What to Expect When Applying for a Cannabis Business License

Your state has legalized either medical or recreational cannabis and it looks like a great business opportunity. One of the first hurdles that must first be completed before entering the legal cannabis industry is the application process. Each state has different rules regarding how licenses will be awarded - some are based on a lottery, some based on the highest scoring application, and other simply award a license to everyone who meets the minimum application requirements. Regardless of how your state decides to award licenses, there are a few things that have thus far been consistent across all states. Here are 7 things you can expect when applying for a cannabis business license.

January 7, 2016

Your state has legalized either medical or recreational cannabis and it looks like a great business opportunity. One of the first hurdles that must first be completed before entering the legal cannabis industry is the application process. Each state has different rules regarding how licenses will be awarded – some are based on a lottery, some based on the highest scoring application, and other simply award a license to everyone who meets the minimum application requirements. Regardless of how your state decides to award licenses, there are a few things that have thus far been consistent across all states. Here are 7 things you can expect when applying for a cannabis business license.

Your life (and those of your business partners) will be under scrutiny.

Each state has certain rules about who can and cannot enter the legal cannabis business, leading to intense scrutiny of each person named on the application. Some states go as far as requiring information on the applicant’s immediate family, including spouse and children, others have residency restrictions, while still others ban anyone with a criminal record from applying. (Example criteria from Colorado and Hawaii). Know what is expected of you and your business partners before entering into partnerships.

It will take a large amount of time to gather all the information required for the application.

Many states have a short application window, usually less than a month, leaving very little time to document all the necessary information. If possible, start your application early. Keep up with all the talk surrounding potential rules and requirements and research what other states have required to get started. When in doubt, include more information than necessary.

The final application will be massive.

Applications for a cannabis business license typically require large amounts of detailed information. Previous states have reported applications in the many hundreds of pages. The short application deadlines mentioned above combined with the large amount of information necessary, mean you can’t afford to wait until the last minute to gather information. You should also plan ahead on how the final document will be delivered based on state rules.

A single mistake can void the entire application.

Be diligent and triple-check (at a minimum) every aspect of your application. The help of a license consultant can be very valuable to ensure you didn’t miss anything, especially things like efficiency plans that can lead to bonus points.

It will be competitive.

This is less of a concern in states that award licenses to everyone who meets the minimum criteria, but those states are the exception. Most states have caps on the number of licenses that will be awarded, meaning only the best applications will have a chance of winning. In New York, there were 43 applications for 5 licenses.

Financial backing is critical.

Application fees are typically a few thousand dollars and the annual licensing fee can be upwards of $100,000 in some states. (Example fees from Maryland.)Additionally, some states require applications to have a few million in the bank to show they are capable of actually starting a business if awarded a license. Another factor that is often overlooked is that most states require applicants to list their intended business address on the application, meaning you have to secure the space and pay rent well before a license is awarded and the business becomes operational.

Delays are likely.

Many states set timelines with the best of intentions, but do to one reason or another the awarding of licenses gets pushed back, often after applications have been submitted. Maryland recently pushed their awarding of licenses back from January 2016 to “summer 2016,” leaving many applicants in limbo longer than originally planned.

Overall, it pays to be diligent and plan for unexpected issues to arise. However, if you successfully complete the application process and win a license, the cannabis industry is an exciting place to be.

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