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The Best Advice For Starting A Cannabis Business

Published

9 months ago

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Consumers continue to drive an ever expanding marijuana industry and new opportunities appear at every turn.  While the market is involving, there is still opportunities to make money and start a successful business.  Public opinion is pro-legalization and it is just a matter of time before the government reschedules driving more growth. If you are considering it, here is the best advice for starting a cannabis business.

Lonnie Rosenwald is a partner in Zuber Lawler’s cannabis practice group and shares some valuable insight into starting a business. In the rapidly growing cannabis industry, small business owners face a myriad of challenges, ranging from the typical complexities of business structures and investment to navigating the particular nuances of cannabis contracts, banking, and real estate. Establishing a successful cannabis business requires careful consideration of these areas of law to ensure compliance, mitigate risks, and foster growth. Here’s a brief guide for small cannabis business owners on five key areas for your focus: legal entities, investments, contracts, banking, and real estate. 

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  1. Legal Entities

Choosing the right legal entity is crucial for cannabis businesses. Each state’s cannabis program differs from all other states, and the legal entity you need may be required by your state’s program. Additionally, each structure has advantages and disadvantages. Sole proprietorships, partnerships, limited liability companies (LLCs), and corporations all offer distinct benefits. For example, LLCs are popular structures for new cannabis businesses due to the liability protection they provide their owners (called “members”) while maintaining flexibility in management and favorable tax treatment. Some sophisticated investors prefer corporations. A sole proprietorship is not an entity, but it is simpler than the other business structures in that you, and only you, control the business, but you do not have liability protection.  Partnerships are just that:  a number of partners work or invest together in the business. A joint venture is a type of partnership whereby the partners are committed to a common goal; general partners may not be protected from liability; limited partners typically are.  Corporations have limited liability for the shareholders and employees. A decision on your business entity structure should be made with advice from your attorneys and tax professionals familiar with cannabis other applicable laws and regulations. Your business may also be required to comply with the U.S. Corporate Transparency Act with respect to reporting to the Financial Crimes Enforcement Network (FinCEN) certain information regarding the beneficial ownership of your entity (effective as of January 1, 2024).   Whether you are required to report should be a topic of conversation with your attorney.  

RELATED: Guess What Is Gumming Up The Marijuana World

  1. Investments:

Securing funding by private capital raises, financial institution lending and/or friends and family commitments is often a crucial step in the growth journey of a small cannabis business because of the significant costs of real estate, equipment, and employees. Investors, whether individuals or venture capital firms, are attracted to businesses with a solid legal foundation, clear growth strategies, and compliance with laws and industry regulations. Business owners should be prepared to present potential investors and lenders comprehensive business plans, showcasing not only the financial viability of the venture, but also a deep understanding of the legal and regulatory landscape. The U.S. and state securities laws typically apply to offerings of securities in cannabis entities notwithstanding that your state may have a cannabis program and that cannabis is illegal at the federal level.  These laws are particularly complex, so before issuing shares or member or partner interests in your cannabis business, please seek legal advice from securities-competent counsel.   Businesses should have an attorney review all investor materials to avoid problems down the road. 

5 Amazing Things To Know About CBD Was And Shatter
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  1. Contracts:

Clear and comprehensive contracts are the foundation of any successful business. In the cannabis industry, contracts play a vital role in clarifying and documenting relationships with suppliers, distributors, employees, investors, lenders, and partners. Ensuring contracts comply with state cannabis regulations (as well as other applicable laws and regulations) is critical to avoiding the potential that the contract is unenforceable or worse, illegal. We frequently see clients desiring to buy or sell a cannabis business, obtain loans or investments, and those entering into complex contracts regarding real estate or equipment leases, cultivation, manufacturing, transport, marketing services agreements, and partnership agreements.  Many of these contracts are lengthy, and of course, use legalese that you may not understand.  Some include complex rights and responsibilities, as well as how the parties will calculate various fees and expenses relating to the contract. Seeking legal advice during the contract drafting and negotiation stages is a prudent step. 

RELATED: The Most Popular Marijuana Flavors

  1. Banking:

Accessing banking services remains a significant challenge for many cannabis businesses as the sale and consumption of cannabis remains illegal under federal law, and most financial institutions (banks) are regulated by the U.S. and are required to follow certain regulations applicable to their operations. While some banks are cannabis-friendly, business owners must establish relationships with banks that have experience in the cannabis industry and that understand and comply with state-specific cannabis regulations. It is imperative to maintain meticulous financial records. Exploring alternative financial service providers, such as credit unions or specialized cannabis banking services, can help businesses navigate the financial landscape. Financial institutions such as banks will want to see what collateral your business has, such as ownership of real estate (a lease typically won’t work here), to secure your promises to repay a loan. Most banks will not lend to plant-touching cannabis businesses (even those with real estate assets), nor will they even process your deposits, debits or credits.  Ask cannabis leaders in your state for cannabis bank referrals; caution, most banks doing business with cannabis businesses don’t publicize that fact!   

RELATED: Science Says Medical Marijuana Improves Quality Of Life

  1. Real Estate:

Cannabis businesses must carefully consider real estate issues, including zoning, building, health and safety and other applicable laws and regulations, lease and lending agreements, and compliance with state, county, and municipal property laws, as well as owners associations’ regulations. Zoning regulations can significantly impact the location of cannabis operations, making it crucial to choose properties where cannabis activities are permitted under local ordinances. Often, the cannabis business’ compliance with local zoning codes requires a lengthy and time-consuming review process with a substantial amount of documents, plans, specifications and other costly information, as well as public hearings and numerous conferences with planning staff. Leases should address cannabis-related activities explicitly by including cannabis use (for cultivation, extraction, retail, etc.) in the permitted use provision, permitting limited access to the facility by landlord (and its lenders), allowing early termination in the event of a change in cannabis law prohibiting a cannabis use, and the like, also ensuring alignment with both state and local regulations. Engaging with real estate professionals and attorneys familiar with the intricacies of the cannabis industry can streamline the process of finding and using suitable properties. 

RELATED: California or New York, Which Has The Biggest Marijuana Mess

Small cannabis business owners must be thoughtful and proactive in choosing suitable legal entities, negotiating enforceable contracts, accessing banking and investment and acquiring real estate. Navigating the complex regulatory landscape requires collaboration with legal and financial professionals who specialize in the cannabis industry. By establishing a solid foundation in these five key areas, small cannabis businesses can position themselves for sustainable growth and success in this dynamic and challenging industry. 

Lonnie Rosenwald is a partner in Zuber Lawler’s cannabis practice group. Ms. Rosenwald  is located in Seattle, WA. These comments are general and not specific to your particular business or business situation; these comments are not intended to be legal advice, nor is Ms. Rosenwald or her firm representing you.  We encourage you to seek qualified legal counsel to represent you or your business especially with respect to a cannabis (touching or not) business.  



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How Cannabis Can Help With Dysmenorrhea

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6 days ago

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November 9, 2024

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Millions suffer, but relief could be here thanks to science and a simple plant.  Here is how cannabis can help with dysmenorrhea.

It is an uncomfortable topic to discuss, but the painful truth is a majority of women will suffer it at some point and finding relief is invaluable. Around 80% of women experience period pain at some stage in their lifetime. Dysmenorrhea is the medical term for pain or discomfort during menstruation. It is a common gynecologic problem, but the pain can range from dull cramps to indescribable agony. Here is how cannabis can help with dysmenorrhea.

Medicinal cannabis has emerged as a potential treatment option for dysmenorrhea, offering hope for the tens of millions of women who suffer from menstrual pain. Current medical management options primarily consisting of over-the-counter pain relievers and hormonal contraceptives. The effectiveness of these treatments vary greatly.

The endocannabinoid system plays a role in uterine function and pain perception. Cannabinoid receptors CB1R and CB2R, as well as TRPV receptors, have been identified in human myometrial tissue. Tetrahydrocannabinol (THC), a primary component of cannabis, can act as a cannabinoid agonist, potentially triggering myometrial relaxation and easing menstrual pain.

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The potential benefits of cannabis for dysmenorrhea includes pain relief, improved sleep quality, and reduced reliance on pharmaceutical pain relievers. While research specifically on cannabis for dysmenorrhea is growing, studies on chronic pain provide some insights:

  • A systematic review of 18 randomized controlled trials found that synthetic cannabis products with high THC-to-CBD ratios may offer moderate improvement in pain severity.
  • A meta-analysis of 32 trials showed that medical cannabis or cannabinoids resulted in small to very small improvements in pain relief, physical functioning, and sleep quality among chronic pain patients.

There is significant interest in using cannabis for gynecologic pain management:

  • A survey found that 61.2% of women who had never used cannabis and 90.0% of those who had were willing to try it for gynecologic pain.
  • After cannabis legalization in Canada, current cannabis use increased from 13.3% to 21.5% among women with self-reported moderate-to-severe pelvic pain.

With th American Medical Association, American College of Physicians and even AARP recognizing the medical benefits of cannabis, it is critical more research is funded.  Millions of women may be in pain needlessly due to untreated dysmenorrhea.



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Staying Trim During The Holidays With Marijuana THCV

Published

6 days ago

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November 9, 2024

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The holidays are fun and full of family, activities, and food.  But does marijuana have a natural  secret weapon to help you at least not gain weight this season?

The holidays are here – turkeys, pie, and family favorites. Along with Christmas cookies, holiday cocktails, everything adds up and starts to make a difference in how clothes fit. On average, people gain between 1-2 pounds in November and December. Some studies suggest people gain more, with an average of 2–5 pounds. But is marijuana’s THCV your natural holiday weight loss plan. While Ozempic has been the wonder drug of weight loss, cannabis a natural plant used for thousands of years in medicine. Why not use to look good also? Here is some information and also advice on how much to take and how it works.

The most famous cannabinoids are THC or CBD. Legal to over 50% of the country and used by millions across the country.  While they are the most commonly used cannabinoids, the cannabis plant contains many other medically beneficial cannabinoids including THCV. Although THCV (Tetrahydrocannabivarin) is similar to THC, it contains its own unique benefits.

Research points to THCV’s ability to block the body’s rewarding sensations while eating different foods. If you’re looking to keep your food cravings at bay or prevent the munchies, check out strains high in THCV, which will suppress your appetite, especially during the holidays.

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It has also been found that THCV in its purest form can calm the unreasonable urge to overeat while also reducing hunger cravings. Thus, consumption of THCV can be beneficial for those who struggle with weight gain and/or food craving. Since THCV can help curb one’s appetite, researchers believe there’s a potential for THCV helping people fight obesity and other related health issues.

It is important to manage the dosage. Start with a low dose of 5-7.5mg of THCV for appetite suppression effects. Options for taking THCV include gummies, tinctures, vapes, or THCV-rich cannabis strains Take THCV in the morning to help with focus and energy. Start on teh weekend so you can make sure it works in a way which is comfortable. Consume it with food to increase absorption.

Gummies and tincture/oils are the easiest ways to consume to manage the dosage. Start with half a gummy or 1 full gummy (typically 10mg) and adjust based on your response. You can increase to 2 gummies per day if needed. For tinctures, start with half a dropper or less and adjust as needed. Take THCV about an hour before you normally start feeling hungry

RELATED: Which Is More Effective For Marijuana Patients, THC Or CBD?

THCV should be part of a healthy routine including exercise and proper rest. Research on cannabis continues, to using THCV is not a long term solution, consider it for the holidays. As usual, take to your health professional to make sure it doesn’t interact poorly with any prescribed medications.  Start low and grow so you can pay attention how your body and mind reacts.



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Science Says Cannabis Can Be Making Us Healthier

Published

6 days ago

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November 8, 2024

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As it it becomes available to more people, there is a positive health change going on according to data.

Cannabis is becoming more mainstream and and the side effects are doing even better than expected.  It seems the availability of legal marijuana is helping with the health of the general population. Studies in California, Canada and the now New Zealand have shown the upside of legalization. While cannabis has been used for health benefits for millions of years, reduction in more harmful intoxication products is another important wellness trend.

RELATED: Can CBD Oils Help With Anxiety & Depression

Alcohol consumption is associated with significant health risks, including liver damage, cardiovascular issues, and certain cancers. In contrast, marijuana has not been linked to the same level of severe physical health consequences. The Centers for Disease Control and Prevention (CDC) reports that over 36,000 annual U.S. deaths are attributed to chronic alcohol use, while there is no comparable category for marijuana-related deaths. Alcohol is also much more addictive than marijuana, causing long term physical and mental issues.

A study from New Zealand has found some interesting trends regarding the relationship between marijuana legalization and the consumption of alcohol and opioids.

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Following the legalization of marijuana in New Zealand, researchers observed a notable decline in alcohol consumption:

This suggests for adults, marijuana may be serving as a substitute for alcohol in some cases, particularly when it comes to heavy drinking episodes.

The relationship between marijuana legalization and opioid use appears more complex:

  • There was no clear evidence of marijuana legalization directly reducing opioid use or abuse.
  • However, some research indicates that people who use cannabis are more likely to initiate opioid use, with an odds ratio of 2.76 compared to non-cannabis users.
  • The likelihood of transitioning from opioid use to opioid use disorders among cannabis users was found to be 2.52 times higher than non-cannabis users.

The study also revealed some additional findings regarding substance use patterns:

  • Marijuana use increased by 16% among adults aged 21 and older following legalization.
  • There was a 5-6% increase in marijuana use initiation among adolescents and young adults aged 12-20. This would be go with the greater North American trend of California sober and Gen Z drifting away from alcohol and more into marijuana.
  • No significant changes were observed in the use of hard drugs like cocaine or heroin in any age group.

RELATED: Marijuana Use And Guy’s Member

These findings suggest while marijuana legalization may lead to decreased alcohol consumption among adults, it does not necessarily translate to reduced use of other substances, particularly opioids. The relationship between cannabis use and other substance use behaviors is complex and multifaceted. Time and more research should yield more benefits.



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