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Marijuana Startups Still Face Many Legal Obstacles

By Ephrat Livni, Esq. | Last updated on

Marijuana has come to seem like the growth industry to get in on for anyone who can handle a little uncertainty. States are increasingly legalizing cannabis for medical or recreational use, sometimes both, and celebrities are scrambling to establish marijuana brands while the industry is still young. It seems like those who invest in cannabis today could do great financially down the line.

But the cannabis business has its own special wrinkles. Even if you believe in weed and want to see marijuana businesses succeed, you need to be aware of some legal issues that continue to threaten the industry, despite its increasing legitimacy.

Banking and Finance

While cannabis has gained legitimacy and momentum of late, it's still not easy to find banks that will do business with weed growers and sellers. The reason for this is that no matter how many states change their medical marijuana laws, the federal government still considers the drug illegal.

Most banks are federally chartered and there are business owners who have run into trouble with banking institutions due to the contradictions between federal and state law. For example, Andy Joseph of Apeks Supercritical in Ohio -- a company that makes equipment for the marijuana industry -- said that he has had trouble with financial institutions before. Joseph says that his company's accounts have been twice frozen due to conflicting financial regulations. "It's a giant pain in the butt," he complains.

Balancing the Scales

Justin P. Breidenbach, an assistant professor of accounting at Ohio Wesleyan University who specializes in the marijuana industry, said cannabiznesses should prepare for banking obstacles.

In September, Ohio will become the 25th state to legalize medical marijuana. Although Ohio's new law makes allowances for local businesses to operate legitimately and pay employees, the many federally chartered banks will still have to be avoided. Small, hometown banks and credit unions will be the better option, says Breidenbach.

He believes in weed as a growth industry and does not consider the obstacles cannabiznesses face prohibitive. The professor told The Columbus Dispatch that opportunities abound and that marijuana is a promising area of growth, despite potential problems with federal institutions. "Advocates think this is going to be a great market because of population size," he said.

Talk to a Lawyer

If you are in the marijuana businesses or considering investing in a cannabiz, talk to a lawyer. Many attorneys consult for free or a minimal fee and will be happy to provide guidance.

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