The following is a step-by-step guide to walk you through the basics of becoming a medical marijuana business in the state of Michigan. For further information on the details of this process, feel free to contact us at CannaLex Lawyers and Counselors.
1. Which part of the business do you want to contribute to?
- Provisioning Center
- Secured Transport
The Medical Marihuana Facilities Licensing Act (MMFLA) does not prohibit an applicant from trying for all or any of the first three. However, if you want to own and operate a secure transport business or a lab, you cannot have a license or be part of a licensed group for any of the other four.
2. Where do you want to operate?
You need to find a municipality (city, village or township) which will allow the type of operation you want. A municipality can pick and choose and even decide to not allow any. If you want to be a provisioning center in the city of Grand Rapids and it does not adopt an ordinance permitting any, you cannot operate legally there. This applies to all types of licenses and all municipalities throughout the State.
3. Who will be your business partners?
The State of Michigan will require squeaky clean businesses and people as licensees. Study the existing law to see if you, your co-owners, and/or your investors meet the known standards. Keep in mind the MMFLA requires disclosures from spouses of owners too. We believe the evaluation of license applicants will be even stricter than for alcohol licenses.
If you intend to be the only owner, you know your history; you can easily evaluate if you are excluded under the MMFLA. If you are part of a group, you better explore the backgrounds of all members. There’s no sense filing an application and then having it kicked back because one of your proposed co-owners (or spouses) has something in their background they forgot to tell the rest of you about. Starting over is time consuming and costly.
4. How is your financial strength?
Financial strength will be critical to evaluation of prospective licensees. State evaluators will be looking at income tax returns, bank accounts, and financial plans. You will not be able to run this on a shoestring. Start working on your financial planning so it conveys the best available data and appearance to state evaluators when you submit your application.
5. What regulations will you face?
Identify the municipal regulations that will face the business you intend to enter. Here are a few examples: If you want a provisioning center, what are the parking requirements for the municipal zone. If you want to be a grower, what will be the restrictions on security and wastewater disposal? Building codes may have a role if you are you going to build new or buy or rent used.
Follow the adoption by the State of Michigan of the rules and regulations they will establish. They may integrate with the regulations and ordinances adopted locally.
6. Be ready to pay your fees and taxes.
Make sure you factor into your financial plans all of the fees and taxes (even though we don’t know what all of them are yet). If you will be trafficking in marijuana, you had best learn about IRS Code §280E. Learn what is and is not deductible. If you are going to be a provisioning center, understand the 3% gross receipts tax plus the 6% State sales tax. Employees will have taxes withheld and social security payments.
7. Security will be critical.
Keep in mind this is still a cash business. The banks, credit unions, and other financial institutions, at least in Michigan, have generally refrained from assisting entities involved in the medical marijuana business. We hope that changes soon. If it doesn’t, it will remain largely a cash business. You will need to secure your cash, and pay all of your bills in cash, including taxes and government deposits.
Get started planning now. It is less than 360 days until Michigan begins accepting applications for licenses under the MMFLA. If you need our assistance, you know where to find us. Good luck.