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Starting A Legal Marijuana Business – Where and is it Profitable?

marijuanna in jar

Starting a marijuana business can be risky but when done the correct way can be quite lucrative. There are a growing number of states that have enacted laws that allow growing, possession, and use of marijuana legal. This opens the doors for business opportunities including growers, processors, distributors as well as people who sell marijuana paraphernalia.

For those interested in such ventures, it is important to know how to sort out the various seeds that can be planted and grown into a part time or full time income. Information below is believed to be current as of June 19, 2015.

marijuana law map

Note: Some states, such as Virginia, enacted laws decades ago allowing for the possession of marijuana if individuals received prescriptions from doctors. Federal law, however, prohibits doctors from prescribing marijuana, rendering those laws invalid. Doctors can only write a recommendation for medical marijuana, which is different than a prescription.

The Basics

The first note of caution is that although individual states have passed laws allowing marijuana production and use, Federal law still prohibits all forms of marijuana growth or use.

“Under Federal law, Marijuana is still 100% illegal. While legal in some way in 23 states and the District of Columbia, marijuana like heroin, is listed as a “Schedule 1 Controlled Substance.” This classification empowers the Fedsto swoop in, shut down, seize funds and imprison those“touching the product.”  Under the Obama administration there has been no direction to enforce these Federal laws but that could change under a new administration. Further, because the business is 100% illegal under federal law, growers, processors and dispensers are ineligible for bankruptcy law protection and courts may refuse to enforce any of their contracts like leases. They are also disqualified from deducting business expenses from their revenues for Federal tax purposes.”
– via forbes.com

The map above also shows the basic geopolitical makeup of the country regarding legalized sales and use of marijuana.

  • If you live in the South, there is zero possibility of doing anything legal with marijuana. Maryland and Delaware are the two small exceptions, but everywhere else you can forget about it. This is a bit ironic though considering the South was early America’s primary economic fuel with its tobacco and cotton growers.
  • The Midwest is very similar to the South, with the states of Illinois, Michigan, and Minnesota having legalized marijuana for medical use only. Recreational use however is forbidden.
  • Moving to the West, Idaho, Wyoming, and Utah are the only three states that prohibit marijuana use for any reason, while the COW states – Colorado, Oregon, and Washington – have passed laws for medicinal and recreational use.Do not expect Utah to join the rest of the West anytime soon.
  • What may come as a surprise is virtually all of the Northeast region of the country, except Pennsylvania, has completely legalized marijuana for medicinal purposes.

Alaska is legalized for medicinal and recreational use, while Hawaii limits use to medicinal purposes.

This means that your best chances of profitability exist in the Northeast and the West. The combined populations of the four states that completely legalize marijuana is about 17 million people – all located in the West.

Profit Potential

The next obvious question is what can a startup business expect to make the first year after opening its doors. One estimate from the Cannabis Career Institute (CCI) is more than $100,000 is not an unrealistic figure. This number is dependent on a number of factors.

marijuanna and cash

  • If you grow, process, or sell the final product, you are more likely to make a lot more money than second tier business that provide the paraphernalia that allow users to use the product. But some of that profit will likely go into dealing with the paperwork and regulation that allow you to grow, process, and sell.
  • Startup capital is not going to be found in banks or other federal financial institutions because Federal law still classified marijuana as a controlled substance. And because many credit card companies are essentially banks, your customers will only be able to pay with cash.

  • As radical as having a marijuana business may seem, the states where it is legal have to undergo the same regulatory requirements as most other industries. One estimate has about half of all marijuana sales eaten by their customers in the form of brownies and other marijuana content foods. If you are not acquainted with FDA labeling requirements, step back and do your homework before proceeding.
  • As an “early entrant” into the marijuana industry, you may feel there are unlimited possibilities. But the more states that legalize the sale and, especially for recreational use, the more people are able to buy it, the more likely it is that the major pharmaceuticals will be your competitors being able to do it cheaper than you. So plan on future competition.

marijuanna and business

  • If you are planning to operate in a state that only allows marijuana use for medicinal purposes you will have to enlist a licensed physician as a referral. While the doctor does not normally sit on site, they do oversee the distribution and usage and make sure the patient is following the prescribed regimen.

A Starting Point for Creating a Marijuana Business

It is clear that one of the keys to getting your marijuana business off the ground is to address the legal issues before thinking about making Dollar One.

In California, there is a web site startacollective.com that will do all the necessary legal paperwork necessary to get you off the ground.

In Oregon, visit the state’s web site oregon.gov/oha/mmj/Pages/faq.aspx for information and links to essential knowledge necessary before planning your new business.

GreenZipp is an online site that assists people from around the country in establishing their own marijuana business. At the bottom of their home page is a series of links to each state. Go to greenzipp.com as a starting point and then do your own homework to find the best ways to get your marijuana startup profitable.

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