Marijuana Business: Licenses, Permits, and Planning

As of 2025, only six states (Idaho, Kansas, Nebraska, North Carolina, South Carolina, and Wyoming) have no legal form of cannabis. All other states have legalized some type of cannabis use and production.

Even in states with legal marijuana use, commercial cannabis activity is heavily regulated. Licensing requirements vary depending on the state, the nature of the business, and the county or city.

Just like a bookstore, a coffee shop, or any other small business, you’ll first need the standard business licenses. Plus, would-be cannabis entrepreneurs must pass other application reviews and background checks. All legal marijuana states require a state cannabis business license.

This article covers the general requirements for starting a business and additional factors for new cannabis businesses. There’s a lot to keep track of — if you need help, consider contacting a cannabis business attorney in your state. They know the state regulations inside and out, and how those regulations interact with federal law.

General Business Requirements

A cannabis business is no different than any other type of business. Before you can apply for a cannabis license, you must go through the general steps of starting a business, including:

• Business license: A general business license gives you permission from the state to operate the business and apply for other business-related permits. You may need county or city licenses, depending on your location.

• Tax ID Number/EIN: Although cannabis remains illegal under federal law, cannabis-related businesses are lawful businesses and must file taxes. To obtain a retail license, you’ll need a tax ID number.

• Business structure: The legal structure of your business is important. A limited liability corporation (LLC) or corporation (C-corp) protects you and your partners from liability in case of a lawsuit. Once you have a corporate entity, you must file a DBA (Doing Business As) notice to register your company name with the state.

Other permits may include:

• A retail sales tax permit if your business is a recreational dispensary

• A cultivation license for a growing business

• Signage permits

• Building permits

Cannabis Business Requirements

Except for states where cannabis is fully prohibited, there are many licenses available for cannabis entrepreneurs. License types have subcategories depending on the size of the operation.

For example, California has seven basic cultivation licenses. There are also subcategories for indoor/outdoor cultivation and on- and off-site production.

State licenses for cannabis businesses typically fall under the following categories:

• Cultivation licenses depend on the size of the operation, the type of lighting (natural or artificial), and the number of plants.

• Manufacturing licenses relate to the activities performed. For example, they might regulate the chemicals used for the extraction of THC from marijuana leaves. They also dictate the processes done on the property (mixed-use facilities).

• Distribution licenses can be “transport only” or include storage, shipping, and testing. In California, reduced fees are available for companies that transport their own products.

• Retail licenses include storefront businesses, which must comply with other business license requirements (see above), and delivery-only licenses. A delivery business may need other licenses, such as shipping licenses and Class-C licenses for drivers.

There are also a few other cannabis business ventures that work a little differently. For example, microbusinesses and investment opportunities.

Microbusinesses

A microbusiness is a type of cannabis business that operates across multiple stages of the supply chain but on a smaller scale. It’s a similar business model to a craft beer microbrewery or a boutique winery.

California’s Type 12 microbusiness license allows a small weed business to carry out at least three of these activities at a single location:

• Cultivation up to 10,000 square feet

• Manufacturing with non-volatile solvents

• Distribution of either type

• Retail, storefront, or delivery

In some states, businesses with existing dispensary licenses cannot apply for microbusiness licenses.

Cannabis Businesses Investment

Cannabis operations have great investment potential. But investors should keep several things in mind. First, marijuana remains illegal at the federal level. Because of this, there are few publicly listed stocks, except for medical marijuana companies.

Second, the cannabis market is more volatile than most stocks. Investors should do their due diligence to avoid risky markets and potential scams.

The Application Process

The license application process for a cannabis or marijuana business can take some time. In most states, you must have:

• A completed business license

• A separate cannabis business plan

The application process may include:

• A nonrefundable application deposit

• A licensing fee

• Surety bond or proof of capitalization

• Waiver of sovereign immunity

• Lists of all owners, financial backers, and cooperative members, if applicable

• Proof of notification of the municipality or county, if required

• Proof of ownership of the proposed location

Cultivators must meet other requirements laid out by state departments of agriculture. Medical dispensaries may need on-site testing laboratories. Or they might agree to oversight by the state health department. Distributors may have similar requirements.

Business owners planning on opening any marijuana-related business should seek guidance from others in the industry before starting their venture. State laws change quickly, so be sure your plan complies with all federal and state regulations before investing time and money.

The table below outlines the legal status of cannabis in each state and what agency handles cannabis business licenses.

Many states and localities restrict the number of dispensaries and cultivators allowed in one state. License holders will also face annual application fees and strict zoning regulations.

Get Help Starting Your Marijuana Business

Check your state’s licensing requirements and license fees before starting your marijuana business. The cannabis industry is heavily regulated, but you can still run afoul of federal laws.

Many states also limit the number of licenses they’ll issue each year, so it’s important to keep track of deadlines.

Consider meeting with an experienced cannabis law attorney. They can advise you of your local government’s laws in your jurisdiction. They can also help you choose the right business structure and file the right paperwork.