Cannabis Business Law

What to Consider Before Starting a Cannabis Business

It had been a long battle among cannabis supporters before state laws became more accommodating to the legal use of cannabis. In recent years, more states have passed legislation that allows medical and recreational use of cannabis. The developments in the legal aspect have opened new opportunities for businesses.

Many businesses are hoping to capitalize on the green rush, taking inspiration from states that first opened their economy to legal cannabis. Colorado, for example, was the first state to legalize cannabis. It is now generating around $35 million from the industry, and that is expected to increase to $100 million in the next two years. California’s legal cannabis market is even stronger, with an estimated value of $8.5 billion.

These numbers are exciting news for businesses, but the road towards getting a piece of this growing industry is a tough one. The regulations are strict and obtaining licenses and permits is a long process. If you are planning to join the green rush, here are some things you must consider before starting a cannabis business:

Laws and Regulations Vary 

Cannabis use and sales remain illegal on the federal level, and it is up to the Justice Department to enforce federal cannabis laws. However, the government has allowed states to have their own rules when it comes to legalized cannabis. That said, regulations remain complex and varied from state to state. Some states only allow medical use of cannabis; some allow recreational use as well.

Before starting a cannabis business, you should research the laws and regulations in the state where you plan to establish your business. You should also check local city and county laws to ensure you meet necessary qualifications and understand what the requirements are to start a cannabis business in your area. Lastly, speak with a lawyer, preferably one who specializes in marijuana law. An experienced attorney will guide you on various legal matters and advocate on your behalf with local administrative agencies and local governments.


Find Your Niche

Many cannabis businesses are emerging, and competition can be tight. Find out your niche so you can make your business stand out against competitors. Is it going to be selling, manufacturing, growing, or providing ancillary business? What products or services will you be providing? Each business believes it can produce, process, or sell the best product. How are you going to stand out? Again, laws dictate what you can or can’t do depending on the niche you’ve chosen, so you need to know your way around.


Choose a Business Type


The most popular business structures are sole proprietorships, LLCs, and Corporations. It is important to understand the advantages and disadvantages before deciding what structure you will choose for your business. Sole proprietorships are less complicated and less expensive to operate; however, the owner has personal responsibilities for the business’ debts, obligations, and other liabilities.

You are also unable to grow the company and add additional owners/investors without undergoing an entity structure change. On the other hand, LLCs are responsible for the business’ debts and offer greater flexibility in regards to taxation. However, LLCs are more expensive to operate and are subject to state laws governing LLCs. Similarly, Corporations can provide additional tax benefits, familiarity, and structure that can be enticing to prospective investors, but don’t provide the flexibility of an LLC.

You need to consider questions of liability, taxation, control, and raising capital, among other things, before making your decision. A marijuana business attorney will be able to help you weigh the pros and cons and determine which business structure is right for you. Once you decide if you will be a sole proprietorship, LLC, or Corporation, your attorney will help you file for a business license. The process of filing for a business application depends on the type you choose.



The cannabis industry is a promising market if you intend on joining. However, the laws and regulations are complicated, so it is essential to get acquainted with the legal requirements before you start a cannabis business. If you’re looking for a marijuana business lawyer, get in touch with Halverson Law, PLLC today for a free consultation.