The cannabis business in Michigan is booming and it’s a good time to jump into the market. Like any business, though, it takes a lot of planning—and the cannabis business, in particular, is highly regulated. That means you can expect plenty of paperwork, inspections, and licensing fees before you even open your doors. But if you have a passion and commitment to the industry, you have the potential to do a lot of good for a lot of people with your medical marijuana business.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to source
StepsPart 1Part 1 of 4:Business Basics
1Confirm you meet the eligibility requirements for a medical marijuana business. Michigan has strict requirements for medical marijuana businesses. You’ll waste a lot of time, effort, and money if you go through the steps to form a business and apply for licensing only to discover that you aren’t eligible for one. These requirements include:XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceCriminal background: No felonies within the past 10 years, no misdemeanors involving controlled substances within the past 5 years, no violations of local ordinances within the past 5 years, no history of noncompliance with state or federal regulationsFinancial background: No bankruptcy within the past 7 years, no lawsuits for unpaid taxes, all taxes currentCapitalization: You’ll need to show you have several hundred thousand dollars available for your business to even pre-qualify for a license.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to source If this is going to be too tough for you, you might look into an adult-use (recreational) license, which doesn’t have capitalization requirements.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to source
2Register your business with the Department of Licensing and Regulatory Affairs (LARA). Choose a unique name for your business, then head over to the LARA website to register. Keep in mind that the business name you choose will be the name on your license and everyone with an ownership stake in the business must meet the financial and criminal background eligibility requirements.Registering online isn’t difficult, but it can be time-consuming. LARA provides a user manual for the online system at https://www.michigan.gov/documents/lara/COFS_Public_User_Manual_604579_7.pdf to assist you.If you’ve never registered a business before or aren’t sure what business entity is right for you, contact the Michigan Small Business Development Center (https://michigansbdc.org/). They have free consultants and resources to help you.If you’re operating as a sole proprietorship or partnership, you’ll register your name with the county clerk in the county where you plan to open your medical marijuana business, rather than with the state.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to source
3Get a federal employer identification number (EIN) for taxes. You’ll need this number even if you don’t have any employees. All you have to do is go to https://sa.www4.irs.gov/modiein/individual/index.jsp and click the button that says “Begin Application” to get started. In addition to using it to file taxes, you’ll also need this number when you open bank accounts for your business.XTrustworthy SourceU.S. Small Business AdministrationU.S. government agency focused on supporting small businessesGo to sourceBecause marijuana is illegal at the federal level, you can’t take the deductions most small business owners can for “ordinary and necessary” business expenses. Rather, you’ll pay federal taxes on all of the income your business generates.XAt the state level, the law establishing regulation and taxation of the marijuana business does allow you to deduct business expenses the same as any other business.XBecause of the complicated tax situation for marijuana businesses, having an accountant to manage your business’s finances and prepare your tax returns is a necessity if you want to avoid mistakes.
4Create a startup budget. Starting a medical marijuana business is not a cheap endeavor. Simply getting state licensing your business can set you back as much as $62,000.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to source On top of that, you’ll have expenses for your stock, growing materials if you’re planning on growing, facility expenses, security, and insurance.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceCheck out the Social Equity Program. It provides licensing discounts if you live in one of the 19 communities identified as having been disproportionately affected by marijuana prohibition. The program also offers assistance with the licensing process and access to other resources free of charge.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to source
5Draft a basic business plan. The Michigan Marijuana Regulatory Agency (MRA) requires you to submit a business plan with your pre-qualification application. A basic business plan includes a description of the products you’re going to sell, your marketing strategy, financial planning, income projections, and budget.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceIf you’re going to be looking for outside financing, any investors will definitely want a detailed and well-thought-out business plan.It’s a good idea to have an accountant or attorney who specializes in the cannabis industry look over your business plan. They’ll give you advice on how to strengthen it.
6Secure sufficient funding for your business. Michigan law requires medical marijuana businesses to produce documents that show they have enough money and assets to run—this is the business’s “capitalization.” At least 25% of your capitalization must be in liquid assets (cash or investments that are easily converted into cash). The rest can include equity in real estate or other property. The amount of money you need on hand depends on the type of medical marijuana business you want to open:XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceClass A Grower (not more than 500 plants): $150,000Class B Grower (not more than 1,000 plants): $300,000Class C Grower (not more than 1,500 plants): $500,000Processor: $300,000Provisioning Center (retail dispensary): $300,000Secure Transporter: $200,000Safety Compliance Facility: $200,000
7Hire a CPA to verify your business’s capitalization. Your best bet is to find a CPA (certified public accountant) locally who has experience with medical marijuana businesses. They’ll understand the state application requirements and can help you make sure you’ve got everything you need.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceThe CPA will help you get together financial statements for any bank or investment accounts you’re using to capitalize your business. They’ll verify those statements so you can include them with your pre-qualification application.
8Open bank accounts for your medical marijuana business. Because most of the major national banks won’t touch marijuana businesses, it might take some time to find a bank. If you hired a CPA, talk to them! They’ll likely know banks that are willing to open accounts for cannabis businesses, especially if they have experience in the industry.XGenerally, focus on smaller, regional banks, as well as local banks and credit unions. They tend to be more likely to open accounts for cannabis businesses.While it might be tempting to sign up with the first bank that will take you, hold off until you’ve eliminated all possibilities. Some banks will charge high fees, so it pays to shop around and look for the best deal.Part 2Part 2 of 4:State Licensing Pre-Qualification
1Fill out the pre-qualification application. Go to https://michigan.gov/mraonline to apply online. From the home page, click the tab that says “+New” and select “Medical Facility Licensing” from the drop-down. This takes you to the initial login screen where you can access your LARA account (or create a new one) and start your application.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceIt’s helpful to read the instructions for the paper application, even if you’re filling out the application online—they’ll walk you through the application and give specifics on how to fill it out. Download them at https://www.michigan.gov/documents/lara/Application_Instruction_Booklet_660113_7.pdf. The last page has a checklist you can use to make sure you have all the necessary supporting documents for your application.The name you list as “main applicant” will be the name on your license. So if you’ve created a company, list the company’s name as the main applicant, not your own.Include information about yourself and anyone else who has an ownership stake in the business. This includes criminal background information as well as tax and financial information. All of you will also need to get criminal background checks before your application is approved.Note that if you or any of your business partners are married, spouses must be listed on the license application. Because the business is considered marital property, spouses are also considered owners, even if they don’t actually do anything with the business.X
2Upload your pre-qualification application and supporting documents online. Part 1 of the state application officially qualifies you to open a medical marijuana business so you can get on with local approval and start developing your facility. Most of the answers you give on your application require you to provide supporting documents, including the following:XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceThe identity of every person with an ownership interest and their spouses, including copies of government-issued identification and consent to background checksFinancial statements verified by a CPATax information, including W-2s and 1099s verifying income of all people with an ownership interest and their spousesThe source and total amount of capitalization for your medical marijuana business, along with verified financial statements to back up that information
3Submit paper applications in person or by mail if you don’t have a Social Security number. You have the option of turning in a paper application regardless, if you’re more comfortable doing that. But if you can submit your application online, the MRA prefers you to do so.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceTake your application in person to:2407 N. Grand River AvenueLansing, MI 48906Mail your application to:Department of Licensing and Regulatory AffairsMarijuana Regulatory AgencyLicensing DivisionP.O. Box 30205Lansing, MI 48909
4Pay your application fee. The application fee is $6,000, as of 2021, and is completely non-refundable. You can pay online using a major debit or credit card. If you pay by mail or in person, use a check or money order made payable to “State of Michigan.”XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceYou only pay one fee per application—there are no additional fees for anyone else you list who has an ownership interest.
5Get your fingerprints taken for your background check. The MRA will let you know where you need to go to get your fingerprints taken. Get this done as soon as possible so there won’t be any delays in your application—it can take a few weeks to get your background check report back.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceAnyone else listed on your application who has an ownership interest in the business also needs a background check.Part 3Part 3 of 4:Municipal Licensing and Land Use Approval
1Choose a location for your facility. If you’re not sure, check the latest opt-in list to make sure the city where you want to open your facility allows them. The state list is available at https://www.michigan.gov/documents/lara/Municipality_Opt-In_Spreadsheet_2-16-18_614253_7.pdf and is continually updated.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceSome areas allow some types of facilities but not others. Some cities also have a cap on the number of facilities in each category (this information is included on the state’s list). A quick call to the city clerk’s office can confirm if there are licenses available for the facility you want to open.Check zoning requirements carefully. Cities that allow marijuana businesses have strict zoning requirements that govern exactly where these facilities can be located.
2Notify the city clerk’s office that you want to start a medical marijuana business. State law requires you to notify the city that you’ve applied for a state license within 10 days of the date you submit your pre-qualification application, so you don’t have a lot of time.X City clerk offices handle municipal licensing. You can find the official website by searching for the name of the city. You might also add “city clerk” or “city office.” Check the homepage for a statement that the site is an official government site to make sure you’re in the right place—not all cities have a “.gov” address.XThe city’s website typically has the most up-to-date information about the local ordinances that relate to medical marijuana businesses. It’s a good idea to bookmark this page so you can check regularly for updates.Most cities also require you to register your business and get a municipal business license. Keep in mind this isn’t the same as a medical marijuana license—this just gives you the ability to conduct business operations within the city.X The city clerk will let you know if you also need a regular business license so you can go ahead and take care of that.
3Draft a plan of your facility. Get specifics from the city clerk so you know the exact dimensions your plan has to be and what must be included in it. At a minimum, your plan should specify the following:XSite plan review (for new construction)A security plan with details regarding security arrangementsA lighting plan (for security purposes outside the facility)Mold prevention plans (for growers and processors)Disposal and ventilation system plansUtility usage plans (for growers and processors)
4Submit a written application to the clerk’s office. Some cities, such as Detroit, only allow submission online.X In other cities, you might be able to take your application to the clerk’s office in person. The information should be available on the city’s website but you can always call the clerk’s office and ask.XThe municipal application typically includes many of the same questions you’ve already answered on the state pre-qualification application, so the easiest thing to do is just copy those answers. That also ensures you have the same information on both applications.
5Pay your application fees. Municipal application fees are always non-refundable. However, the specific amount of the fee varies depending on your location. Under state law, cities can charge a fee of no more than $5,000.XSome cities charge a fee well below the state maximum. For example, application fees in Detroit are only $116.X In contrast, the fees in Bay City are $5,000.X
6Attend a land-use hearing if required. Some cities, such as Detroit, have public hearings before issuing conditional approval of your application. If a public hearing is required, the city clerk will let you know when you submit your application.XTake a copy of your facility plan and all the documents you have related to zoning with you to the hearing. You might also want to talk to an attorney who specializes in zoning hearings. Even if they don’t accompany you to the hearing, they can give you some pointers.
7Wait for a decision on your application. Provided your application is complete, some cities are capable of making a decision relatively quickly. For example, Bay City indicates on their website that they typically make a decision within 1-3 months.XIf the city approves your application, you’re free to move forward with state licensing. Remember that you’ll need to have both city and state licensing in place before you can start operating your business.If the city denies your application, they’ll typically tell you why. If it’s something you can correct, you might have the opportunity to do that if you talk to someone in the clerk’s office about it—but usually, you’ll need to fill out another application (which also means paying another application fee).Part 4Part 4 of 4:State Licensing Facility Approval
1Get your facility ready. With land-use approval from the city, you can start building or adapting an existing facility. Your facility should be existing and ready to pass inspection before you start Part 2 of the state application process.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceThe MRA will inspect your facility within 60 days of the date you submit Part 2 of your application. However, you don’t want to wait until the last minute to get things ready and risk failing your inspection.You have up to 2 years to get your facility ready before your pre-qualification expires.
2Complete Part 2 of your state application through your LARA account. The first part of your application dealt with you and anyone else who owns the business. Part 2 deals with the actual facility you want to open. Read through the application and instructions carefully so you understand the information you’re going to need before you get started.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceYour application is very time-sensitive because after you submit it, Michigan law requires the MRA to inspect your facilities and make a decision on your application within 180 days from the date your completed application is received.Make sure you’ve got everything you need! If you’re missing something, your application could be denied and you’d have to start over (including paying a second application fee).
3Submit your Part 2 application to complete the state licensing process. You can submit your application online, mail a paper application, or take your paper application to the MRA office in person. Include following supporting documents:XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceA description of the type of facility you want to open, including an estimated number of employees and projected gross receiptsYour business planThe proposed location of your facilityYour security planA copy of your proposed facility plan (the one you submitted for municipal licensing)A statement of proof of financial responsibility (injury liability insurance)XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceProof of auto insurance and commercial vehicle registration for each vehicle you’re using in your business, if you’re applying for a license as a secure transporter
4Complete your facility inspection. An MRA inspector will contact you to schedule an inspection of your premises. Make sure everything is operational and all your security is in place, including locks and barriers to access apart from a customer point-of-sale area.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceThe inspector will confirm that your product is all secured and inaccessible to anyone other than employees of your business.They’ll also check the condition of your facility and make sure it’s safe and operational.If the inspector finds any issues, they might give you a chance to correct the problems if there’s enough time to do so before the MRA has to make a decision on your application.
5Find out the MRA’s decision on your application. Once you’ve passed the facility inspection and assuming all the rest of your paperwork is in order, you’ll get official notice from the MRA that your license has been granted. Expect this to happen within 60 days or so of your inspection. Remember the MRA only has 180 days from the date you submitted your application to make a decision.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceIf the MRA approves your application, you’ll get information about the next steps to take to get your license so you can display it in your facility and officially open for business.If the MRA denies your application, the denial notice will explain why. You’re welcome to re-apply for a license after you’ve corrected the issues listed.
6Pay your regulatory assessment to get your license. The regulatory assessment covers your equitable portion of the expenses required to regulate marijuana throughout the state.X These are the new license regulatory assessments for each license category as of fiscal year 2020:XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceClass A Grower (not more than 500 plants): $10,000Class B Grower (not more than 1,000 plants): $30,000Class C Grower (not more than 1,500 plants): $56,000Processor: $56,000Provisioning Center (retail dispensary): $44,000Secure Transporter: $44,000Safety Compliance Facility: no fee
7Submit proof of general commercial liability insurance within 60 days. In addition to insurance covering bodily injury, you also need at least $100,000 of general commercial liability insurance. Even though you have 60 days, it’s generally best to submit your proof of insurance as soon as possible.XTrustworthy SourceState of MichiganOfficial website for the State of MichiganGo to sourceEven though you can’t get commercial liability insurance until you have a license to operate, you might want to call around to a few insurance companies in advance and decide which one you’re going to go with. That way, you don’t have much to do when your license is approved.