There are still challenges despite the rapid growth of the cannabis industry. Federal law still prohibits the possession, distribution, or sale of marijuana. Right now, thirty-seven states, along with the District of Columbia, Guam, and Puerto Rico, have embraced varying degrees of legalized marijuana usage.
It means that any financial involvement linked to state marijuana activities might be viewed as money laundering under federal law. Consequently, such connections could pose substantial legal, operational, and regulatory risks to banks.
Having a bank account comes with clear benefits, but the risks of not having one are substantial.
Theft risk is high when marijuana dispensaries handle large cash amounts, making them prime targets for criminals. Cannabis industry banking can help mitigate the dangers to owners and threats to the reputation of facilities, staff, and the brand.
The cost of maintaining security for cash reserves is significant. Dispensary owners invest in solid security systems and guards, aside from the time spent on managing, counting, and transporting cash.
Banking offers efficiency by facilitating faster payments and streamlined operations through electronic transactions. It also ensures tidy accounting, which is crucial for legal, tax, and compliance purposes.
Access to non-cash payments, like ACH payments, requires a bank account that supports these transactions through a point-of-banking solution.
Banking for the cannabis industry is crucial for securing loans, attracting investors, or selling the business. Operating solely with cash makes it challenging to prove the business’s income, impacting future opportunities.
Running a cannabis business means understanding how to handle your company’s finances effectively. Whether you’re new to the industry or aiming to grasp the specifics of managing cannabis banking, here’s what you need to know about financing in the marijuana sector.
Every cannabis business can gain from a specialized accountant well-versed in the industry’s nuances. These professionals navigate the intricate web of accounting for the cannabis industry and local, state, and federal cannabis tax laws, reducing the risk of audits and easing the burden of tax planning and preparation.
Their expertise extends beyond taxes to encompass financial duties like bookkeeping and payroll management.
In the event of an IRS audit due to errors or inconsistencies in your business tax returns, a cannabis accountant can provide invaluable support through tax debt resolution and audit representation services.
Engaging a skilled tax attorney tailored to your specific financial and business circumstances is also crucial. Given the stringent regulations governing marijuana businesses, these legal professionals adeptly handle the complexities of compliance.
For businesses struggling to find banking options for the cannabis industry, an accountant can offer guidance or manage cash-related matters.
This initial step at the inception of your cannabis business ensures that an experienced professional oversees your finances and operational processes, providing you with peace of mind.
In 2023, securing a bank account for a cannabis company remains a challenge but isn’t impossible. Start by researching local banks and credit unions that serve marijuana businesses before resorting to cash transactions.
The Secure and Fair Enforcement Act, passed by the House of Representatives in September 2019, aims to shield bankers from legal repercussions for working with cannabis businesses. Despite being passed multiple times, this bill faces hurdles in the Senate.
Advocates of cannabis industry growth continue to push for its passage in the coming years, which could potentially encourage more banks to serve marijuana companies by offering bank accounts, credit cards, and loans.
Focusing on regional banks and credit unions is advisable due to varying banking policies across states. States like Colorado, with established legal marijuana industries, might offer more banking options than newer markets like Illinois.
When pursuing a cannabis bank account, honesty is crucial during consultations with financial institutions. Disclose that you operate a cannabis business and build a relationship with the bank.
Bring comprehensive financial records, such as profit and loss statements, to demonstrate your business’s financial health.
As a new business, immediate access to banks serving the cannabis industry might not be feasible. Prioritize financial stability and responsible cash management to qualify for a bank account in the future.
Every marijuana business varies in costs due to different state tax laws and regulations on sales. However, some expenses are universal, like setting up a storefront or office and buying necessary equipment. You’ll also need to budget for licenses and permits, which can be costly.
Handling cash brings risks if you can only get a bank account after some time. With a digital system, paying employees becomes more manageable. Some payment methods, like direct deposit, might not be an option for certain cannabis businesses.
Even if you have a bank account, some banks that do business with the cannabis industry might refuse to work with you, affecting your employees’ financial security. Getting loans or a business account can be challenging in some states, pushing businesses to explore other funding options.
Sales can be uncertain due to restrictions on interstate commerce and concerns about users losing their jobs over-prescribed medical cannabis. Operating on cash makes businesses vulnerable to theft. Locking away cash and inventory or hiring a specialized accountant can mitigate this risk.
While this industry is expanding, accessing banking services and financing has historically been a challenge for marijuana businesses.
Seeking guidance from a specialized accountant at Safe Harbor Financial is crucial for businesses navigating the complex cannabis industry. Our experts understand cannabis law and financing intricacies, providing services like tax filing, financial document preparation, and efficient bookkeeping tailored to your needs.
Connect with us today to explore how our specialized services can support and enhance your cannabis business.
Do you own a hemp, CBD, dispensary, marijuana, or cannabis business and need a business bank account? We’ve validated over $8 billion dollars in cannabis-related funds since 2015. Bank with confidence. Bank with Safe Harbor Financial today.Open Your Account