As the November 8th vote on Florida’s Proposed Amendment 2 draws closer, many eyes within the cannabis business community are viewing Florida as the most enticing prospective new market based on a variety of demographic factors. Many of the large players within the cannabis space are already preparing to make a push in Florida. Moreover, we fully expect Floridian entrepreneurialism to certainly make its mark in this new industry

We previously discussed the 5 Things You Need to Know before voting on Amendment 2. In this article, we tackle 5 things entrepreneurs need to know before launching a medical marijuana business in Florida.   

1.     Have a thorough understanding of the Medical Marijuana Industry.

While the concept of starting or working for a business in the Florida Medical Marijuana industry may sound like a dream come true for many people, entrepreneurs will be wise to go to great lengths to learn as much as possible about legal cannabis before proceeding with their own ventures.

The legal cannabis business is just as complicated, if not more complicated, as any other highly regulated industry. The overlap of applicable federal, state and local law  creates a minefield of potential of civil and criminal liability. Understanding the way cannabis businesses in other states currently operate will go long way to prove that not only are you worthy of a State of Florida issued license, but your venture is worthy of human and capital investment. 

Does anyone on your team have experience in other marijuana businesses in other States (legal operations only, of course)? If you are planning a grow operation, what is the agricultural acumen of your team? If you are planning dispensary, what retail experience does your team have?

For example, cannabis businesses in other states are typically required to implement quite complex “Seed-to-Sale” tracking software. There are a variety of seed-to-sale software providers. However, having hands on experience with this critical operational component prior to launch will go a very long way. The market leader in seed-to-sale software is the Florida-based software company, BioTrackTHC. BiotrackTHC offers comprehensive training opportunities and will likely be the leading software provider in the State of Florida following the enactment of Amendment 2. 

2.     Watch the Florida Department of Health regulations closely

In our previous post on Amendment 2, we discussed the broad regulatory authority granted to Florida’s Department of Health to “ensure the availability and safe use of medical marijuana by qualifying patients.”

For entrepreneurs considering the Florida medical marijuana market, the implementing regulations issued by Florida’s Department of Health will have a major impact the business opportunity as well as operations. 

Clearly, the implementing regulations issued by the Department will have an impact on the potential size of medical marijuana market in Florida. Amendment 2 instructs the Department to issue regulations determining: 

  • how a patient is qualified for care (and identification procedures);

  • how qualifying patients receive treatment; and 

  • how much marijuana is “appropriate” for treatment. 

The Department’s action in this regard is critical from an business operations point of view, as well as determining the potential economic risks associated with a florida cannabis startup. Further, as we’ve seen with the Department’s rollout of implementing procedures for the Compassionate Medical Cannabis Act of 2014 (hint: it hasn’t went well), tracking the Department’s movement implementing regulations on a broader medical marijuana market warrants close observation.

3.     Choose partners wisely

If the current licensing qualifications and application procedures in currently in effect from the Office of Compassionate Use is any indication, Florida’s licensing requirements for a broader medical marijuana regime will include thorough analysis of all the partners of the operation. The analysis will include the criminal history and background of the company’s principals and investors and may extend to the business track record and industry acumen of all those involved. It is also safe to assume that this analysis will extend beyond those who will be operating the business -- it will likely extend to anyone involved in the business as an equity partner or funding source. 

Therefore, as you proceed in the strategic planning of your Florida medical marijuana business make sure you conduct full due diligence on your potential partners and funding sources. Perform background checks, ask tough questions, as well as be aware of any potential issues you might have as an individual before engaging partners. Anyone with past drug arrests can count on being excluded. For medical marijuana grow operations in Florida, it may also be prudent to associate that venture with an established agricultural grower already operational in the State. This has already be a consideration of licensing growers in the State of Florida. 

4.      Understand local political issues & understand site selection/zoning restrictions

As we have already seen with the better-late-than-never implementation of the Compassionate Medical Cannabis Act of 2014, a variety Florida cities and counties have place moratoriums on cannabis related dispensary and cultivation activities. (View Orange County’s moratorium ordinance here.)

As Amendment 2 comes to fruition, we can expect more counties and cities to follow suit. At a minimum, Florida Medical Marijuana Businesses can expect there to be geographic restrictions on operations near schools or other places large numbers of children congregate. Proximity to other public venues may also be a factor. Thus, Florida Medical Marijuana entrepreneurs must understand any (potential or actual) local zoning restrictions political issues before completing site selection of their business in addition to any other necessary due diligence and demographic research. 

5.      Understand the tax consequences and banking issues in cannabis businesses 

Marijuana is still a Schedule 1 drug under the Controlled Substances Act. Based on that classification, operating a Medical Marijuana business in Florida will present unique tax and banking issues to entrepreneurs. Seeking the assistance of qualified legal counsel is critical to ensuring these issues are properly addressed. 

For example, IRS Section 280E prohibits marijuana related businesses from deducting business expenses other than costs of good sold. Everything else (office supplies, employee costs, rent, professional services, etc.) cannot be deducted from taxable income. 

Additionally, the banking issues associated with marijuana businesses may result in many ventures operating solely as a cash business. This presents additional operational concerns, such as adequate security, employee theft measures and payroll solutions. Each of these topics will be covered in depth in our blog. 

If you an entrepreneur interested in the Florida Medical Marijuana industry, contact the Trueblood Law Group, P.A. for a free consultation.