Starting a Marijuana Business: Do You Need a Lawyer?

Many kinds of businesses can be established and operated without the involvement of an attorney. Marijuana businesses, however, have specific reasons for involving a lawyer even at the earliest stages. Unlike the products of other businesses, marijuana remains an illegal drug under federal laws. In addition, states have adopted a wide variety of approaches ranging from decriminalization to medical authorization or even full legalization.

Navigating complicated and rapidly changing state requirements for the cannabis industry, while also avoiding federal prosecution can be a daunting task. A knowledgeable attorney can help simplify the process and ensure your cannabis business is protected against potential legal risks.

High Costs and Complex Requirements

States have passed their own rules and cannabis laws regarding the establishment and oversight of marijuana businesses. Many states have placed firm limits on the number of marijuana businesses that may be established. The result has been that some states only issue licenses during a very narrow application period with intense competition for the licenses and very high costs.

Applicants often have to pay high application fees that are intended to generate profits for the licensing states. Connecticut, for example, charges a non-refundable $25,000 application fee to those seeking a license to produce marijuana. Given the high expense, it's important to ensure that all regulatory and application requirements are met; otherwise, the cost of the fees may be wasted.

Proposed businesses may also be required to show that they have the financial resources to establish and run the business; half a million dollars in Illinois, for example. The state may require extensive security and financial measures that ensure that marijuana produced for medical use does not end up on the black market, either intentionally or accidentally. States commonly require background checks of both owners and employees as a prerequisite to even filing an application for a license. In addition to state regulation, local governments and even cities may have their own regulations on marijuana businesses.

Due to the high cost of obtaining a license for a marijuana business, it's in your best interest to consult with an attorney or specialized law firm before moving forward. After all, failure to follow the requirements can result in the revocation of a business license, fines, and criminal liability.

Limiting the Risk Your Business Faces

Marijuana remains illegal under federal law with no exception made for states that have legalized medical or recreational marijuana. On the other hand, businesses and individuals that follow state laws are generally not at risk of arrest or prosecution by federal authorities. However, the fact remains that possession, distribution, and sale of marijuana are federal crimes.

Whether the federal government would prosecute a business that follows state regulations is another matter. In a 2013 memorandum, the Attorney General stated that the federal government would focus on prosecuting crimes that aren't protected under state marijuana laws, such as the distribution of marijuana by organized crime networks, the distribution of marijuana to minors, drugged driving, and other clearly unlawful activities.

However, the Department of Justice's memo is simply a guide to prosecutors and can't be relied upon as a solid defense if the government should decide to prosecute a business.  In addition, this policy can easily be changed by a future president.

As a result, it's in the best interests of marijuana business owners to follow their state's regulations very closely in order to reduce the chances of criminal prosecution and a total loss of their investment. An attorney can help ensure that your business is structured in a way that reduces the risk of federal prosecution. By keeping track of case law and changes in policy, an attorney can also keep a marijuana business up to date and protected.

As the industry and retail dispensary volume grow, business owners may also want to protect the intellectual property of their products or trade secrets in the marijuana industry. A business attorney with a focus on cannabis law can offer legal advice to new or established cannabis companies, cultivators, or employees focused on adult use marijuana. Your cannabis attorney will help advise on regulatory compliance concerns and the legal issues you need to watch out for.

Get Legal Assistance

Marijuana may be legal in an increasing number of states, but businesses involved in the cultivation and sale of marijuana still create a significant amount of risk. An attorney is a reasonable expense given the high cost of starting a business, the complexity of the regulations involved, and the risk of federal prosecution. Contact a local cannabis law attorney for a free initial case assessment to learn how they can help you start a marijuana business with as little risk as possible.