All businesses in the US require certain licenses and compliance to stay in operation, but the cannabis industry is one of the most heavily regulated. Laws can vary extensively from state to state and are subject to constant change.
Knowing what your company needs in order to achieve compliance is fundamental to the success of businesses within the cannabis industry. You need to know how to get a cannabis business license, cultivation, or transportation license depending on your business goals.
Below, we have some of the principal legal conditions for running a cannabis business and examples of the more specific license requirements for working within different cannabis categories in certain states.
Basic Legal Requirements for Cannabis Businesses
To legally run a business in the USA, several basic legal requirements must be met. These prerequisites are largely the same whether you are in the cannabis trade or not.
It is always best to check the requirements for your location as these can vary from place to place.
- Form an LLC or Corporation
Becoming a corporation or LLC separates and protects you from being personally financially liable for the business.
- Business Name
Choose and register a name under which your business will operate. Select something that matches your brand and is not already taken.
- Tax ID
You will need to apply for a federal tax ID number to legally hire employees, open a bank account, pay federal taxes, and get business licenses. Some businesses also need to apply for a state tax ID. It is best to check your state’s website to know your obligations.
- Business Permits and Licenses
Essential permits and licenses vary depending on the business and state in which you operate.
You must insure your company to protect your business assets.
- Bank Account
Separate your personal and business finances by opening a business bank account.
What are the Business License Requirements for Cannabis
Licensing is the key to all business operations and without one your business cannot operate. Keeping up with license requirements while remaining compliant will reduce the risk of your business facing legal issues. For example, in California, 57 licensed cannabis businesses were set to lose their permits after failing to return and pay their annual license renewal applications on time.
Licenses aim to keep all cannabis businesses compliant and prevent misconduct. The sheer number and changeability of legal necessities can make it challenging to remain compliant. But failure to do so can result in heavy fines or even loss of licenses.
Business license requirements for cannabis vary widely from state to state and between municipalities. Some jurisdictions have an open application period and grant many licenses, while others are far more limited.
Example Cannabis License Requirements by State:
The key cannabis license types in Maine include:
- Medical marijuana treatment center (MTC)
- Marijuana cultivator
- Testing facility
- Marijuana product manufacturing facility
- Level I or II cultivator licenses (which allow cultivation areas of up to 3,000 or 25,000 square feet, respectively).
Medical and recreational cannabis are treated as separate systems are require different licensing types in Michigan. Grower licenses in both sectors have increased by 277% since 2020.
Medical Cannabis Licenses:
- Provision center
- Secure transporter
- Safety compliance center
Recreational Marijuana Licenses:
- Marijuana retailer
- Marijuana safety compliance facility
- Marijuana secure transporter
- Marijuana processor
- Marijuana microbusiness
- Marijuana grower (Class A to C)
- Marijuana event organizer
- Designated consumption establishment
With laws constantly changing, it is essential to remain well informed of recent regulations and how they may affect your business.
Licensing Requirements for Different Cannabis Business Categories
Your business must keep up to date with all relevant local, state, and national guidance, whether you are already working within cultivation or learning how to open a dispensary. With so many variations in obligations, it can be a struggle to keep up with the necessary licenses, permits, and planning.
Growers are heavily regulated and often need extensive horticulture understanding and experience before being granted a license.
Many states restrict the number of cannabis products that dispensaries may sell, and the licenses available may also be limited.
Some states require edibles to be cooked in commercial kitchens. Oklahoma demands that OMMA licensed processors and dispensaries obtain a food license to sell or produce marijuana edibles.
Cannabis compliance software can help your business stay on top of the constantly changing license requirements.
ProCanna’s cannabis compliance solutions are simple to use, mobile-friendly, and regularly updated to assure complete compliance across states and business types.
Work with a compliance firm to stay one step ahead for smooth and safe operations. Schedule your free ProCanna software demonstration today.