What are Business License Requirements for Cannabis Business?


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What are Business License Requirements for Cannabis Business?

DUI Under the Influence of Marijuana

What are Business License Requirements for Cannabis Business?

The green herb revolution is opening doors to a vast scope of business potential. But the road to success is not so easy with cannabis. Canada and Uruguay are the only two countries that have passed legislation allowing legal use of recreational and medical cannabis. The USA is still in a conflict of federal and state laws, making it difficult for small businesses to start and large ones to maintain the balance in both regulations.

Getting local and state licenses are the first step to starting a cannabis business. Some states allow only dispensaries to operate and sell the yield they grow. Other states include different licenses for cultivation and supply. With the increasing competition in the market, your stake of applying and getting the license might be only once. The article attempts to simplify the complex business license requirements of this industry to help you prepare well before submitting applications.

Forming LLC

LLC or Limited Liability Company is prevalent in the U.S that identifies the business as a private limited company. It makes them liable for their business’s debts, obligations. When the business experiences loss, one can use personal assets for the debts. You also need to get a federal tax identification number designated to you for processing the business taxes. 

Decide your Business Type

There are different license types for different businesses. Each has a different set of regulations and rules that keeps the business on the track of abidance. Whether you want to cultivate, grow, manufacture, start a dispensary, or involve in distribution, first select the business type to obtain the license. Often regulatory agencies look for a realistic and well-thought business plan in the applicants. Failing to have one will make the application weak and likely lead to rejection. Get a general business license once you figure out the business type.

Professional Team

You need a team to manage the funding and license documentations. Having a professional group of employees at the management level increases the chances of getting investors to gain capital. The authority will verify your team’s expertise, knowledge, and capacity to run the local cannabis business market. Some states even look for qualifications of your business partners you mention in the application. You can include industrialists, medical professionals, liaison officers, marketing officials, distributors, and cannabis industry experts. Overall a good team maximizes your chances of not only getting the license but also to lead the game in this industry.

No Criminal Records

As a business owner or investor, you should not have committed any crime under the state law or federal law. It is a standard requirement to start any business. If you have any felony record, make sure you come out clean of it before applying for the license. The cannabis industry is already under strict regulations as its cultivation and sale is still a federal crime.

The Permits

A sales tax permit is a requirement for those who wish to sell cannabis products online or offline. The permit will allow you to collect local and state sales taxes. Next, you will require a permit according to the type of business. If you want your startup to deal with edibles, get a health department permit before you apply. Apart from that, there is a location permit, sign permit, environmental protection permit, etc.


Location of your Business

If you are starting a dispensary, most people only tend to focus on the prospective growth in this industry. Before setting up, make sure the location you decide is 150-300 meters away from social institutions like schools, colleges, and churches, or any restricted sites. The distance can vary depending on the state. But in general, it is similar to the liquor regulations of maintaining a proper distance from such locations.

Financial Model and Capital

To grant the license, regulatory agencies also look in the applicants their financial strength and capital to carry out the cannabis business. You will need a business model that should include start-up costs, revenues, property ownerships, and liabilities. Your licensing needs to include the funding details and capital you own. For instance, if you wish to grow cannabis, there are funding agencies to invest capital. Mention these in your application.  

Safety Regulations

Working in compliance with the safety regulations is the top priority for cannabis businesses. Irresponsible acts of selling, distributing, and cultivation can lead to public health hazards, which in no way a state or country can afford. Occupational Safety and Health Administration (OSHA) puts the cannabis industry under the ‘moderate hazard’ category. Several manufacturers are producing cannabis-based products with incorrect specifications of potency in their labeling. That is misleading the consumers and attempting criminal offense.

Community Service

Every business is meant to generate profits, to achieve higher ROIs at the end of every financial year. You will have a business plan that will bring money to you and your investors. Besides the business plan, you will need a CSR or corporate social responsibility section that can manage operations of community service. Attaining license also will depend on how you plan to benefit society through your cannabis business. Some entrepreneurs are running CBD companies that give discounts for military. It is essential and gives your company more value. 


These were some requirements that qualify you in getting the license. In this scenario of cannabis legalizations, the industry has the potential to flourish. Once you get it, the rest of the journey would be productive in this lucrative business. Consult an attorney to understand more about the complete process as per the state laws in which you reside.     

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