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The Best Advice For Starting A Cannabis Business

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3 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.  

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  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. 

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  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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Does Lizzo Consume Weed – The Fresh Toast

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19 hours ago

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May 7, 2024

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She has won Grammys and awards from BET, BillBoard and more while redefining enticing. But does she consume weed?

She burst into the mainstream in 2019 with her third studio album, Cuz I Love You and has been making waves ever since. Resetting standards of how a female music star needs to look and behave, she has been the center of ongoing dissuasions.  Through all this, you wonder does Lizzo consume weed to chill and relax. She has attracted legends of fans called Lizzbians, a number of social media trolls and Grammys, BET awards, Billboards Awards and appearance on SLN, Ugly Dolls, Hustlers, and more  . She rode another wave of popularity when she featured an original single titled Pink in the Barbie movie.

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She started her career in hip hop music. After doing a couple of studio albums, she signed with  with Nice Life Recording Company and Atlantic Records releasing Coconut Play.The album spawned the singles Juice and Tempo. The deluxe version of Cuz I Love You topped the US Billboard Hot 100 and became the longest-leading solo song by a female rapper. In 2021, Lizzo released the single Rumors (featuring Cardi B), which debuted in the top five of the Billboard Hot 100. Her fourth studio album, Special (2022), was preceded by its lead single “About Damn Time“, which reached number one on the Billboard Hot 100 and made Lizzo the first black female singer since Whitney Houston in 1994 to win the Grammy Award for Record of the Year.

Sir Chidi and Lizzo

Like everything in her life it seems, she is unabashed about her use of marijuana. Her Instagram shares she is on a fan consuming and treats it just like drinking wine. She has even been cheeky about her use including wink wink tweets about marijuana suppositories.

RELATED: How To Be Discreet When Using Weed

Lizzo grew up attending the Church of God in Christ but has since embraced a more open concept where she sings hip hop mixed with soul and blues. Lizzo being so open about herself and weed use is similar to the late Mama Cass, who refined talent, fun and what is like to be a celebrity.

 



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Could You Help Your Lips With CBD Balm

Published

1 day ago

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May 7, 2024

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Spring has arrived and so has the sunny.  While most want to soak in the rays – your lips might need a bit of help.

The summer sun brings out the kid in us, water activities, sun bathing, sports, or just long walks….but our lips might not be so excited. Lips are vulnerable to EV rays and often get forgotten. The skin on the lips can’t produce its own natural moisture or protective oils, making it more prone to drying out, so it is important to give them a little assistance.  Could you help your lips with CBD balm…yes, and here is why.

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From simple Chapstick to Chanel lip balms, the global market in just lips balms (not counting lipstick, glosses, and other lip products) is expected to hit close to $850 million this year.  Not only do the products help the lips stay healthy, they can prevent cancer with a sun screen, so it is important.  A CBD lip balm can have extra benefits.

this company is transforming lip balm into a luxury cannabis brand
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It’s antibacterial and antioxidant

CBD is known for its antibacterial and antioxidant properties, which, when applied to lip balm, lead to more protection for your skin and to reducing element overexposure. When experiencing symptoms of the flu, cold sores, inflammation or allergies, CBD lip balm can reduce redness and irritation.

The oil is packed with vitamins

Most CBD products are full of vitamins like A, C and E and hemp oil. These vitamins promote healthy skin and slow down its natural aging process.  It gives them a healthy appearance and a natural glow.

Everything You Should Know About CBD Lip Balm
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It prevents flaky lips

Drinking enough water is key to keep your body hydrated, especially in the heat. Lips are one of the first places to show signs of dehydration. Good lip balms provide the pathway avoiding them becoming dry and flaky. Lip balms with quality CBD oil creates a seal which can make your lips moist for longer periods of time.

It can treat severely chapped lips

Things happen and before you know it, the lips are painful and chapped. A CBD balm can can help severely chapped thanks to CBD’s healing properties. Unlike the compounds found in everyday lip balms, CBD oil can treat skin blemishes much faster, helping heal superficial cuts, protecting you against weather and more.

Could you help your lips with CBD balm, you bet your summer smile it can.

 



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Key Things To Know About Hemp And Marijuana Drinks

Published

2 days ago

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May 6, 2024

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Hemp and marijuana beverages represent about $4 billion in sales and are only going to get bigger.  Tasty, intoxicating, and available in most states, here are some key things to know about hemp and marijuana drinks. You might enjoy either or both, but where, how and what happens varies between the two.

RELATED: Are CBD Drinks Legal?

Hemp or CBD drinks are created by infusing hemp extract, derived from the cannabis plant, into a liquid base. The most popular hemp-infused drinks include water, juice, tea, and coffee. One of the big differences between marijuana and hemp drinks is the “high”. With  Delta-9 hemp, consumers tend to have a more intense experience and comes on faster than THC.  It is a euphoric high when altered sensory perception and a sense of relaxation.

study proves that cbd reduces some of the mental impairment caused by thc
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THC or marijuana drinks require digestion (like an edible) for the THC to hit the bloodstream. It takes between 15-20 minutes to kick in, with the effects peaking after approximately 45 minutes. The high from marijuana beverage can be unpredictable, and potentially more intense.

Another big difference is 47 of the 50 U.S. states and DC have legalized the sale and use of hemp-derived CBD products. Bayou City in Texas is a huge brand which sales in mainstream retailers.  Cannabis drinks, a growing market but still way behind gummies, can only be purchased in the 24 legal recreational states.

RELATED: Do CBD Gummies Actually Work?

Additional scientists determined liners inside aluminum cans cause the drinks to lose their potency. These liners are used for different reasons, among them extending the product’s shelf life, preventing the corrosion of the can and, most importantly, protecting the flavor of the drinks themselves. Without these liners, the natural metallic taste of aluminum would seep into the drinks.

“Our theory is the cannabis material, the droplets, will stick to the liner and cling on it. When you open the can to take a drink, it will lose its potency,” said Vertosa founder, Harold Han.



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