Starting a Marijuana Business: Do You Need a Lawyer?

Although marijuana legalization has happened in some states, it is still an illegal drug under federal law. Cannabis businesses must follow state law where they operate. At the same time, a cannabis business must also avoid federal prosecution. For these reasons, cannabis business owners and entrepreneurs should consult a cannabis attorney.

You can establish and operate many types of businesses without involving an attorney. However, starting a cannabis business requires you to navigate complex regulations in the industry.

Federal vs. State Cannabis Law

Marijuana remains illegal under federal law. There is no exception made for states with legal medical or recreational marijuana. Businesses that follow state laws are generally not at risk of federal prosecution.

In 2018 the Department of Justice released a new policy on enforcement of federal marijuana laws. But this has not led to increased federal enforcement at the state level. Instead, it serves as a guide for federal prosecutors.

Marijuana business owners should closely follow their state's regulations. This will reduce the chances of criminal prosecution. An attorney can help you structure your legal cannabis business startup in a way that reduces the risk of federal prosecution.

High Application Costs and Complex Regulations

Cannabis laws vary from state to state. State laws range from decriminalization to medical marijuana authorization to full recreational use. Many states also place firm limits on the number of marijuana businesses that can exist at one time. This means some states issue cannabis business licenses during narrow application periods.

Joining the cannabis industry is expensive. It is important to make sure that you meet your state's licensing requirements. Applicants often have to pay high license application fees. These fees generate revenue for the licensing states. New York charges a $10,000 application fee for a medical cannabis dispensary license.

Some state licensing processes require security and financial measures. This ensures that marijuana does not end up on the black market. States usually demand owner and employee background checks. This happens before filing an application for a cannabis business license.

Local governments and municipalities also may have their own regulations on marijuana businesses. Colorado demands cannabis businesses obtain licenses from the county or municipality. They must get this license from where they operate and a license from the state itself.

Obtaining a license comes with high costs. The application process can take a lot of time and have pressing deadlines. Consult with a cannabis lawyer before joining the cannabis industry. Failure to follow your state's cannabis laws can result in losing your business license.

Limiting the Risks Your Cannabis Business Faces

Cannabis businesses face unique real estate challenges, such as zoning restrictions. Many states regulate the locations where you can operate your cannabis business. A property suitable for a grower or processor may not be suitable for a dispensary or ancillary cannabis company.

A real estate attorney with experience in your state's cannabis laws can:

  • Ensure regulatory compliance with state and local zoning regulations
  • Negotiate land or building lease terms unique to cannabis businesses

As the industry grows, business owners should protect their intellectual property of products. With the rise of cannabis companies, competitors may try to steal ideas from each other. An intellectual property attorney with a focus on cannabis law can:

  • Establish a trademark to protect your brand and cannabis products
  • Enforce patent and trademark rights against infringers
  • Create policies and procedures to maintain confidentiality and enforce trade secret rights

It is also important to choose the right business entity for your cannabis business. A small business lawyer can help you choose a legal structure and draft a business plan based on your goals. The choice of business formation will depend on several factors:

  • The number of owners and employees at your business
  • The level of liability protection and risk mitigation you need
  • The tax implications of each entity
  • The legal and regulatory requirements of each entity

Get Legal Advice

Although marijuana is legal in some states, marijuana businesses still come with risks. A business attorney is a reasonable investment at the start of your journey. Besides the high cost of starting a business, there are complex regulations involved. Contact a local cannabis lawyer for an initial case assessment. Some attorneys will even do the first consultation for free!

Was this helpful?

DIY Forms for Cannabis Business

Restrictive federal laws and ever-changing state laws make the marijuana industry a dynamic environment for cannabis business owners. Before you open a cannabis business, make sure it is legal in your state, and follow your state laws. Once you decide on an LLC, S-corp, or C-corp business, you can register your business entity online using DIY business formation forms.

Start Planning