Now that you have gone through the process to legally start up a cannabis business in Michigan, you need to execute on your business plan. If you are properly funded and have a rock-star team of employees, consultants and / or partners, you are set up for success. However, as many business owners can attest (including myself), running a business is not as easy or as sexy as it looks. For plant touching companies, maintaining compliance with the ever-changing regulations and guidance applicable to the Michigan cannabis industry is tough.
The answers to these questions will decide what type of company you want to form, how it will be managed, and what tax selections you will want to make. It is important that you put sufficient time and energy into this step since incorrectly structuring your company can lead to headaches, lost profits, and potential litigation down the road.
You will certainly face obstacles, some of which are outlined below, and you almost definitely won’t be an overnight success. I sometimes joke that it took my three years in the industry to be an “overnight success.” But with the right funding, team and lots of hard work, you can have a successful, and legal, cannabis business here in Michigan.
Step 7: Execute!
Many municipalities “cap” the number of licenses they allow for specific facility types, and there may be a limited window to apply for these limited number of municipal licenses. Most municipalities will cap the number of dispensary (also referred to “provisioning center” and “retailer”) licenses they allow, though some also cap the number of growers, processers, and other license types. Thus, even if you find a property in a municipality that allows cannabis and is properly zoned, you also need to make sure the municipality is actually accepting applications for your license type.
Nonetheless, until the cannabis becomes legalized or Congress passes of the Safe Banking Act, banking in the cannabis space will be limited, and expensive. Michigan cannabis banks and credit unions will generally charge a hefty due diligence fee, thousands of dollars in monthly maintenance fees, and sometimes an additional fee based off the percentage of total deposits. It is therefore a good idea to shop around and find the bank or credit union that is best for your situation. If you have a high volume business, you may be better off with a bank that charges a higher monthly maintenance fee but no deposit fees, or vice versa.
Step 3: Form Your Business and Choose Your Team
Private lending is also available to cannabis businesses, just be prepared for incredibly high interest rates. Even real estate backed loans, which is the most common type of lending in Michigan’s cannabis industry, can easily have interest rates between 10-15%. Equipment loans for start-ups are particularly hard to come by, as are operating loans. Hopefully this will change, and loan programs like the SBA will start allowing loans to cannabis businesses, but until that time, obtaining financing for your business is no easy task.
At Scott Roberts Law, we’ve submitted well over a hundred prequalifications, and can help you identify and overcome potential licensing issues. With respect to multi-partner groups, sometimes this means leaving someone off of the license due to issues in their background, and instead having them control or finance the real estate or equipment. In other situations, it may simply mean getting ahead of certain issues and providing your side of the story in the form of a cover letter to your application. While each situation is different, we recommend you talk to a Michigan cannabis licensing attorney before submitting your MMFLA or MRTMA prequalification.
Odor Control Resources:
Bangor, HRC, (pop. 1,885); MMFLA opt-in ordinance
Marijuana Localism, Robert A. Mikos, 65 Case Western Reserve Law Review 719 (2015)
Episode 9 – Marijuana Legalization in Colorado
Medical Marihuana Facilities Licensing Act (MMFLA), 2016
Eaton Rapids, HRC (pop. 5,214); not authorizing MMFLA facilities
· 1,758 physicians provided written certification for qualifying medical marihuana patients
Omer, HRC 4th Class, (pop. 313); Resolution—intent to opt-in to MMFLA
Michigan Medical Marihuana Act (MMMA), 2008
Adrian, HRC (pop. 21,133); MMFLA opt-in ordinance
Marijuana Regulatory Agency: Municipal Guide (MRA paper based on questions it received from municipalities. It includes Q&A for the MMMA, MMFLA & MRTMA) 10/21/20