Running a successful business is challenging no matter the industry, but those in the marijuana trade have additional complications, especially because the product itself is still classified as an illegal substance by the federal government. Still, despite many hurdles, there’s no denying that the marijuana business is booming.
This smashing success, however, also means that there are potential legal challenges that many cannabis businesses just aren’t yet ready to handle. Here are five of the most common:
Many marijuana enterprises simply may not have the necessary financial resources to take advantage of the burgeoning market, especially because raising capital can already be a challenge. Hiring more employees or physically moving operations to a larger place can be expensive. Expansion also means a lot of research and paperwork to make sure everything is all done according to applicable laws and regulations.
2. Mergers and Acquisitions
As the industry expands, mergers and acquisitions are likely to increase as well. When smaller operations are unable to meet the demands of expansion, joining another company either as a partner or a subsidiary may be the best option to keep going. Having a business’s affairs in perfect order can go a long way to keeping it alive through a merger or acquisition.
Years ago, banks were reluctant to work with marijuana businesses, but that continues to change, opening up more opportunities and choices for both new and existing companies. Just as with any business looking to develop a relationship with a bank, marijuana businesses owners will have to make sure they have kept their record books current and accurate and also that they have complied with all applicable laws and regulations.
4. Federal Enforcement
In January 2018, Attorney General Jeff Sessions issued a memorandum that put enforcement of federal marijuana laws back on the table after an Obama-era policy had eased concerns. It’s therefore essential to receive solid legal advice regarding the latest state and federal legislation. And in the meantime, as the laws continue to change, you need someone working hard to make sure your business responds appropriately and also that your record-keeping is spotless.
Have you noticed a common thread in all the above challenges facing marijuana businesses? Keeping your business in full compliance with all federal and state laws and maintaining correct documentation is paramount to ensuring your business not only survives but also thrives—and with an ever-changing legal landscape, this becomes more challenging by the day.
If you’d like to make sure your business is prepared for these challenges as well as any others that may arise, send us a message or call us at (314) 454-9100 today.
Scott’s practice is dedicated to assisting entrepreneurs, investors, emerging and established businesses with the unique and often challenging issues they meet throughout the formation and growth process: from entity formation, to the management of founder relationships and economics, to the protection of intellectual property, to the financing of growth and navigating securities law compliance. He assists clients as they continue to grow and develop, whether this involves merger and acquisition activities, international licensing and distribution arrangements or counseling of directors and officers.