical or digital products or services, both online and offline, must have a sales tax permit. This permission is required if you must collect state and local sales taxes.
Permits: Different enterprises require different types of permits. If your firm requires food preparation, for example, you’ll need one with the health department. Permits for signage, zoning and land use may also be required.
Note that a home-based or internet business frequently necessitates the same level of regulatory compliance as a traditional brick-and-mortar business.
Cannabis requires a business license.
Business license requirements for cannabis vary widely from state to state and between municipalities, just like general licensing requirements. For example, although some jurisdictions have an open application period and grant a large number of licenses, others are more limited and can issue only a few licenses.
There are additional residency and background requirements (those with prior crimes may be ineligible), which can apply to business owners, contractors, and employees.
What department is in charge of licensing?
You may be required to file your organizational papers with the Secretary of State’s office in some states, but you will most likely need to work with local licensing agencies for best online weed dispensary.
The Nevada Department of Taxation is in charge of regulating and licensing retail marijuana enterprises as well as the state’s medical-marijuana program.
Potential business owners in California can apply to one of three agencies:
California’s Bureau of Cannabis Control is one of the key authorities in charge of regulating commercial cannabis licenses for both medical and adult-use cannabis. Retailers, distributors, testing labs, microbusinesses, and temporary cannabis events are all subject to their license requirements.
CalCannabis Cultivation Licensing: CalCannabis is a branch of the California Department of Food and Agriculture (CDFA), and it is in charge of issuing licenses to companies who cultivate medical and adult-use (recreational) cannabis. They also oversee the state’s track-and-trace system for tracking cannabis product movement across the distribution chain.
The California Department of Public Health’s Manufactured Cannabis Safety Branch monitors persons who work in the cannabis manufacturing industry. This covers anyone who makes and sells cannabis-infused edibles for medical or recreational purposes.
How licensing vary depending on the type of business
You’ll be regulated as a cannabis business based on a number of variables. One of them is the type of business you’re in—whether it’s growing, selling, manufacturing, or investing. Here are a few examples of how licensing vary depending on the type of business.
Cultivation: Cannabis cultivation is usually highly restricted. This type of enterprise will necessitate a large initial investment, a thorough site plan evaluation, and practical and proven horticultural experience.
Some states may require you to be able to provide proper product and building security if you’re a retailer. They may also impose restrictions on the amount of merchandise that can be sold to a single customer and on your pricing. In Nevada, for example, cannabis entrepreneurs must have at least $250,000 in liquid assets that are “unencumbered and can be converted within 30 days after a request to liquidate such assets.” If you’re applying for multiple retail licenses, you’ll need to make sure you have enough money for each one.
Edibles: Some jurisdictions require you to prepare and maintain your product in a professional kitchen while making edibles. You might also need to make the cannabis butters and oils that go into your product on site.
Investors: Those interested in investing in cannabis firms may be required to adhere to various regulatory and statutory requirements. Anyone interested in lawfully investing in a marijuana business in Colorado must meet a number of standards.
Employee licensing is a process that involves obtaining a license from the government.
Employees who work for a cannabis company also need to have a license. Some states require that any employee working for a cannabis-related firm be licensed, in addition to meeting basic state criteria for all employees.
A registered agent card must be applied for and received by any employees or volunteers of a cannabis business in Nevada. According to Nevada.gov, this agent card is granted by the state and needs a background check.
The MED Occupational License in Colorado is divided into two categories. This permits holders to work for Medical and Retail Marijuana facilities regulated by MED, as well as vendors who supply services to MED Medical and Retail Marijuana company licensees. According to Colorado.gov, there are two types of licenses available: –
This is required for any employee who makes operational or management decisions that have a direct influence on the company. This might be the master grower, the person in charge of deciding how much of a specific strain to produce.
Any employee who works for the company but isn’t involved in making operational choices must fill out this form. A “budtender,” for example. As a result, this is where the vast majority of occupational license holders fall.
Pay great attention to the rules and laws in your area.
While operating a cannabis business is allowed on a state level, you may face challenges on a municipal level.
The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) in California, for example, gives local governments the power to regulate what activities are permitted in their area. Some cities demand a municipal license before approving your business, while others may outright forbid it.
This is the case in Mill Valley, California. Despite the fact that Proposition 64 (the 2016 voter proposal to legalize cannabis in California) received 74 percent of the vote, the city is following municipal restrictions that rigorously prohibit any commercial cannabis activity, including growing and sale.
Understand the rules governing cannabis licensing.
Starting a firm in this highly regulated field might be difficult. To comprehend and follow all of the legal standards that are expected of you, you will need a lot of planning, understanding, and preparation. Before you take the first step toward starting a cannabis business, do your homework. Learn about the rules, regulations, and requirements that apply at the state, city, and perhaps county levels.