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When it comes to parenting, one saying puts it all into perspective, “It takes a village to raise a child.” In much the same way, it takes many different professionals to help cannabis business owners succeed. Achieving this goal isn’t something that you can do alone or even with just one trusted “right-hand man.”
Considering this industry is fiercely competitive and expected to become even more so, it takes the experience, knowledge, and dedication of many professionals to succeed as the owner of a cannabis business.
For starters, the services of an attorney are vital to your cannabis business. This professional plays a key role in keeping your company aligned with current laws and regulations, which is essential since these can vary based on location and type of operation.
As the marijuana industry continues to grow and legalization expands, it’s likely that laws will change. So, you want a highly qualified attorney who can handle all the legalities of the business while you focus on increasing sales.
As with all outside help that you’ll need, you want to hire an attorney with years of corporate law experience. Beyond that, make sure the lawyer understands the cannabis market and its unique challenges.
As a cannabis business owner, you’ll also need to work closely with an insurance agency. Whether you grow pot or operate a dispensary, you need adequate protection. As with other organizations, licensed marijuana retailers, producers, dispensaries, and ancillaries can secure business insurance.
For instance, owners of hydroponic shops typically have a policy against damages and claims. Most cannabis business owners have commercial property insurance, as well. That covers the physical structure for things like vandalism, theft, and fire.
Unfortunately, some people in the marijuana industry struggle to get insurance simply because it’s tightly regulated, fast-paced, and unpredictable. However, coverage is available. If necessary, your attorney can help with this.
These are both excellent examples of the help that you’ll need to achieve success and remain competitive. However, there’s yet another expert that plays a critical role – an accountant.
A licensed accountant plays a big part in keeping your business in order. Although some owners try to handle the books themselves, this seldom works. Whether you already have a cannabis business up and running or you’re thinking about starting one, it’s worth having a licensed CPA on your side. This professional handles finances for marijuana, concentrates, and other products sold.
One of the best things you can do to grow your company is to understand the five most common accounting problems that cannabis business owners face. By hiring an excellent accountant, you won’t have to deal with any of these. At the same, having even basic knowledge can help you quickly identify an issue, including an accountant who’s not doing what you hired them to do on your behalf.
The good news is that legal cannabis owners now get a lot of support from local and state governments. However, this is where things get a little confusing and complicated. While you can grow and sell pot in places where it’s legalized, the federal government still considers these actions illegal.
One of the most important tasks of an accountant is to decode the IRC 280E tax code. Specifically, this forbids cannabis businesses from taking expense deductions for trafficking Schedule I and II controlled substances. In other words, you can’t take a tax write-off for most of the things you paid for to open and operate your business.
That means as a cannabis business owner, you’ll likely pay substantially more in taxes compared to companies not associated with the marijuana industry. If you grow or farm weed, you can deduct some of your expenses. However, if you operate a dispensary, you’re out of luck.
Your accountant must maintain accurate records of what you spend on goods. This expert also needs to identify what expenses, if any, you can deduct. Although accountants perform multiple services, this is, without question, one of the most critical.
As the owner of a cannabis business, you can’t just hire any accounting firm. Sure, many throughout the country do an amazing job for their clients. However, your industry is unique. For that reason, you need to select a licensed accountant who specializes in the marijuana industry.
Only then will you feel 100 percent confident that your accountant has the required knowledge of current laws, regulations, and taxes. An expert with years of experience in both accounting and cannabis will ensure that your finances are in order and that the company remains compliant at all times.
California was the first state to legalize marijuana in 2003 but only for medicinal purposes. Today, people can legally grow, sell, and buy pot for recreation. This particular industry is thriving. Even so, one accounting mistake could prove disastrous. So, the individual or firm you go with must meet two criteria: possess excellent accounting skills and have in-depth knowledge of the cannabis industry.
Considering marijuana is legal and a booming industry, this might sound like an odd problem. However, many owners have a hard time opening an account for their cannabis businesses. Here’s why. From a local and state government’s perspective, growing, selling, and buying pot is legal. However, the federal ban on cannabis is yet to be lifted. For that reason, many financial institutions remain reluctant to provide their services.
This is why so many cannabis business owners keep their money in a safe, whether at their dispensaries or in their homes. As a result, they usually have a lot of cash on hand. As you can imagine, that increases the risk of getting robbed or experiencing a business or home invasion.
Fortunately, by working with a reputable firm, your CPA can open a bank account for you. However, this entails a lot of expertise and paperwork. Along with getting an account set up, your accountant can advise you on ways to handle large sums of money.
Another common problem that owners of cannabis businesses face has to do with IRA audits. Again, while this industry is legal in most places throughout North America, audits occur relatively often since growing, buying, and selling weed is illegal in the eyes of the federal government. That alone causes stress. Making it worse, you’ll never know when it’s your turn.
You want to eliminate any fear or anxiety of an IRS audit, so you can focus on growing your cannabis business. That’s where the right accountant can help. Keeping your company compliant and ensuring that you follow all the laws and regulations, you shouldn’t have any problem breezing through an audit. Having a reputable accountant working for you is the best way to avoid the IRS shutting down your operations.
Even if you only have one or two employees currently, with demand skyrocketing, you can anticipate your cannabis business growing quickly. At that point, payroll becomes an even more important task. However, as a cash-only business, this is another area that gets tricky.
An accountant will keep all your financial records current and accurate. They’ll oversee this aspect of the business to ensure that everyone’s paid correctly and that records are on the up and up.
Here’s an important fact: Compared to other types of businesses, those in the marijuana industry have unique and specific accounting needs. This is why as a cannabis business owner, you want to hire someone who’s licensed, experienced, and knowledgeable of the marijuana industry.
Whether you grow or sell weed for medicinal reasons, recreational purposes, or both, accounting is one aspect of the business you can’t compromise on. Demand for products in this particular market continues to skyrocket. A qualified accountant can help overcome obstacles so that your business can grow.
Hiring a niche accountant is highly advantageous. This professional will become your go-to source for a host of things. Along with tremendous insight, you want a CPA who has solid partnerships with various software and app developers. As a result, you can expect to get better service.
A reputable and trusted accountant ensures that your cannabis business has adequate control over inventory and cash. With a combination of an outstanding recordkeeping system and proven accounting controls, a CPA can help you start a business and then provide guidance as it begins to grow.
It all comes down to choosing a competent accounting expert. The individual you select should know everything the government requires. That includes the proper way to maintain financial records, the length of time to retain records, and both current and future laws and regulations.
Simply put, the expert you put in charge of the business finances should follow every government guideline to a tee. When researching and interviewing potential accountants for your cannabis business, you want to ask the right questions and, more importantly, get the right answers. Here are a few specific things to expect.
Accountants working for clients in the marijuana industry understand the critical nature of recording and maintaining accurate records. This responsibility is a priority. After all, these records help determine if a business is growing or becoming stagnant.
If your cannabis business faces the latter problem, you and other members of your professional team can use the data to determine required changes to the operations.
The accountant is also responsible for preparing financial statements. Included are profit and loss statements and balance sheets. Especially when dealing with your company’s bank or even creditors, you need up-to-date and accurate statements and having receipts as a backup.
Using cutting-edge software, this expert can enter specific information about expenses. Then, they can scan or screenshot all applicable receipts and store everything in one secure location.
A qualified accountant will prepare your tax returns. With properly maintained financial records, they shouldn’t have any trouble with this. The accountant for your cannabis business will meet government deadlines and provide any requested information or documentation.
If you own a retail shop or dispensary, you probably won’t have many things to deduct. That’s one downfall to this cash-only business. Now, if you have a farm where you grow marijuana, you’ll likely have some deductible items. This is where a good accountant can help to identify any possible deductions.
A large chunk of an accountant’s responsibilities is to organize and keep track of all business transactions. That entails listing specific information and having documentation or receipts as backup.
For peace of mind, hire an accountant who’s proficient in a top-of-the-line computer program. An excellent system should include several items, including those listed below.
Another benefit of hiring an accountant who uses software is the ease of storing information. Since the government has specific retention periods for different types of business documents, this eliminates any risk of something getting deleted prematurely.
Especially for the marijuana industry, doing things right goes a long way to achieving success. That means hiring a licensed accountant who understands the cannabis market and everything it entails. As mentioned, a qualified accounting expert will help you through rough patches and quickly identify anything that might cause an issue.
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