The cannabis marketplace is steadily growing with opportunities for serious income streams that need to be navigated. Keep your business going strong by adding a knowledgeable accountant to your team.
Accountants from MI Tax CPA, in Michigan, stand ready to supply your business with our highly competent cannabis tax and accounting CPA services.
The Cannabis Business
Your cannabis business needs a solid foundation of professionals and advisors to support your endeavors, but not all CPAs (certified public accountants) function the same. In general, CPAs must take accounting courses, pass an examination, and be licensed. They comprehensively review financial statements and prepare adjustments for businesses.
However, the cannabis business is barred by different laws and regulations than any other business. Your cannabis business requires a CPA who has experience with cannabis bookkeeping (review of business transactions), cannabis tax strategies, and a firm understanding of Internal Revenue Code Section 280E.
Section 280E prohibits cannabis businesses from taking deductions for expenses related to the buying and selling of Schedule I and Schedule II controlled substances. Although medicinal and recreational marijuana are legal in the state of Michigan, marijuana is still classified as a Schedule I substance, meaning that selling it falls under the category of drug trafficking. Regarding helping your business navigate 280E, your CPA needs to be an expert in:
- Cost accounting (finding the company’s total cost of production by assessing the variable and fixed costs)
- Accrual accounting (revenue and expenses are recorded when a transaction occurs)
- Generally accepted accounting principles, or GAAP (a set of guidelines for business and corporate accounting).
- Absorption accounting (direct and indirect costs are all accounted for)
The Right Accountant for You
Your accountant needs to be an expert with a wealth of experience specifically in cannabis taxation laws and regulations.
The selling of cannabis and its related products is a constantly evolving marketplace with different federal and state rulings on its legality. Commonly, transactions are cash-based or deal with cryptocurrencies. With this hindrance in mind, you need to work with a CPA who is up to date with current affairs and ensures that you are following the best current industry practices.
Your accountant saves you time.
Filing tax forms for a cannabis business is a complex and downright confusing process. Outsourcing your accounting also releases your team members who may have previously been assisting to complete their job duties without interruption. Allow a professional to manage your finances, freeing up your time to run your business!
Competent CPAs are efficient when it comes to making accurate deductions and tracking revenue, using high-tech and consistently upgraded software. Their knowledge of accounting technology will lead to greater productivity than what you can accomplish on your own.
Another marker of a good CPA is responsiveness and communicativeness. No one wants to be waiting around for a callback and subsequently miss a tax season deadline. Only work with CPAs who make you and your business a priority.
Your accountant saves you money.
Trying to save money as a cannabis business is tricky due to the limitations imposed by Section 280E. You need a CPA who knows the ins and outs of the tax code and can help you find fully legal avenues to keep your business cost-effective.
Your accountant is ethical.
While it may be tempting to take shortcuts by creating misleading statements on tax returns or fudging documents, a CPA will hold you accountable and steer you away from such decisions. The cannabis business as a whole and its reputation as such are still growing, necessitating its protection from any unethical and damaging practices. Keep it by the books and adhere to the regulations.
Your accountant keeps your data secure.
Cannabis accountants use secure technology to process your data and protect you from cyber-attacks. A splashy article about the stolen financial and personal data of your clients is the death keel for any business. Protect your clients’ information by trusting it to your CPA instead of your business’ potentially vulnerable server.
Your accountant is part of a capable professional network.
The sign of a good CPA is when they put you and your business first by referring you to another professional when necessary. An accountant can help with budgeting and making sure your business is compliant with the required tax and financial reports, but they should not prepare legal documents, underwrite insurance policies, or act as your broker. Instead, you should be referred to a professional from your CPA’s network—someone they know is trustworthy and proficient.
Your accountant understands legal entities (companies or organizations that have legal rights and responsibilities, such as tax filings).
Each legal entity must have its operations reported to the IRS. Think of each legal entity as its own independent business, even if it falls under an umbrella business group. Although your business could own several entities such as farms, extracts/edibles, and dispensaries, each entity needs to have its own bookkeeping and record keeping.
Your accountant should not create legal entities. Merging or separating corporations is a function of state law and must have the proper documentation. Only once the legal entities are recognized under the state law may the accountant then record the transaction.
If the wrong entity is selected, it could lead to your business having a doubly expensive tax bill. Get it done right the first time by speaking with a CPA to clarify the specifics of your business and how they can best serve you.
Contact MI Tax CPA Today
Reduce the risk of audits costing you steep penalties, years of litigation, and potentially your business being shut down by reaching out for professional help. No matter if you are a large conglomerate or an up-and-comer, having a knowledgeable and qualified accountant on your team is critical to the success of your cannabis business.
MI Tax CPA in Michigan is offering our potential clients a free consultation regarding our available tax and accounting CPA services. Call today!