How to start a Legal Cannabis Business in Michigan

The cannabis industry has been proliferating at a fast pace since recreational  legalization began. Michigan is one of those states in the USA, who have legalized the use of recreational marijuana.  Before diving deeper into the ways of starting cannabis business, it’s inevitable to get familiar with the laws that administer legal cannabis businesses in Michigan. There are three highlighted laws as follows:

  • The Michigan Medical Marihuana Act, or “MMMA”

The MMMA gives authority to  “caregivers” that they can grow up to 12 plants for each registered patient, with a maximum limit of total 72 plants, but it only allows the sale of marijuana to caregiver’s registered patients.

  • The Medical Marihuana Facilities Licensing Act, or “MMFLA”

The MMFLA issues the licensing of medical marijuana businesses and permits that only dispensaries can sell products containing marijuana to registered patients, as well as out-of-state patients in particular circumstances.

  • The Michigan Regulation and Taxation of Marihuana Act, or “MRTMA.” 

The MRTMA authorizes the licensing of recreational marijuana businesses and the sale of marijuana to anyone 21 years and older. This law is also referred as  “adult use licencing law”. 

Steps to start a legal cannabis business in Michigan

Choose Your Domain

The foremost step is to make a decision regarding what exactly you want to do in the industry i.e. are you interested in starting a commercial cultivation facility or you want to open a cannabis dispensary?

Prepare a Business Plan

Before initiating your business, the crucial thing is to prepare a business plan along with a calculated budget and pro forma digits. No matter if you are self-financed and funding your business on your own and don’t depend on investors or need any sort of financing, it is still beneficial to develop your business model and formulate fundamental documentation.

Establish Business Foundation and Select Your Team

After having a strong business plan, the next move is to initiate your firm and select  an appropriate team which is best-fit as per your business strategy and goals. There exist many things to consider while deciding the right corporate structure for your business. It is of great importance because the choice between a C-Corporation, S-Corporation or Limited Liability Company (LLC) varies from case to case  due to the unique requirements and objectives of each business. 

Register Business in Michigan

In order to start a cannabis business in Michigan, it is important to register it legally with LARA, the Department of Licensing And Regulatory Affairs. You are required to complete an application for a cannabis licence in the business name. After getting done with the procedure and fulfilling the requirements of LARA,  you are allowed to initiate the application process for any of the below mentioned licenses with the state:

  • Cannabis retailers
  • Cannabis wholesalers
  • Cannabis processors
  • Cannabis producers
  • Medical cannabis dispensaries
  • Medical processors

In order to run a cannabis business, these licences are also necessary to be issued. 

  • State licenses
  • City land use approvals
  • Building permits

The annual renewal of business registration is mandatory every year as per the law and regulations of Michigan. 

Cannabis license at local level

The submission of documents for a legal process is not sufficient. To operate your business in a city, municipal approval is required. Municipal approval also calls for an independent application process. The requirements for each license varies according to its nature. So, it is good to get in contact with a professional who has a keen understanding of law and legal processes so you can get assistance in proceeding your application in the right direction.

Cannabis license at state level

The cannabis license at the state level is mandatory to get issued in time, because certain cities demand a proof of a state application prior to reviewing your request for city application. 

Determine your Tax Obligation

There are different types of taxes which can be involved in a Cannabis business in Michigan. It is crucial to invest time in researching tax obligations while organizing a business because Michigan also claims the payment of an excise tax to run a cannabis business likewise some other states. The amount of tax depends on the nature of business you operate. As an example, the ratio of tax applied on provisioning centers is different than cannabis growers. So, it is pivotal to determine the tax liability of your business.

Few Obstacles in the way to Cannabis business

It is difficult to get conventional loans in the cannabis industry, because the Federal Deposit Insurance Corporation (FDIC) does not support any bank that provides loans to such businesses that play any role in breaking federal law. In current settings, all entire state-compliant legal cannabis businesses are considered illegal. So, in the given spectrum, cannabis businesses experience overheads and hurdles. Although conventional loans are almost impossible to acquire by cannabis businesses, nevertheless they can avail funding sources. In this regard, some investors along with venture capitalists have launched cannabis-specific funding companies to fill the void created by banks in providing loans to newly established cannabis businesses that are struggling at an early stage. 

Final Thoughts

After reading the article, hopefully you may now understand the roadmap to be followed in order to start a legal cannabis business in Michigan. It is vital to get familiar with the above mentioned steps as these are bare minimum required to start a cannabis business. It is highly recommended to consult with a professional who can help you in saving your worthy resources such as time, energy, and money and making a room for your business in the growing cannabis industry. You should get prepared for the whole journey from the initiation of the legal process till fruitful results as operating marijuana business under laws and regulations is of invasive nature. Hardwork is the key to success, so do not be afraid of putting in your efforts as stepping in the Michigan cannabis industry might be a very good decision to flourish and enhance your business growth exponentially. 

Costanza Kelley

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