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Legal Obstacles to Marijuana Small Business Growth

By George Khoury, Esq. | Last updated on

Despite the fact that more and more states are passing laws to legalize marijuana for both medical and recreational use, there are numerous legal obstacles that marijuana businesses face. At the outset, all marijuana businesses operate with the fear of federal prosecution. While individual states may have legal marijuana, the federal government still regards it as a Schedule I narcotic drug, and considers the sale, use, and possession to be illegal.

In addition to the concern over federal prosecution, local and state laws tend to require marijuana business operators to cut through quite a bit of bureaucratic red tape before opening up shop. While the red tape may seem like a hurdle that can be easily overcome, local permitting often requires the payment of hefty, cost-prohibitive application fees, as well as lengthy processing times, that make setting up a marijuana business even more cost prohibitive.

Financing Issues

In addition to paying for permitting and licensing fees, marijuana businesses also need to secure financing for their operations. Again, because of the federal drug laws, marijuana businesses do not qualify for many government programs aimed at assisting small businesses, and big banks are extremely wary about working with pot businesses. This means that operators generally have to secure private financing, or be able to self-fund the operation.

One major issue occurs in states that require a dispensary to be fully set up before a license can be approved. In California, it can take up to 10 months for a license application to be approved. This means that a potential operator may have to pay rent, utilities and other costs on their business before it even opens for business while waiting for a license to be approved.

Security for Cash, Crops, and Crew

Because marijuana businesses often have large amounts of cash on-hand, security is an extremely important aspect to the business. Marijuana dispensaries, grow operations, and storefronts are popular targets for criminals.

Storefronts, in particular, due to the likelihood of having large amounts of cash, as well as the highly valued marijuana products, are frequently targeted for robberies. In addition to the financial losses from stolen cash and products, businesses need to be aware of the need to protect their employees from robberies, which can become violent.

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