For a state whose most famous city is known as “Sin City”, Nevada has a not-so-progressive history with cannabis. Having banned cannabis possession and consumption in 1923, Nevada was the only state for which possession of any amount of marijuana was a felony offense until the passage of Assembly Bill (AB) 453 in June 2001.
In addition to growing Alice & Fran LLC into a premier cannabis accounting & finance firm, one of my goals is, and has always been, educating small to medium size business owners on all things (cannabis) accounting & finance. My first two blog posts, Strong Accounting & Finance - Essential for a Successful (Cannabis) Company and Strong Accounting & Finance? Start Here were “long reads” intended to introduce traditional accounting & finance best practices and efficient processes to cannabis business owners. Many executives and founders in the industry are in leadership roles for the first time in their careers. They might not have a deep understanding of the day-to-day accounting function or the importance of financial management to exit strategy, expansion plans and audits.
Cannabis, unlike 99% of other industries, is new and until January 2018 there really wasn’t such a thing as cannabis accountant. There were experienced, talented accountants working with cannabis companies in legal states (medical and recreational) developing processes, creating cannabis-specific chart of accounts and staying up-to-the-minute on legal cases involving the application of 280E. There were, and still are, bookkeepers, accountants and CPA’s working with cannabis companies that don’t have the correct skills, the latest information or the right tools to keep their employers/clients compliant, audit ready and on a path to success.
This spring the hubs and I took a short working vacation, or a “workcation”, to Portland, Oregon to attend the Cultivation Classic and explore all things green: vegan food, cannabis businesses and outdoor green space. It was my first visit to the city and I was excited to see if it was as funky and surreal as Portlandia made it seem. Yep, it really is. The Cultivation Classic was a fantastic event and all expectations were exceeded in regards to food, dispensaries and lush, green scenery.
🌱 Traditional non-cannabis businesses, particularly small businesses, can successfully operate with a good monthly bookkeeping service and a knowledgeable CPA. Cannabis businesses cannot. Why? IRC 280E. Local/State/Federal compliance. Lack of access to banking. That’s why it’s so concerning that many (most?) Cannabis CEO's continue to try to “get by” with a monthly bookkeeping service and a CPA firm at year-end for annual tax filings. The issue with this approach? It’s what’s missing. Everything in between!
First and foremost, having an A-team of the best professionals you can find in place is essential. The right fit is both cultural and skills -based. Every organization needs a Cannabis Attorney, Accountant and CPA to work with the executive team on compliance, regulations, tax planning, 280E and entity selection. One does not replace the other; few CPA’s do monthly accounting/reporting and an attorney should be the primary adviser on entity selection. Surround yourself with people who share your vision, have the right experience, and have the training and tools to get the job done correctly.
The California EDD (Employment Development Department) offers free training and seminars on all things employee related. They recently offered a two and a half hour seminar “Cannabis Industry State Payroll Tax” seminar in Downtown LA. The morning was enlightening, there was some great discussion among the attendees and instructor and I left with a folder full of materials on payroll tax, e-filing and misconceptions around independent contractors.