They say follow your dreams and I see you’ve decided to heed that advice. Ever since you first heard of legal cannabis, it has been your dream to open a dispensary of your own. With more and more states legalizing the recreational use of cannabis, the time is now. You’ve made the decision to follow that dream, now what?
Get the best location? Get the best product? Design your dispensary so it’s the Apple Store of dispensaries? While all of those things are important, the first thing you should do is hire the right professionals.
The right professionals? Sounds boring, I know. However, by hiring the right professionals to help you get your cannabusiness off the ground and to stay involved once you’ve opened, you’re giving yourself the best bet at lasting success.
So who are these professionals you speak of, you ask? I think the three most important professionals are:
- Security Specialist
Here’s a brief explanation as to why I think the services of these three professionals are indispensable if you’d like to avoid seeing all your hard work go up in smoke.
If you’re opening a dispensary, it’s safe to assume you live in one of the states that have legalized the recreational use of cannabis. If it’s legal, that means you don’t need a good lawyer, right?
Wrong. If you plan on opening a dispensary, you will need a great lawyer. And not just any lawyer, but one who specializes in the cannabis industry.
You will want someone who specializes because there are a multitude of rules and laws to follow for cannabis businesses and these vary from state to state. Preferably, the lawyer will practice in the state in which you will conduct business. Not only will he or she be familiar with your state’s laws, but there’s a good chance he or she will also know the inner workings of state and local governments.
Additionally, the rules and regulations are constantly changing. Again, this is why you will need someone who specializes. To find a lawyer who specializes in the cannabis industry, this searchable database compiled by NORML is a good place to start. If you hire the right lawyer, he or she will be invaluable to you by ensuring you are in compliance with all of your state’s rules and laws.
Even though it has been legalized where you intend to do business, it’s important to remember the possession, use, and sale of cannabis is still illegal under federal law as determined by the Controlled Substances Act of 1970. With each passing year, it’s looking less likely that the Department of Justice will instruct the DEA to enforce federal laws. While this may not be much of a legal issue, it’s classification as a Schedule I controlled substance does have large ramifications when considering hiring an accountant and a security specialist.
You like green. I like green. We should be best buds. Sorry, a little cannabis industry accounting humor. Don’t worry, for your sake and my sake, I’m not quitting my day job.
As with your lawyer, I’d highly recommend hiring an accountant who specializes in the cannabis industry. I know what you’re thinking, “Money is money. Why do I need someone who specializes in the industry?” Simple, Section 280E of the IARS tax code.
What is IRS Code 280E?
IRS Tax Section 280E is the federal tax code that states that any business engaged in the trafficking of a Schedule I or II controlled substance is barred from taking tax deductions or credits. Remember when I said that it’s classification as a Schedule I controlled substance would have large ramifications on the accountant you hire? This is why.
In talking to a few of my clients who are relatively new to the cannabis industry, one of their biggest fears comes from talk of the high taxes cannabis businesses face. While there is some truth to that, this is why it makes sense to partner with a firm that has the knowledge and the experience to help you maximize your deductions and pay only what you owe. A firm that specializes in the cannabis industry will help you navigate the tax laws, including IRS Code 280E, IRS Form 8300, etc.
In addition to helping you navigate IRS tax codes, your accountant will also assist you in handling state and local taxes. Unlike many retail businesses that simply pay a sales tax, the cannabis industry is taxed in multiple ways. In many states, cannabis sales have both a sales tax and an excise tax applied. Additionally, cities and towns can command their own sales tax.
Due to the fact that cannabis remains illegal at the federal level, many credit card companies and banks are prohibited from doing business with dispensaries. What does this mean?
Cash. Lots and lots of cash.
As a cash business, dispensaries make a tempting target for would-be criminals. For this reason, it’s imperative to hire a security specialist to help you protect your investment. This includes your property, your staff, your customers, and your inventory.
As with a lawyer and an accountant, there are security companies who specialize in the cannabis industry. A good security company will ensure that your points of entry and exit are secure. They will also make sure your business is protected around the clock with state-of-the-art surveillance systems and other theft deterrents.
Many security companies can also provide cannabis and cash transportation services. Not only does this protect your inventory and your revenue, but also your employees. You do not want to put your employees at risk carrying valuable product or large amounts of cash.
Takeaways for opening a dispensary?
If you are going to take anything away from this post, it should be this; hire good professionals. And not just any professionals, but ones who specialize in the cannabis industry. Your lawyer, your accountant, and your security company will be indispensable to you as you plan your business, as you open your business, and as you continue to grow and cultivate your business. Good luck!