Joining The Cannabis Industry: Things You Need To Know

By Liya Cox.

As the cannabis industry continues its progress in the U.S. and abroad, there are several entrepreneurs showing interest in getting involved in this line of business. Several existing businesses are also looking to expand their horizons and get into the cannabis business. There are certain risks you need to take into account though. Although several states have legalized the use of cannabis for medicinal and adult-use it is still federally illegal. Due to this, you need to be vigilant about the federal law regarding cannabis. Here are some key aspects you need to consider before getting into this business.

1. There may be banking problems

As dealing in cannabis happens to be a federal crime, the majority of the banks are unlikely to give you an account. They might even close your existing accounts and there may be difficulty in getting cannabis financing. Although technically they can provide their services, the requirements for a bank to deal with a company involved in illegal activity can be cost-prohibitive. Even the companies that do not touch the plant can be a risk. Many such companies lose their account because they are doing business with weed makers. Therefore, ensure that you are clear about your business plans with your bank or consider switching to a cannabis-friendly bank.

2. Several business expenses are not deductible

When a Minneapolis drug dealer in 1981 sued the IRS successfully for deducting his scales, car, and baggies as business expenses during the filing of tax returns, Congress passed legislation that banned the companies dealing in illegal drugs from deducting anything apart from the costs of the sold goods. Due to this, companies dealing in cannabis can be taxed at 70% or more. If you are a plant-touching company the key lies in allocating most of the expenses to the costs of sold goods rather than showing them as overheads in the business. When you are a non-plant touching business you must be aware of the partners and customers who do.

3. Do not cross the state lines

Interstate commerce in the U.S. is controlled by the U.S. federal government therefore, transporting cannabis across the borders is illegal even when transporting between two permitting states. Even transporting funds across the border intended to be used for further activities is illegal. Although DEA is not setting up checkpoints, this can develop issues for several businesses. All states have their micro industries and you have to separate the business operations according to the state and legal ramifications involved. All states will have different laws, regulations, and enforcement procedures. The sheer complexity of all this will be forbidden for the operations in several states.

4. It is impossible to advertise on larger platforms

If you mention pot, cannabis, or weed in your promotions it is not possible to advertise on Google, Facebook, and several other platforms. However, most of them will allow you to post content that can promote cannabis products and services. Paid advertising is off limits though. Although the cannabis market is a prospering market, the companies doing this business cannot risk getting involved in legal trouble due to advertising regulations.

5. A risk with the trademark and intellectual property

There is another implication involved in cannabis being federally illegal in America and that is the USPTO will reject the application for registering the cannabis-related products and services. It is possible to register a trademark at the state level but it can become pretty complicated. Most organizations tend to avoid these problems with the submission of applications that are not specific about cannabis and make a general claim of use outside cannabis. This will have to be addressed if cannabis becomes federally legal.

Conclusion

Although there are domain-specific complications involved in all industries that have to be faced by the entrepreneurs, the ones in the cannabis industry are more complex and involve severe risks. You must be in touch with a cannabis consultant and a lawyer about how the business can get affected and how you may operate legally. Despite a lot of challenges, you can also find many opportunities in this line of business for those who can get various details right, manage the risks, and navigate through a changing landscape.

Benzinga's Related Links:

• Cannabis Industry Set For More Consolidations In 2021
• How Covid-19 Is Affecting The Cannabis Industry | Benzinga
• How to Invest in Cannabis Stocks Right Now • Benzinga

• Más contenido sobre cannabis en Español en El Planteo.

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