As the Michigan cannabis industry expands and matures, businesses that intersect with this dynamic and heavily-regulated market must remain ever cognizant about a host of legal, practical, and financial considerations. In many respects, adult-use and medical marijuana interests face the same issues as other businesses – corporate formation and governance, financing and capital investment, real estate and zoning. But the unique nature and status of cannabis mean that a complete understanding of the young, multifaceted, and still-evolving legal and regulatory landscape is essential for sustained success.
Business Lawyers for the Business of Marijuana
In the years since the Michigan Medical Medical Marihuana Act became law in 2008, the Michigan cannabis law attorneys at Kreis Enderle have earned a reputation for our sound, reliable guidance that facilitates successful license applications, ensures continued compliance with all applicable state and local laws, and minimizes the risks that can threaten ongoing operations and profitability.
The enactment of the Medical Marihuana Facilities Licensing Act (MMFLA) in 2016 and the passage of the Michigan Regulation and Taxation of Marihuana Act (MRTMA) by Michigan voters in November 2018 opened up a host of new opportunities for entrepreneurs and investors who seek to participate in what is expected to be one of the largest adult-use marijuana marketplaces in the nation. We leverage our extensive industry experience with our even deeper capabilities as business lawyers to provide comprehensive representation for commercial growers, dispensaries, processors, transporters, and testing facilities.
Our attorneys stay abreast of all developments that impact marijuana businesses in the state, including regulations and rules promulgated by Michigan’s Marijuana Regulatory Agency (MRA), local ordinances, and changes to federal laws, rules, or enforcement approaches.
A Full Suite of Cannabis Law Services
Our full suite of cannabis industry services makes us a valued partner for established players or those looking to enter or work with those in this lucrative business. We work closely with our clients on every aspect of their marijuana-related companies and operations, including:
- Corporate formation and governance
- Shareholder and partnership agreements
- Governmental relations
- Financing and investment
- Banking and cash flow management
- Real estate transactions
- Land use and zoning
- Environmental issues
- Labor and employment
- Intellectual property
- Mergers and acquisitions
At Kreis Enderle, we help existing participants and those wishing to become part of Michigan’s cannabis industry move forward with their businesses with confidence and clarity. Our Michigan cannabis lawyers understand the challenges and complexities of this new, lucrative, and expanding market, and can shepherd you through every aspect of application, licensing, operations, and compliance.
How is starting a cannabis-related business different from other businesses?
Like plenty of other industries, the cannabis industry is heavily regulated, and cannabis entrepreneurs need to satisfy a range of requirements under state law relating to licensing and operations before they can open for business. Unlike almost every other industry, however, companies involved in the development, production, transportation, marketing, and sale of cannabis are in an industry that remains illegal under federal law. This has significant implications for cannabis businesses, including the inability to use most banks and other financial services. Additionally, local governments in Michigan retain the right to prohibit cannabis businesses, adding another layer of challenges to budding cannabis entrepreneurs.
What is the licensing process for a marijuana business?
Pursuant to Emergency Rules issued by the Michigan Marijuana Regulatory Agency (MRA) in July 2019, only Michigan residents currently licensed under the state’s medical cannabis laws may apply for an adult-use license when MRA begins accepting adult-use applications on November 1, 2019. On December 6, 2021, the application process will open to everyone. That process involves two steps.
The first step is pre-qualification, during which the MRA conducts a full criminal and financial background check of the applicant, any individual or company that has a direct or indirect interest in the applicant, and all of the applicant’s officers, directors, and managerial employees. Applicants must provide extensive documentation and disclosures during the pre-approval process. The second step is the license application itself in which the applicant indicates which type of adult-use marijuana license they want to obtain.
The emergency rules are 64 pages long and include a host of other requirements, limitations, and parameters for Michigan’s nascent adult use cannabis industry. Those interested in participating in that market need to be prepared to address a wide range of issues and provide significant documentation to support their applications.
Recreational marijuana is illegal under federal law, but not Michigan law. What risks does a Michigan cannabis business face because of the disparity?
Since marijuana is still a prohibited controlled substance under federal law, banks that service cannabis businesses face exclusion from federal insurance and national electronic payment networks, as well as potential federal prosecution. Congress is currently considering legislation such as the SAFE Banking Act to give banks and financial institutions legal cover to do business with state-authorized cannabis businesses. At the moment, however, cannabis businesses can’t pay with or accept credit cards, write or deposit checks, or make or receive electronic payments. Doing business in cash in an increasingly electronic financial landscape creates a range of practical, economic, and security issues. While non-traditional financial services may be available, they are often prohibitively expensive.
Even though Michigan law allows marijuana businesses, can local municipalities in the state prevent me from opening a cannabis store?
Yes. Under the Michigan Regulation and Taxation of Marihuana Act (MRTMA), municipalities may completely prohibit or limit the number of marijuana businesses within their boundaries.
How does legal cannabis affect workplace drug policies in Michigan?
It doesn’t. Employers can maintain “zero tolerance” policies and conduct testing for marijuana as they did before legalization. The MRTMA does not:
- Require an employer to permit or accommodate conduct otherwise allowed by the Act in any workplace or on the employer’s property.
- Prohibit an employer from disciplining an employee for violation of a workplace drug policy or for working while under the influence of marijuana.
- Prevent an employer from refusing to hire, discharging, disciplining, or otherwise taking an adverse employment action against a person with respect to hire, tenure, terms, conditions, or privileges of employment because of that person’s violation of a workplace drug policy or because that person was working while under the influence of marijuana.
What are the capitalization requirements for an adult-use cannabis business?
Unlike medical marijuana business licensees who must have between $200,000-$500,000 in assets, there are no capitalization requirements for adult-use cannabis businesses.
How much does it cost to apply for, obtain, and renew an adult-use cannabis license?
A non-refundable application fee of $6,000 applies to all adult-use cannabis license types. The fees due upon issuance depend on the nature of the license and range from $4,000 for entry-level grow licenses to $25,000 for retailers and $40,000 for cannabis processors. The annual license renewal fee for a marijuana business will correlate to the amount of cannabis they produce or sell.
What is the excise tax on Michigan cannabis businesses?
Medical marijuana sales in Michigan are subject to the standard state sales tax of six percent, while recreational adult-use cannabis is subject to a 10 percent excise tax in addition to the state’s standard sales tax.