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With the legalization of marijuana for adult recreational use in California, it’s an exciting time for the state’s business community. The new law brings many opportunities for entrepreneurs interested in producing and selling cannabis and cannabis products.

CorpNet is working with aspiring cannabis business owners in California, and we’ve found many are struggling to “weed” through what they need to do to legally and legitimately start their companies.

I'm not surprised; there's a lot of information out there, and much of it is confusing!

Are you facing the same challenge in starting a marijuana business in California?

Before you start filling out forms and making commitments, consider talking with an attorney for legal guidance and to an accountant for financial and tax insight. It’s also helpful to do some self-study to gain a better understanding of the many considerations involved in starting a cannabis business.

To help you get a jump start on your research, we’ve assembled this guide that covers a spectrum of considerations cannabis business owners will want to address as they pursue their dreams of entrepreneurship.

Our cannabis startup guide will teach you what you need to know to start a marijuana business in California. This how to guide covers everything from obtain the licenses and permits to creating a business plan and getting your new venture funded. Here’s what’s waiting for you:

  1. Overview of California’s New Marijuana Law
  2. Types of Commercial Cannabis Businesses
  3. Marijuana Business Licenses
  4. Cannabis Business Permits
  5. Cannabis Business Taxes
  6. Creating a Marijuana Business Plan
  7. Steps for Starting a Cannabis Business
  8. Startup Costs
  9. Funding Options
  10. How CorpNet Can Help

This guide is meant to help you gain a basic understanding of the many tasks and responsibilities marijuana business startups encounter. It does not offer legal or accounting advice. Please be aware that government rules and regulations may change over time, thus affecting the requirements that need to be met when starting and operating a commercial cannabis company.

Overview of California’s New Marijuana Law

Below, I’ve shared some highlights from the law that new cannabis entrepreneurs might find helpful. Note that the law is complex and lengthy, and what I’ve provided equates to just the tip of the iceberg. Budding marijuana business owners can read it in its entirety on the State of California website. To ensure they interpret it correctly and understand their legal obligations, they should consider consulting a business attorney.

Background

After two decades of the evolving law regarding the use and sale of medical marijuana in California, the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA) was approved on November 8, 2016, legalizing adult recreational use of marijuana starting on January 1, 2018. In June 2017, Senate Bill 94 was signed into law as The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) to merge AUMA and the Medical Cannabis Regulation and Safety Act (MCRSA). MAUCRSA provides a streamlined state law governing both medicinal and adult recreational use of cannabis.

What’s New in the Law

The Act allows adults 21 years of age and older to possess, privately use, give away up to one ounce of cannabis, and cultivate a maximum of six plants for personal use at their homes. It has also legalized the production, commercial sale, and distribution of cannabis for adult use at state-licensed facilities. City and county governments can override state law and restrict or ban cannabis businesses in their local jurisdictions.

The agencies that license and regulate cannabis businesses are as follows:

  • Bureau of Cannabis Control in the Department of Consumer Affairs – Retail dispensary sales, distribution, and testing
  • Department of Food and Agriculture – Cultivation
  • Department of Public Health – Manufacturing

What Hasn’t Changed About the Law

California’s 1996 medical marijuana law, Proposition 215 remains in effect for medical use of cannabis by patients with a physician’s recommendation.

MAUCRSA does not affect employers’ rights to have policies that prohibit the use of cannabis by employees or the rights of landlords and other private parties from forbidding or restricting cannabis use on their private properties.

Types of Commercial Cannabis Businesses in California

Cannabis Cultivator

Cannabis cultivation refers to planting, growing, harvesting, drying, curing, grading, or trimming of cannabis. Types of cultivation environments include indoor and outdoor that use natural light, artificial light, or a combination of the two.

Cannabis Manufacturer

A cannabis manufacturer is a business that carries out any of the following processes in the production of cannabis products:

  • Compounding
  • Blending
  • Extracting
  • Infusing
  • Packaging or repackaging
  • Labeling or relabeling
  • Holding and storing

Cannabis Retailer

A cannabis retailer, or recreational adult use dispensary, is a business that engages in the retail sale and delivery of cannabis or cannabis products to customers. A retailer must have a physical location from which it conducts its business and follow all California dispensary rules that apply to selling marijuana on a retail basis.

Cannabis Distributor

A cannabis distributor is a business that transports cannabis and cannabis products. Distributors (unless licensed as “Transport Only”) also arrange for testing of cannabis products, and they check to make sure labeling and packaging meet applicable requirements.

Cannabis Microbusiness

A cannabis distributor is a business that transports cannabis and cannabis products. Distributors (unless licensed as “Transport Only”) also arrange for testing of cannabis products, and they check to make sure labeling and packaging meet applicable requirements.

Cannabis Testing Laboratory

A cannabis testing laboratory is defined as a facility, or entity in the state of California, which performs or offers tests of cannabis or cannabis products.

In January 2018, the Secretary of State began accepting filings for this newly created cannabis business entity type.

What Marijuana Business Licenses and Permits are Required in California?

State Licenses for Cannabis Businesses

Before conducting cannabis-related activities for recreational adult use, businesses must have the required category "A" cannabis licenses (as opposed to a category "M" license for the medical-use market) issued by the Department of Consumer Affairs, the Department of Food and Agriculture, and the State Department of Public Health. In addition to following all state rules that apply to their type of busines (for example, retailers must comply with California dispensary laws), they must also comply with local ordinances regulating commercial cannabis activity. A separate license is required for each premise where a business engages in cannabis activities.

Marijuana businesses may hold both category A and M licenses at the same premises provided they've completed separate license applications. Applicants must have been a California resident since January 1, 2015 to receive a license. In 2019, that restriction will expire. State licenses are valid for 12 months and must be renewed annually.

Business owners may apply for a temporary (conditional) license to engage in commercial cannabis activity. The process for getting a temporary license is generally faster, has fewer requirements, and doesn’t require an application fee. Having a temporary license enables a cannabis business with valid local permits, licenses, or other authorizations, to continue doing business while its annual license application is processed. For a business to take advantage of the temporary license option, it must already be authorized by the city or county to operate there. A business holding a temporary license is subject to the same rules and regulations as those holding annual licenses. A temporary license is valid for 120 days and may be extended for 90 days if the business owner applies for an annual license before the end of the 120-day period.

Anyone selling marijuana without a license could face punishment of up to six months in county prison and a fine of up to $500.

Before issuing a marijuana business license, the state and many local jurisdictions require a cannabis business to post a surety bond.

Licenses for the Retail Sale, Distribution, and Testing of Cannabis and Cannabis Products that a Marijuana Business in California Must Have

The Bureau of Cannabis Control issues the following types of licenses:

California Cannabis Business License Types Applicable to:
Retailer A business that sells cannabis products at its premises or delivers its goods to customers. A retailer must have a physical location where it conducts its commercial cannabis activities.
Non-Storfront Retailer A retailer that sells and delivers cannabis products from a licensed physical location that is not open to the public.
Distributor A business that transports cannabis goods, arranges for their laboratory testing, and conducts quality assurance reviews to ensure cannabis products comply with all packaging and labeling requirements.
Distributor Transport Only A business that transports cannabis goods between licensed cultivators, manufacturers, and distributors.
Microbusiness A business that cultivates cannabis on less than 10,000 square feet of property, conducts Type 6 manufacturing activities, distributes, and sells cannabis and cannabis goods.
Laboratory A ISO/IEC 17025 accredited laboraty, facility, or entity in the state that offers or performs tests of cannabis goods. Provisional licenses may be issued to testing laboraties while they obtain ISO/IEC 17012 accreditation if they meet all other requirements for licensing.

State license application fees are $1,000, and the cost of annual licenses vary depending on factors such as the size of the operation.

Cannabis Cultivation Licenses in California

The Department of Food and Agriculture, through its CalCannabis program, issues the following licenses:

California Cannabis Business License Types Applicable to:
Specialty Cottage Outdoor Outdoor cultivation sites with up to 25 mature plants
Specialty Cottage Indoor Indoor cultivation sites with up to 500 square feet or less of total canopy
Specialty Cottage Mixed-Light Mixed-light cultivation sites with up to 2,500 square feet or less of total canopy
Specialty Outdoor Cultivation sites with up to 5,000 square feet or less of total canopy or that have up to 50 mature plants on non-contiguous plots
Specialty Indoor Indoor cultivation sites with 501 up to 5,000 suare feet of total canopy
Specialty Mixed-Light Mixed-light cultivation sites with 2,501 up to 5,000 square feet of total canopy
Medium Outdoor Outdoor cultivation sites with 10,001 square feet up to 1 acre of total canopy
Medium Indoor Indoor cultivation sites with 10,001 up to 22,000 square feet of total canopy
Medium Mixed-Light Mixed-light cultivation sites with 10,001 up to 22,000 square feet of canopy
Nursery Cultivation sites that operate solely as a nursery, conducting activities like cloning and seed propogation
Processor Cultivation sites that conduct only trimming, drying, curing, grading, or packaging of cannabis and nonmanufactured cannabis products
Large Outdoor
(Not available until January 1, 20123)
Outdoor cultivation sites that use no artificial lighting for more than 1 acre of total canopy on one premises
Large Indoor
(Not available until January 1, 2023)
Indoor cultivation sites that exclusively use artificial lighting for more than 22,000 square feet of total canopy on one premises
Large Mixed-Light
(Not available until January 1, 2023)
Cultivation sites that use a combination of natural and supplemental artificial lighting at a maximum threshold (to be determined by the licensing authority) for more than 22,000 square feet of total canopy on one premises

State license application fees and the cost of annual licenses vary depending on factors such as the size of the operation.

Cannabis and Cannabis Product Manufacturing Licenses

The Department of Public Health, through its Manufactured Cannabis Safety Branch (MCSB) issues the following commercial licenses for manufacturing cannabis products (such as edibles and topical products). Various licenses exist for manufacturers according to the manufacturing processes they conduct at their sites.

California Cannabis Manufacturing Licenses
License Type Applicable to: Additional provisons
Type 7 Manufacturers conducting extractions using volatile solvents (such as butane, hexane, propane) Type 7 licensees may also perform activities of Type 6, N, and P licensees.
Type 6 Manufacturers conducting extractions using mechanical methods or non-volatile solvents (such as water, ethanol, CO2, butter, cooking oils) Type 6 licensses may also perform activities of Type N and P licensees.
Type N Manufacturers producing edible products or topical products using infusion processes Type N licensees may also perform activities of Type P licensees.
Type P Manufacturers that only package or repackage cannabis products or label or relabel the cannabis product container or wrapper

State license application fees are $1,000, and the cost of annual licenses vary depending on factors such as the size of the operation.

MCSB is also developing a fifth license type for shared-use manufacturing facilities.

Permits for Cannabis Businesses

Businesses operating as cultivators, processors, manufacturers, retailers, distributors, and microbusinesses must register with the California Department of Tax and Fee Administration (CDTFA) to obtain a seller's permit. This is a prerequisite for applying for their state licenses. Also, distributors must obtain a cannabis tax permit from the CDTFA, so they're set up to report and pay the two new cannabis taxes.

Surety Bonds for Cannabis Businesses in California

A surety bond of $5,000 (or some other amount if required by the county or city) must be posted by cannabis business licensees before they are issued a license to conduct business in the State of California. Entrepreneurs often obtain surety bonds from insurance companies or surety companies.

Business Licenses and Permits by Type of Marijuana Business

I realize it can get a little confusing trying to pull all the pieces together regarding all of the business licenses and permits a specific type of cannabis business might need. The below chart should help make sense of it all. Contact the state and your local government to verify that you have all your bases covered. Requirements may change as the laws evolve.

Type of Cannabis Business Permit Requirements License Requirements Issuing Agency
Cultivator Seller's Permit Cultivator license California Department of Food and Agriculture
Distributor Seller's Permit, Cannabis Tax Permit Distributor license Bureau of Cannabis Control
Manufacturer Seller's Permit Manufacturer license California Department of Public Health
Microbusiness Seller's Permit, Cannabis Tax Permit Microbusiness license Bureau of Cannabis Control
Nursery Seller's Permit Cultivator license California Department of Food and Agriculture
Processor Seller's Permit Cultivator license California Department of Food and Agriculture
Nursery Seller's Permit Cultivator license California Department of Food and Agriculture
Retailer Seller's Permit Retailer license Bureau of Cannabis Control
Testing facility Possibly a Seller's Permit Laboratory license Bureau of Cannabis Control

Cannabis Business Taxes

Cannabis businesses have many of the same tax obligations as businesses in other industries. Which taxes a business must pay and the rates that apply will depend upon the business's legal structure, level of income, and other factors.

  • Income Tax (Federal, State, and Local)
  • State Franchise Tax
  • Alternative Minimum Tax
  • California State Sales Tax
  • State Use Tax
  • Property Tax

Also, two new cannabis-specific taxes went into effect on January 1, 2018.

  • Cannabis Excise Tax
  • Cannabis Cultivation Tax

What is the Cannabis Excise Tax?

The cannabis excise tax is a 15 percent tax (based on the average market price of the sale) that retailers must collect from buyers that purchase their cannabis and cannabis products. The state requires that retailers separately show the excise tax amount on their sales invoices or issue the following statement: "The cannabis excise taxes are included in the total amount of this invoice."

What is the Cannabis Cultivation Tax?

The cultivation tax is a tax on all harvested cannabis that enters the commercial market. Marijuana cultivators must pay the tax to either their distributor or their manufacturer.

California Cannabis Cultivation Tax Rates Effective January 1, 2018
Plant Description Tax Amount Applicable Per:
Cannabis flowers $9.25 Dry-weight ounce that enters the commercial market
Cannabis leaves $2.75 Dry-weight ounce of cannabis leaves that enter the commercial market
Fresh cannabis plant* $1.29 Ounce
*Unprocessed cannabis must be weighted within two hours of harvesting to qualify for the fresh plant category.

The cultivation tax does not apply to seeds and immature plants (including clones).

Creating a Marijuana Business Plan

A marijuana business can benefit from having a business plan to use as its roadmap. A business plan lays out how a company will be structured, what it’s mission is, what products and services it will provide, who will manage it, what its financial projects are, and other aspects of operating the business. What a marijuana business plan includes will depend on what activities the company will engage in and whether it intends to seek funding from a lender or investor.

Some typical elements of a business plan include:

  • Executive Summary
  • Company Summary
  • Market Overview
  • Marketing and Sales Strategies
  • Operations
  • Management Summary
  • Financial Projections
  • Supporting Data

Here are some of the details that businesses often include within the individual business plan sections. Sometimes the sections contain some overlap of information, providing a different amount of detail or take on something that is included elsewhere within the business plan.

Executive Summary

  • Main goals and objectives of the business
  • Mission of the company
  • Key success factors (e.g., establishing goodwill within the local community; strong branding initiatives to set the company apart from competitors, etc.)
  • Profit forecast
  • Market opportunities
  • Products and services overview

Company Summary

  • When the company will begin (or began) operating its business.
  • The business entity type (e.g., LLC, corporation, etc.) the company will operate as
  • What business licenses the company will have
  • How many employees the business will have
  • From where the company will conduct business
  • What cannabis activities the company will engage in
  • Financial overview
  • Market Overview
  • Market analysis overview (including a summary of research findings regarding things like market trends and industry outlook)
  • Target market (e.g., where the company’s target customers are; research results regarding opportunities within that target market)

Products and Services

  • What specific products and services will be made, transported, or sold by the company
  • Pricing
  • Product and service margins
  • From where the company will obtain products it doesn’t make

Marketing and Sales Strategies

  • Marketing and advertising channels (e.g., social media platforms, online directories, magazines, newspapers, events, etc.)
  • Branding (e.g., logo, tagline, etc.)
  • Website development
  • Memberships (e.g., trade association memberships, business organization memberships, etc.)
  • SWOT analysis (strengths, weaknesses, opportunities, threats that the company faces)
  • Pricing strategy
  • Sales growth assumptions
  • Sales forecast (often provided for first five years in business)

Operations

  • Hours of operation
  • Locations
  • Security plan (measures to be put in place for meeting the state’s requirements for preventing theft and unauthorized access to cannabis or cannabis products – e.g., video surveillance system, commercial locks, storage of product, alarm system, etc.)
  • Transport (if applicable, types of vehicles that will be used; qualifications of staff that will operate the vehicles, etc.)
  • Equipment and technology used to conduct and run the business

Management

  • Leadership of company
  • Staffing plan
  • Training plan

Financial Forecast

  • Profit and Loss (P&L) forecast (often for first five years)
  • Cash flow statement
  • Balance sheet
  • Start-up and ongoing expense estimates (e.g., payroll, rent, mortgage, taxes, equipment needs, insurance, etc.)

Supporting Data

  • Additional charts and graphs not used in other areas of the business plan
  • Agreements or contracts (e.g., with vendors, key customers, etc.)
  • Licenses, permits, trademark documentation
  • Management team bios and resumes
  • Attorney and accountant contact information
  • Credit history
  • Detailed studies that support information within other sections of the business plan

Steps for Starting a Cannabis Business

So now you’re probably thinking, “OK, great. Now what?”

Whether you’re interested in how to open a dispensary in California or another type of marijuana business, the basic steps are similar to what other types of businesses needs to complete.

  1. Choose a business entity type
  2. Choose a business name
  3. Designate a Registered Agent
  4. Register your business with the California Secretary of State
  5. Obtain local (city and county) licenses, permits, or authorization
  6. Obtain seller’s permit and tax permit (if required)
  7. Obtain required state license(s)
  8. Obtain an EIN
  9. Open a business bank account
  10. Apply for a trademark or service mark
  11. Keep track of your ongoing compliance requirements

Here’s some additional information about each step of the process:

1. Choose a business entity type

The business entity type you choose for your cannabis business has legal and financial ramifications, so it’s important to understand your options. I encourage you to talk to an attorney and accountant to assess which business structure will be most advantageous to you. A few of the most popular business structure types for small businesses in California include:

Sole Proprietor

Operating a business as a sole proprietor is the most simple way to go from a set-up and administrative standpoint. The state of California doesn’t require the filing of any formation documents to start a sole proprietorship. However, sole proprietors in the cannabis industry must still meet all other state and local requirements to legally operate their marijuana businesses.

Assets and liabilities of a sole proprietorship are held in the owner's name. Business profits are taxed as personal income. One downside of operating a business as a sole proprietor is that the owner is usually personally liable legally and financially for the business. That opens the owner's personal assets (bank accounts, home, car, retirement savings, etc.) to risk if someone sues the business or the business cannot pay its debts.

Partnership

There are two types of partnerships that a cannabis business in California might consider:

General Partnership (GP)

A general partnership is similar to a sole proprietorship; only it has more than one business owner. Owners share legal, financial, and management responsibilities for the business, and owners are usually personally liable legally and financially for the business. A GP’s business profits are taxed as personal income, and those tax obligations are passed through to the owners of the partnership.

General partnerships may register their businesses with the state by filing formation paperwork, however it is optional rather than a state requirement.

Limited Partnership (LP)

An LP usually limits liability for some partners in the business. For a company to be a limited partnership, there must be at least one controlling partner who is considered a general partner and one partner whose has less involvement in operating the business and whose liability is typically limited to that individual’s participation in the business’s activities. An LP’s general partners assume unlimited personal liability for the businesses legal and financial responsibilities.

Limited Liability Company (LLC)

The LLC structure provides small business owners some personal liability protection and some flexibility in how they manage their companies. A domestic LLC may have one or more managers (owners) and one or more managers (who may be owners or employees hired by the LLC). An LLC's business profits are taxed as personal income, and that tax obligation flows through to the LLC's members.

Corporation

A corporation operates as a legal entity that is separate from its owners. It typically limits the personal liability of its owners (shareholders) and pays taxes on its profits. Shareholders also pay personal income tax on business profits that they receive as dividends. Hence the term “double taxation” that is used to describe income tax treatment of corporations. Note that corporations (if they qualify) may file for S Corporation tax treatment. When electing to have S Corp tax treatment, all of a corporation’s profits flow through to the owners, are taxed as personal income, and are reported on the owners’ income tax returns. Corporations offer more personal liability protection for owners and have more allowed deductions than other business entity types. They also have more extensive business compliance requirements to meet (such as bylaws, board of directors, meeting requirements, and other obligations).

2. Choose a Business Name

Before registering a business with the state, it’s best to do a name search to make sure another business isn’t already using the desired business name. If the name you choose is too similar to another business’s name and might confuse the public or if another California corporation has claimed the name, the state will likely not approve it.

When a sole proprietorship is formed with a name other than the individual’s first and last name (example: Southside Coffee Shop rather than Jill Sanchez’s Coffee Shop), the owner must file a Fictitious Business Name Statement—also know as a DBA (Doing Business As)—with the county where the principal place of business is operating.

With other business entity types, the business name is automatically registered with the state after formation paperwork is filed and approved. That safeguards the name from being used by any other registered business entities within the state.

Business owners can reserve an available business name in advance if they want to claim it but aren’t quite yet ready to officially register their business. Name reservations are good for just 60 days, though, so entrepreneurs cannot sit on a name indefinitely.

3. Designate a Registered Agent

Certain entity types require that a business designate a “registered agent” to receive “service of process” on their behalf. A California-based company must have a registered agent with a physical location within the state. A business can select a company that provides registered agent services (like CorpNet) or an individual (at least 18 years of age) who is a California resident.

A registered agent must be available Monday through Friday from 8 a.m. to 5 p.m. to receive important paperwork such as:

  • Corporate filing notifications
  • Official federal and state correspondence
  • Subpoenas for information
  • Notice of lawsuits
  • Tax notices from the IRS and local tax authorities
  • Summonses to appear in court
  • Wage garnishment notices

Register Your Marijuana Business with the California Secretary of State

To officially form a business entity, the required business formation paperwork must be submitted to and approved by the state.

California Business Registration Forms
Business Entity Type Document
Sole Proprietorship No formation document
General Partnership Statement of Partnership Authority (optional)
Limited Partnership Certificate of Limited Partnership
Limited Liabilty Company Articles of Organization
Corporation Articles of Incorporation

Note that in addition to filing formation paperwork, other state requirements might also apply (such as having an operating agreement, bylaws, board of directors, stock certificates, etc.).

5. Obtain Local Licenses, Permits, or Authorization

New marijuana business owners should consult their city and county government offices to find out what requirements apply to them. The rules from one city or county to the next may vary.

6. Obtain Seller’s Permit and Tax Permit

If required, business owners can register for these online via the California Department of Tax and Fee Administration’s website. These permits are necessary for filing any applicable sales and use tax and cannabis tax returns.

7. Obtain Required State Licenses

As we detailed earlier, companies must obtain the licenses required to legally conduct the cannabis activities they will engage in through one or more of the following California government agencies:

  • Department of Consumer Affairs
  • Department of Food and Agriculture
  • State Department of Public Health

8. Obtain an EIN

An EIN (Employer Identification Number) is a nine-digit number that helps establish separation between a business and its owners. Used for tax filing and other business startup and reporting purposes, businesses that have employees or that operate as partnerships or corporations must have an EIN. EINs (also known as Tax ID numbers) are used when obtaining business licenses and permits, setting up business bank accounts, applying for business credit cards, filing taxes, and conducting other business transactions.

The IRS issues EINs at no charge and businesses may apply for them online through the IRS website. In addition to CorpNet’s many other filing services, we can order you EIN for your business, as well.

9. Open a Business Bank Account

Before a business can accept payments from customers and pay vendors, it must open a business bank account. This is essential for keeping a company's financial assets separate from its owners' finances. Businesses that commingle owners' funds and those of the company risk "piercing the corporate veil," and thereby putting owners' personal liability protection at risk.

10. Apply for a Trademark or Service Mark

A company can protect its business name beyond the California state borders by applying for a federal trademark. With a registered trademark (or service mark for companies that offer services rather than products), a cannabis company’s owners have the peace of mind that no other businesses in the United States will be able to use their business name if they’re offering similar products or services.

11. Keep Track of Your Ongoing Compliance Requirements

Beyond the filing requirements for launching a business, there are ongoing compliance obligations that must be met, too. Make sure you thoroughly research what you must do to keep your business in good standing with the federal, state, county, and local governments. Compliance tracking tools, like CorpNet’s Business Information Zone (B.I.Z.), can help you stay on top of upcoming deadlines.

Ongoing requirements vary by business entity type and where a company is located. Examples include:

  • Filing taxes
  • Submitting annual reports
  • Renewing licenses
  • Maintaining a registered agent

Cannabis Business Startup Costs

The cost to start a Cannabis company can vary significantly depending on the type of Cannabis business, its location, and its operational requirements. Below, I’ve listed many of the startup expenses cannabis businesses must consider:

  • License and permit application fees
  • Business entity registration fees
  • Attorney fees
  • Consultant fees
  • Accountant and tax advisor fees
  • Equipment
  • Computers and other communications technology
  • Utilities
  • Product inventory
  • Essential materials (such as seeds, fertilizer, etc.)
  • Real estate purchase or rent downpayment
  • Surety bond
  • Insurance
  • Website design and development
  • Other marketing and advertising (signage, business cards, etc.)
  • Memberships (to local business organizations and industry associations)

Marijuana Business Funding Options

The costs to start a cannabis business can add up. While some entrepreneurs can self-fund from their personal savings or take out a home equity line of credit, the financial requirements may exceed what those options can provide. It may be necessary to seek other sources of funding.

Not many traditional lending sources are available, and currently, no SBA (or similar programs) exist for cannabis businesses.

Big banks, due to marijuana’s illegality at the federal level, do not offer loans to cannabis businesses. However, there are other resources that might provide capital to startups.

Entrepreneurs should first decide whether they want to incur debt (via a loan) or give up equity (selling a piece of the business) in the company.

Getting debt-based funding from a lender usually entails a fairly straightforward application process that focuses on the numbers involved. Some small banks and credit unions may offer debt funding to businesses in the cannabis industry.

Equity investors, on the other hand, expect a more extensive “pitch” that goes into detail about a company’s management team, industry outlook, products and services competitive strengths and weaknesses, market opportunity, etc. In return for the funds they provide, investors usually expect a significant return on their investment. Understandably so, given the dynamic nature of the laws and risks involved. Angel (private) investors, venture capital firms, friends, family, customers, suppliers, and investment banking firms may be candidates for providing equity funding.

Regardless of choosing debt- or equity-based funding, keeping honest, accurate, and detailed financial records is a must. And maintaining a strong credit rating is very important, as well.

How CorpNet Can Help You Start Your Marijuana Business in California

By asking CorpNet for assistance, you can handle many of the filings required for starting your business cost-effectively and save time, too. Our business filing specialists can assist you with:

We can also help you stay on top of the ongoing business compliance requirements you need to fulfill after your business is established.

CorpNet also gives you access to our free B.I.Z. (Business Information Zone) online business compliance tool that lets you tracks—and sends you notification of— important deadlines.

Helpful Resources for California Cannabis Businesses

Below are online resources that you may find helpful as you research what’s involved in starting your commercial cannabis business.

Whether you plan on opening a dispensary in California or operate some other type of marijuana business, the information the above resources provide will help you get all your ducks in a row.

The expertise of an attorney, accountant, and tax advisor will be critical as you start your cannabis business. They can help you understand your legal and financial responsibilities and guide you when you encounter challenges.

And remember, the CorpNet team is also here as a resource to assist you with all your business formation paperwork, license and permit applications, and more.

Contact us today to talk with one of our business document filing experts!