Financial Innovation: Creative Ways To Improve Your Cannabis Business From Experts In The Know

The Benzinga Cannabis Capital Conference recently hosted a panel discussion on financial innovation in the cannabis industry, featuring industry experts who shared valuable insights on how to enhance and sustain cannabis businesses.

The panel, moderated by Katie Catanese partner at Foley & Lardner, comprised of panelists Michael Brewer, director at Strategic Tax Planning, Liesl Bernard, founder & CEO of CannabizTeam, Tiffany Richardson, partner (National Cannabis Industry Lead) at Crowe LLP, Robert Hoban, chair, Cannabis Industry Group at Clark Hill.

See Also: Can Cannabis Be More Green? Hear From This CEO On The Best Ways For Cannabis Companies To Create Sustainable Businesses

Structuring a Cannabis Business for Success

One crucial aspect discussed was the importance of structuring a cannabis business correctly from the outset.

"(...) It's really about creating the right structure of leadership, the right structure for your business, from a tax perspective, and that's across operational risk management, and financial compliance," said Michael Brewer.

• Moreover, Brewer emphasized that while the cannabis industry shares some similarities with other retail sectors, it also possesses unique complexities that demand careful consideration.
• Choosing the right business structure, such as an LLC, C corp, or partnership carries significant tax implications and considerations, necessitating professional guidance.
• Brewer underscored the importance of engaging with the right vendors and consultants to ensure compliance and efficiency, particularly concerning operational aspects like compliance officers, security measures, inventory management, and standard operating procedures (SOPs).

He also touched on the challenging issue of 280E, a tax regulation that limits expense deductions for cannabis businesses due to federal restrictions. Although changes might be on the horizon, Brewer stressed the importance of managing costs effectively.

"Things are about to change in the next two to three years across the country," he added.

Tax Planning and Navigating Challenges

Tiffany Richardson, an expert in auditing and tax implications, highlighted the need for strategic tax planning in anticipation of potential regulatory changes.

She urged businesses to explore various tax methods legally to minimize tax liabilities.

Preparing for financial statement audits well in advance and maintaining accurate records emerged as pivotal steps essential for IRS examinations.

See Also: Tax Considerations For Investors In Financially Distressed Cannabis Companies

Running a Cannabis Business Efficiently

Liesl Bernard delved into the critical role of human capital management in the cannabis sector. She introduced the concept of "hybrid staffing" as a cost-effective hiring strategy, involving temporary positions and fractional executives for specialized roles.

• Employee retention, a significant challenge in the cannabis industry, was addressed by emphasizing the importance of a positive workplace culture, which is vital in an environment facing tighter budgets and increased compliance hurdles.

Robert Hoban stressed the significance of communication, technology and adaptability in the ever-changing cannabis industry. Monitoring established markers to track success can be achieved cost-effectively through reports, facilitating informed decisions for all stakeholders.

Planning For A Bright Future

As the discussion concluded, the experts provided key takeaways for cannabis businesses. Michael Brewer emphasized the need to stay diligent and continuously evaluate the success of various aspects of the business. Richardson echoed this sentiment, emphasizing the importance of governance, record-keeping, and preparedness for increased scrutiny.

Hoban offered a hopeful outlook for the industry. "There's a lot of opportunity." He encouraged businesses to explore lending, investment and buying opportunities while being prepared for an upswing in the industry's growth.

Their advice may serve as a guide for cannabis businesses navigating this dynamic and evolving landscape. Want to know more? Tune in to the Benzinga Cannabis Capital Conference in Chicago. For existing subscribers, you can get direct access through our research platform. For new users, you can get instant access here! 

Image by Benzinga