The cannabis industry has proven to be prosperous for Michigan since the adult-use first (recreational) shops opened up in 2019. But just as quickly as profits grow, the industry gets more complex for Michigan-based cannabis businesses.
Here we’ll explore some of the opportunities for cannabis-related businesses and some of their challenges.
Michigan cannabis sales projected to grow 4x by 2025
Monthly sales of adult-use (recreational) marijuana have absolutely exploded in Michigan – with sales on track to exceed $1.2 billion in 2021. More than double adult-use (recreational) sales in 2020.
Some analysts project that adult-use sales will quadruple by the year 2025. From $500 million to $2 billion or more by the end of 2025.
Consider that the amount of marijuana sold in March of 2020 weighed in for a total of 3,690 pounds — in July 2021 sales gained a little over 20,000 pounds. For a total of 24,839 pounds sold.
With numbers like these it’s no wonder why more than 350 businesses have acquired licenses to sell adult-use (recreational) marijuana in Michigan.
However, many retailers, growers, processors and other cannabis businesses competing in the same state present some challenges. Not the least of which is a saturated and highly competitive market.
A special time for the Michigan cannabis industry
Indeed, Michigan is a great place to open a cannabis related business.
With so much growth, it seems like there’s no stopping the cannabis industry’s momentum in the state.
But this won’t last forever. This is a special time.
Michigan benefits from the fact that many states have still not legalized adult-use (recreational) marijuana yet.
This gives the state a solid start at becoming a national stronghold in the industry should cannabis become legalized at the federal level.
And with the first adult-use (recreational) shops opening in 2019, it’s still new… There’s still time to get in.
This is an age of pioneers. It’s exciting, prosperous, and dangerous.
But business owners have to get into the fray now if they want to stake their claim for Michigan’s future in the cannabis industry.
Crafting the right operating agreement
For Provision Centers that are just starting out, it could be tempting to cut corners.
One of the crucial steps that can make or break a successful company is an operating agreement.
A well-written operating agreement is the foundation of any successful business, and it’s no different for Michigan cannabis businesses.
The agreement outlines the rights and responsibilities of each partner, including how they will share profits, manage risks, and make decisions about the business. It also helps protect stakeholder’s investment by providing a clear understanding of what one partner can do without approval from others.
An operating agreement can be complicated and cumbersome to draft. And templates for cannabis agreements are not difficult to find online.
These templates are tempting to business owners. Because they are often free of charge and include pre-populated content that can save hours of time drafting an operating agreement from scratch.
But whether or not it’s wise to trust legal documents intended to protect one’s business and livelihood to a template they found on the internet… is a question left up to the individual.
In a market that’s as new and changing as the Michigan cannabis industry — it is strongly advised to seek out the expert counsel of a lawyer and CPA that specialize in the cannabis industry.
MI Tax CPA can ensure that new businesses implement the right structure and in compliance with all of Michigan’s tax requirements for cannabis businesses.
Differences between Medical Marijuana and Cannabis businesses
With the legalization of adult-use (recreational) marijuana in Michigan, it’s important to understand the differences between medical and adult-use (recreational) cannabis. Especially in terms of business.
Medical cannabis may be prescribed by a doctor for pain relief, seizures, nausea, loss of appetite and other conditions.
The medical cannabis industry is regulated by the Michigan Department of Licensing and Regulatory Affairs (LARA) who oversees licensing requirements that are specific to this type of medication.
Marijuana dispensaries are not allowed to sell both types of marijuana in one location. There must be separate retail space allocated for each type of marijuana.
Adult-use (recreational) marijuana on the other hand is used for adult-use (recreational) purposes. It is consumed primarily by smoking it but also can be taken in edible form which has less risk of health harms.
In July 2020 adult-use (recreational) sales surpassed medical marijuana sales in Michigan for the first time. And it keeps on rising.
As of July 2021, adult-use (recreational) marijuana accounted for 75% of Michigan’s total cannabis sales.
A Michigan CPA that specializes in cannabis like MI Tax CPA will possess the knowledge of Michigan cannabis laws and make sure that businesses know how to stay compliant with any new changes to the law that affect either medical or adult-use (recreational) cannabis businesses.
Rapid growth could mean rapid changes in regulation
The speed at which Michigan’s cannabis industry is growing could force lawmaker’s hands to act fast on new regulations.
During such an early era of adult-use (recreational) cannabis legalization in Michigan, no one can predict what these new regulations could bring.
With constant changes in laws and regulations across counties, towns, the state of Michigan, and the federal government, it can be difficult to ensure that businesses stay in compliance with any and all new regulations.
This isn’t something that a business owner should tackle on their own.
An experienced CPA that understands the unique needs and complex developments around the cannabis industry and tax laws is necessary.
The experts at MI Tax CPA help Michigan-based cannabis businesses navigate this difficult landscape almost every day.
A business’ survival could depend on its compliance with regulations.
Why hiring a cannabis CPA is so important
Cannabis is an emerging industry, and there are many new regulations that will be voted on soon.
This is one of the reasons that cannabis CPAs are so essential to helping cannabis businesses stay compliant.
Cannabis has become one of the fastest-growing industries in the country. With legal cannabis sales growing by 26% nationwide over the past year alone.
And as with any burgeoning industry, there are challenges to overcome—one of which is regulation.
MI Tax CPA is here to help Michigan-based cannabis businesses navigate this complicated road of compliance and regulation.
Contact MI Tax CPA to schedule a consultation today.