The opportunities are endless for forward-thinking cannabis entrepreneurs in Michigan.
With a marijuana microbusiness license, you can own and operate a business growing, processing and selling small-batch cannabis to the public. Marijuana microbusinesses are an ideal business model for craft and specialty products, with inventory levels limited to 150 plants. Cannabis entrepreneurs looking to offer curated cannabis experiences and exploring new ways to interact with cannabis consumers need to consider the microbusiness option.
Being the owner of a marijuana microbusiness can provide many opportunities not previously available in Michigan’s cannabis industry. The microbusiness model is great for entrepreneurs looking to set themselves apart running a small business that is in tune with their passion and desire to participate in the legal cannabis market.
In addition to following the rules (which are still in finalization) regulating microbusinesses by the Michigan Department of Licensing and Regulatory Affairs (LARA), you will need to see if your desired municipality allows marijuana microbusinesses to operate. Each Michigan municipality receives a portion of the state’s excise tax on recreational Marijuana and that’s determined by how many provisioning centers and microbusinesses operate in the municipality. Many municipalities are not keen on having numerous provisioning center storefronts within their boundaries, however, we expect many cities and townships to jump on the microbusiness concept as it will allow them to obtain a greater share of the recreational marijuana tax revenue without the presence of numerous Marijuana storefronts.
What’s holding you back? Need help getting started with your marijuana microbusiness? Give us a call today.
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What’s a Marijuana Microbusiness?
Proposition One legalized recreational marijuana in the State of Michigan and created new license types for cannabis companies in Michigan. While most recreational cannabis licenses require the applicant to first have a Michigan medical marijuana license, one license type did not—the Marijuana Microbusiness.
A Michigan microbusiness license allows the holder to grow up to 150 plants, process those plants into a variety of cannabis extracts and edibles, and sell those products directly to the consumer. There are limits to what the microbusiness can do, however, as well as limits to who can be a licensee.
Microbusiness licenses are initially limited to Michigan residents, and licensees cannot hold any other recreational marijuana license. Microbusinesses also cannot sell to other licensees—they can only sell directly to consumers over the age of 21. While these requirements do restrict what a microbusiness licensee can do with the license, they also serve to protect the Michigan microbusiness market from large “big cannabis” companies that will eventually swallow up much of the Michigan market as they have done in other states such as California and Colorado.
Microbusinesses in Michigan will also be subject to two sets of regulations. First, they will be subject to state-level regulations from the Department of Licensing and Regulatory Affairs—or “LARA”. These regulations have yet to come out and are expected to be released by the end of 2019. Another potential set of regulations are municipal regulations. Municipalities are able to place additional regulations and requirements on Michigan microbusinesses that operate within their municipality, as long as such regulations are not considered to be unreasonably impractical.
So what can you do with a Michigan cannabis microbusiness license? The possibilities are endless! One of the business models we have seen that has attracted the most attention are cannabis lounges, also sometimes called Amsterdam-style coffee shops. Other business models include “tour-and-taste” operations, which are popular in California, as well as Cannabis-themed arcades, movie theaters, restaurants, and more!
Our attorneys are able to guide you through the legal and compliance process, help you hone your business model, and put you in the best possible position for success! Our managing attorney, Scott F. Roberts, has spoken at industry conferences about the microbusiness model and is one of the state’s foremost experts on Michigan microbusinesses. He has worked with small to medium sized businesses almost his entire career, is an entrepreneur himself, and is able to provide not just legal services, but business consulting and advice as well. Contact us today for a free phone consultation and marijuana microbusiness overview.
Frequently Asked Questions
What are the fees for a marijuana microbusiness?
To apply for a marijuana microbusiness license in Michigan, the applicant must pay a $6,000 application fee. If a license is granted, the regulatory fee is $8,000.
Does my municipality have to "opt in" to allowing microbusinesses?
Adult use rules do not specify that a municipality has to “opt in” to allowing marijuana establishments, unlike the medical use rules. Intead, a municipality must “opt out” from allowing marijuana businesses to operate. However, it is advisable to ensure an affirmative municipal ordinance is in place to allow adult use marijuana businesses before committing to operating in that municipality – that way there are no uncertainties to whether the municipality may eventually opt out.
How much does it cost to start a marijuana microbusiness?
In addition to licensing and regulatory fees, a marijuana microbusiness will also need to budget for costs related buildouts for cultivation, processing and retail space areas, equipment, security, wages and staff, utilities, marketing, legal and accounting services, inventory management software, product supplies and testing, and several other items. Operating a compliant, regulated marijuana business requires business owners consider many different costs. Please contact us to discuss the development of your budget plan further.
What can I do with a marijuana microbusiness?
A marijuana microbusiness may cultivate up to 150 at one time. A microbusiness can also process these plants and sell their products at retail to customers.
Can I buy inventory from other marijuana businesses as a microbusiness?
No. A marijuana microbusiness can only produce, use and sell its own inventory. Microbusinesses may not transact with other marijuana businesses.
What taxes do marijuana microbusinesses pay?
A marijuana microbusiness will need to assess a 6% sales tax on their sales. Additionally, a microbusiness will also need to remit an additional 10% excise tax on their sales. Finally, microbusinesses will also be subject to ordinary federal and state income taxes on taxable income.
What information do I need to disclose in order to apply for a microbusiness license?
There are many different pieces of information that are required in order to submit a full application. Among these, all applicants will need to undergo a full background check and review of their financial information over the last year.
Do you have to be a Michigan resident in order to apply for a marijuana microbusiness license?
Yes. An applicant must be a Michigan resident at the time they submit their application for a microbusiness license.
Is there a minimum capitalization amount required to apply for a marijuana microbusiness license?
No. There are no capitalization requirements for any adult use marijuana businesses, including microbusinesses. An applicant should be prepared however with a budget and available funds to cover their expected costs.
Can you help me find a location to operate out of?
Yes. We offer property brokering services. Please contact us to discuss this further.
I've heard that marijuana business can not deduct any expenses for tax purposes. Is this true?
A marijuana business, including microbusinesses, must follow Internal Revenue Code §280E. This means they are not able to deduct expenses for federal income taxes, except for their cost of goods sold. Cost of goods are the costs that go into inventory. Once the inventory is sold, the cost of it may be deducted. However other expenses, such as bud tender wages, are not currently deductible for federal tax purposes. Our accounting professionals can help determine methods for reducing your business’s exposure to this limitation.
Is banking available for marijuana microbusinesses?
Our firm has developed relationships with marijuana friendly banks in Michigan. In most cases, we can help facilitate a reliable banking option for our clients.
Are there any special compliance requirements for employees?
Each employee must submit for a background screen to verify that no felonies or controlled substance misdemenors involving a minor have occured within the last 10 years. If there is a hit, then special permission must be requested directly from the MRA to hire that employee with a prior criminal history
Can I start a microbusiness at my home?
Generally, no. A microbusiness must operate in a properly zoned location as directed by the local municipality, as well as maintain a building compliant with commercial health and fire safety regulations, among other regulations.