MICROBUSINESS LICENSE

Microbusiness License Update

While largely ignored by many in the Michigan cannabis industry, the Michigan marijuana microbusiness license seems like it is finally starting to get the attention that it rightfully deserves. Increasingly, MMFLA licensees are starting to take notice of the microbusiness license (though they often incorrectly refer to it as a “microgrow license”), and some MMFLA applicants are even contemplating pivoting to the microbusiness license rather than pay the exorbitant licensing assessments being charged by the Michigan Department of Licensing and Regulatory Affairs.

Now that microbusinesses are starting to enter the industry lexicon, it would useful to recap what we know with respecting to Michigan microbusiness licensing so that potential applicants know what to expect when they eventually apply. Below we will recap what we know about microbusiness licensing, as well as what is still up in the air, so that potential microbusiness applicants can know what to expect when they move forward.

What’s We Don’t Know

There are a couple key items that we will need to wait for the MRTMA rules on before we can answer. The two big ones are whether a microbusiness licensee can sell out of a retail storefront that is separate from their cultivation and processing center. The second is whether LARA will allow microbusinesses to enter the delivery market.

While we don’t have answers to these questions yet, we at least have some sort of timeline for when we will get them. Director Andrew Brisbo recently stated that we can expect emergency rules under the MRTMA to be issued in June or July, which is sooner than expected, though in LARA-speak probably means the end of July. He also stated that he expects LARA to start accepting the first MRTMA licensing applications about 90 days after issuing the rules. Under that timeline, we may be able to start applying for microbusiness licenses in October of this year.

While we certainly hope that will be the case, there has been talk from LARA that they may not accept all license types right away, instead phasing the license type to first accept applications from growers, then processors and retailers closer to the December 6th deadline. Unfortunately, we don’t know whether the microbusiness license will fall into this first category, or the second two.

At the rulemaking workgroup meeting, I tried my hardest to lobby for microbusiness being including in the first phase, which would make sense given that LARA is concerned with ensuring there is enough supply before allowing retailers to enter the market. Basically, LARA wants to avoid the supply issues that we have seen with the MMFLA. These issues were in part caused by the fact that the licensing board only approved a very small amount of growers in the beginning, which led to a situation where provisioning centers did not have an adequate supply of marijuana from licensed growers.  Thus, if LARA was seriously concerned about supply, they would include microbusinesses in this first group as they would be able to quickly supply cannabis to the recreational market.

What We Know

While much is still uncertain, there are many items that we do know even without the guidance that will be provided by the MRTMA emergency rules. For instance, we know that along with the 100 plant grow license, the microbusiness is the only way to legally enter the Michigan recreational marijuana market without already obtaining a medical marijuana facilities license.

Another such item is how the applications will be processed and who can apply. Michigan residents will be the only individuals allowed to apply for microbusiness licenses, and there are no disqualifying misdemeanors or felonies other than selling controlled substances to minors. That means that you could have been convicted of multiple controlled substance related felonies or misdemeanors, and as long as they don’t involve the sale of a controlled substance to a minor, then you will be able to obtain a microbusiness license. Thus, microbusiness license applicants won’t have to worry about whether their youthful indiscretions will make them ineligible for a microbusiness license.

One key fact about the microbusiness application is that the MRTMA contains “shall approve” language. What this means is that if an microbusiness license applicant meets the qualifications set forth by LARA, then LARA must approve them. There is no vague discretionary language such as “business probity” that LARA can use to deny applicants like they have done under the MMFLA. This should make the microbusiness licensing process much simpler and more straightforward compared to the medical marijuana licenses.

Another key fact is that LARA is required to approve or deny a microbusiness license within 90 days of its submission. Here, it is important to note that LARA’s position is that they have 90 days from receipt of a complete microbusiness license application, meaning that the 90 day clock doesn’t start to tick until LARA has received all application items. Still, this is a vast improvement over the MMFLA licensing system where applicants have waited up to 12 months to be approved.

What You Can Do Now

As we all wait for LARA to issue the MRTMA rules governing Michigan microbusinesses, there are certain steps potential microbusiness owners can take in the interim. The first step is working on your business plan and honing your business model. Whether you want to start a cannabis loungeor other microbusiness concept, now is a good time to start developing your business plan and doing your due diligence. This will require you to identify Michigan microbusiness attorneys and consultants that have worked with cannabis businesses and small businesses generally.

Another step that you can take is to start discussions with municipalities. In many ways, municipalities hold the key to the success of any microbusiness as obtaining a municipal microbusiness license will likely be the biggest hurdle you will need to overcome. With state microbusiness licensing not expected to be as burdensome as MMFLA licensing, municipalities will in effect act as the gatekeepers for those looking to obtain a microbusiness license. Thus, starting discussions with target municipalities will ensure that you will be in the best position to obtain a license once they opt-in to the MRTMA.

Finally, now is also the time to start to firm up your financing. One analogy I like to use when it comes to microbusiness start up costs is that starting up a microbusiness is like starting up a restaurant. You could potentially start up a microbusiness on a shoestring budget, or you could put in enough money to ensure that you can immediately deliver a high quality product and experience. Either way, you will need capital, and if you don’t have it yourself, you will need to bring on investors. Finding investors often takes time, and most investors don’t agree to anything right away. They will want to see your business plan, pro forma projections, start up costs, and more. Finding investment or otherwise securing capital now will put you in the best position to succeed once you are able to apply for a microbusiness license.

Interested in starting your own Marijuana Microbusiness here in Michigan?

Get started by scheduling a consultation with the leading expert in Marijuana Microbusinesses, Scott F. Roberts!

Mr. Roberts is a tried and true business lawyer with experience representing businesses both within and outside the cannabis industry. Mr. Roberts spoke on Marijuana Microbusinesses at October’s CannabisAid conference in Detroit, the Cannabis Industrial Marketplace Expo in Frankenmuth, Michigan in February 2019, and the 420 Canna Expo in April, 2019. Mr. Roberts will also be speaking on Michigan microbusinesses at CannaCon this June in Detroit.

Mr. Roberts has represented small to medium-sized businesses and start-ups throughout his entire career, including representing many of the ancillary businesses in which a microbusiness would make a perfect addition—e.g. event venues, escape rooms, and more! Since the passage of the MMFLA, Mr. Roberts has focused his growing law practice on representing Michigan cannabis and CBD companies. His combination of small business, real estate, and cannabis law experience, as well as real world business experience, makes him the perfect cannabis business lawyer and consultant for your Marijuana Microbusiness start-up.