So you’re planning on a marijuana start-up business in the USA? You’ve made the right choice as the cannabis industry is one of the most productive and rewarding industries at the moment. It’s no wonder that when you search for how to start a marijuana business, you’ll get so many great responses.
We are here to help you start a simple, home-based marijuana business. This guide will help you tackle the most important issues that cannabis entrepreneurs experience and how to keep with the times, what cannabis products you can sell, and other frequently asked questions you may have about starting a weed business. Remember, knowledge is the key to success and successful cannabis business.
An Overview of the Cannabis Industry in the United States
In the US, the cannabis business is very new and legal in most key parts of the country. From consumers completely relying on the black market to buying from a legal cannabis dispensary down the block, this is how this precious industry has grown in just a few decades.
It took a lot of help and support from different sectors before cannabis was finally legalized in most parts of the US. The industry has also attracted a variety of entrepreneurs and businesses from growers to retailers and from technical experts to home-based edible makers. The cannabis industry has already grown rapidly, but many still predict that it will continue its awesome expansion.
And because of these positive views, it’s no wonder many are thinking of starting their own marijuana business.
33 states and Washington DC are okay with medical marijuana. Meanwhile, 10 states plus Washington DC have legalized recreational or adult-use marijuana. 15 states have decriminalized marijuana, and thus, possession of cannabis to certain amounts is a civil charge and not a criminal charge.
The legalization of medical marijuana was initiated by California’s Proposition 215 in 1996, which culminated in Chicago and Washington’s open policy on recreational cannabis in 2012. Afterward, more states followed. According to recent data, the cannabis industry in the US is expected to experience more growth. In 2018, the marijuana industry was valued at $10.4 billion, with predicted values at $26.3 billion in 2025.
When it comes to jobs, the marijuana industry has created around 300,000 employment opportunities. This number did not include those jobs created by businesses like professional advisors and marketing companies.
Which Cannabis Business Would You Like to Start?
When you say you want to start a marijuana business in the US, you may need to be more specific as this industry is so vast that almost every phase of marijuana growing and manufacturing may be attributed to a particular kind of business.
When cultivating cannabis, you need seeds. Marijuana seeds are grown by growers who cultivate weed plants for seeds. If you need marijuana plant nutrients, another business can provide that for you. If you need pots, grow lights, digital thermometers and hygrometers, and other growing equipment, other companies manufacture and sell these products as well.
Still, other businesses are indirectly involved with growing cannabis. This includes online technical support for cannabis dispensaries, logistical support, software programmers to create dispensary software or online payment platforms.
Also, better and more thriving businesses create cannabis by-products as not all consumers tolerate smoking weed. Some business owners focus on making cannabis edibles, oils, concentrates, vape oils, supplements, teas, and other unique products.
As the cannabis industry continues to evolve, more and more business opportunities start to open for entrepreneurs. So take the time to consider exactly what you want. You might be interested in growing cannabis, or you would rather make edibles out of weed, or both!
You might get into growing medical cannabis and eventually manufacture medicinal oils or concentrates. You may also consider recreational cannabis growing and eventually start your brand of THC vape oils, or THC concentrates.
About Cannabis Regulations in the Country
Sad to say that under US federal law, cannabis is still a Schedule I drug, and thus, it is federally prohibited. Cannabis use, growing, retail, and possession regulations still rely on different states. It’s also a matter of how the cannabis market behaves in a state; consider that rules evolving cannabis growing and retail in Arkansas do not reflect the markets in New York.
This is why it’s important to get to know better marijuana regulations in your particular state before you plan your business. If you’re unsure about regulations in your state, check updated information online.
Because cannabis is federally illegal, marijuana businesses have different taxation considerations than other industries. The IRS Section 280E specifically states that cannabis companies are not allowed to deduct their regular business expenses from tax bills.
Under Section 280E, any kind of expenses that are related to “trafficking of controlled substances” are not permitted credits or deductions. Because marijuana is still a controlled substance, legal marijuana companies are subjected to this IRS ruling.
Cannabis businesses have higher taxes compared to selling federally-legal products. Also, cannabis companies should settle taxes depending on their gross earnings. The effective rate is 55% for cannabis-related businesses. Traditional companies or businesses that are not related to cannabis only have a 30% effective rate.
Aside from following the federal tax code, marijuana companies should follow state tax plans. In some states like Washington, excise taxes are charged together with normal taxes. Familiarize yourself with state and federal policies regarding tax beforehand.
About Licenses and Permits
If you want to start a marijuana business that touches the plant, getting a license and permit is very important. The process of applying for a business permit and license varies from state to state. Just like applying for any type of business, you need to specifically describe your business, how it operates, and about your policies and procedures.
If you were to start a cannabis edible business, you must state in your application your location, how your products are manufactured, how your products get to your customers, and so on. The cost of a business license varies depending on what type your business is and how large or complex it is. Businesses like dispensaries and growers must prepare at least $150,000 up to $200,000. Meanwhile, large-scale cannabis-related companies may need $500,000 up to $750,000.
About Banking and Business Financing
Because of the federal prohibition on cannabis, many banks are not so welcoming of cannabis-related businesses. This is because partnering with marijuana-related businesses can be a risk to financial institutions. Consider that cannabis businesses may be faced with a federal crackdown, and assets may be seized.
This is why most cannabis-related businesses, like growing companies and dispensaries, accept only cash. In some dispensaries, an onside ATM is available, so customers may withdraw cash and use this to pay for their purchases. Also, it has become very difficult to track cash and tax payments and for completing payroll for their employees.
Also, cannabis companies are unable to start a line of credit, which limits early growth financing. Company owners often result in bootstrapping, borrowing from family and friends, and raising money just to finally start their businesses
Training and Skills
It would be best to receive professional training for the cannabis-related venture you wish to indulge in. If you plan to start your own growing business, you may enroll in formal marijuana growing classes, use growing bibles, read the latest research on plant growth, and many more. Most of the time, we think that we know everything about things only to find out there are better, more efficient, and cost-efficient ways.
For cannabis edibles making, join baking or cooking classes, check out new equipment, try out new flavors or check out the latest polls and reviews from consumers. If you want to market a new cannabis dispensary software, consider updated software designs and features, get to know what customers want, and find out how to market products and services better.
It won’t take you long to learn something new about the venture you want to start. Because almost all learning can be done online, you will be fully prepared for your business or startup in no time.
Just a quick roundup of how to start a marijuana business in the USA
- Check local laws about cannabis regulation.
- Consider carefully the type of cannabis business you intend to venture.
- Get training for the type of cannabis business you want to venture.
- Check local rules and regulations about licensing and getting business permits.
- Consider your finances
The Most Frequently Asked Questions About Starting a Cannabis Business
Ancillary or Plant-touching Business, What’s the Difference?
Ancillary business is any cannabis-related business that does not touch the plant. This could be accounting and bookkeeping for a cannabis company, creating websites, or managing social media pages for a cannabis business or designing marijuana business logos and product labels.
Meanwhile, the cannabis plant-touching business is any marijuana-related business that touches the plant or parts of the plant. This could be growing, caring, or cultivating the cannabis plant, harvesting the cannabis plant or buds, manicuring the buds, drying weed, and packing them. Also related are businesses that use marijuana as an ingredient like making concentrates, edibles, oils, topical products, sprays, supplements, and teas, to name a few.
Can I Sell My Homegrown Weed Without a License?
No, you cannot sell your homegrown weed if you are not licensed to do so. It is prohibited to grow for other people, much less sell what you have grown. In the case of growing weed for a patient or a person who needs medical marijuana, you must get permission to grow on behalf of the person.
How Much to Start a Dispensary? How About a Grow House?
It is difficult to put an exact price of opening a dispensary or a growing operation, but you need to spend a small fortune if you want to compete with other similar businesses. What to consider in a dispensary:
- The location of the shop
You can save money if you open shop in your home or you own the property where the shop will be constructed. Generally, it costs more to rent a commercial space than to use a spare area in your home.
- The cost of constructing a shop from scratch
You could save money if you were to use a space in your home rather than constructing one from scratch. It’s also cheaper to use a commercial space rather than erecting a shop from the ground up.
- The cost of licensing and permits
- The cost of the shop interior designing
- The cost of shelving, storage areas, shop equipment, lighting, security systems, A/C, humidifiers, etc.
- The cost of marketing and advertising
- The cost of hiring and maintaining staff
- The cost of overall shop maintenance
- The cost of procuring different cannabis products
If you want to start a growing operation at home or in another location, consider the following
- The cost of the location
As with starting a dispensary, you can save money by using land that you own.
- The cost of land development
Assuming you want to erect a large greenhouse where you can cultivate your plants safely and more efficiently, you need to consider the cost of renovating the area, constructing proper drainage, water supply, and fencing.
- The cost of the actual greenhouse or growing space
- The cost of equipment for growing
This includes racks or shelves for your plants, pots, soil, lighting, humidifiers, fans, and water delivery systems.
- The cost of plant growing and maintenance
Cannabis seeds, fertilizer or nutrients, water, pest control, mold control, gardening equipment, harvesting and pruning tools, etc.
- The cost of licensing and permits
- The cost of hiring and maintaining staff
Do I Need to Get a License for an Online Cannabis Dispensary?
Yes, you must have a license to start an online cannabis dispensary. If you want to start, apply for a license from a local marijuana business office or licensing office. Now that you have an idea as to how to start a marijuana business in the USA, you can plan for this venture ASAP. Take your time and study your competitors. Take cues from customers so you’ll know exactly what to offer.