The cannabis industry has grown exponentially in recent years and over the past dozen years the California cannabis attorneys at Manzuri Law have been representing commercial cannabis entrepreneurs, start-ups, existing business owners, venture capitalists, and outside investors.
Irrespective of the overall market growth, entering the California cannabis industry in 2023 still carries ongoing risks involving companies that conduct commercial cannabis activities, in production, distribution, real estate, retailing, and other areas.
Fortunately, some of the major industry challenges can be surmounted with the help of experienced California cannabis industry lawyers.
Risk One: Adjusting to the Ever-Evolving Cannabis Compliance Regulations
In California, 44% of cities and counties allow at least one type of cannabis business to operate in their jurisdiction – That is 237 out of 539 that “opted-in.” Each of these 237 cities and counties has their own specific cannabis laws and compliance regulations, which can change annually.
The frequent changes in regulations make adherence challenging for cannabis companies throughout California. Non-compliance and licensing violations can lead to heavy fines, and licensing suspensions or revocations and, unfortunately, pleading ignorance to the ever evolving statutes is not a sound defense.
Partnering with California cannabis law firm specialists from the time you choose a corporate structure to start your own company, or when buying an existing business, can help ensure you sidestep any potential compliance pitfalls for the duration of your ownership.
Risk Two: Obtaining the Proper Risk Management Protection
When individuals or groups start, grow, merge, or acquire California cannabis businesses, they think of their professional endeavors just as other business owners would, and consider their overhead accordingly.
One thing all business owners — cannabis-related and otherwise — have in common is their need for insurance coverage. Depending on the type of cannabis business, your insurance needs may include property insurance, product liability coverage, and/or workers’ compensation.
Despite the legality of cannabis businesses in California, Federal law continues to classify all marijuana-related business endeavors as criminal enterprises, whether they are operating legally in California or not, many insurance companies may not to work with legal cannabis businesses.Unfortunately, this remains true for the banking industry as well. Due to continued federal illegality, legal cannabis businesses in the state of California are repeatedly shut out from the kind of risk-management cushions that are commonplace in other industries, like credit cards, loans, lines of credit, and bankruptcy law protection.
Risk Three: Cash Businesses Face an Increased Potential for Theft & Security Threats
As long as cannabis remains federally illegal, credit cards will not be a compliant payment option at cannabis dispensaries. As a result, California cannabis retailers are forced to deal almost entirely in cash transactions, save for the few that accept debit cards. This inherently opens cannabis operations — and cash registers — to employee theft. In addition, cash transactions can lead to substantial security risks. Last year, in 2022, licensed cannabis businesses in California reported 329 break-ins or burglaries with losses, according to California Department of Cannabis Control figures provided to MJBizDaily. Unfortunately, due to this current business model and its restrictions, theft continues to cause significant financial hardships to cannabis businesses of all sizes.
Working with the California cannabis industry specialists at Manzuri Law can help new, existing, and veteran business owners identify their unique risks, so they can plan their operations accordingly. Contact us today by phone at (310) 912-2960 or online to learn more about how we can help protect your operation from its formation and licensing stages through ongoing compliance and security measures.