How Much Does It Cost to Start a Cannabis Business in California?
The cannabis industry is one of the most lucrative industries in the world. The US cannabis industry was worth $10.4 billion in 2018, but specialists expected it to be worth a mind-blowing $66.3 billion in 2025.
Now, experts are so impressed by the rapid growth of the cannabis industry that some of them are calling it a modern-day gold rush, or simply – the “green rush”. You might be wondering how you could join this profitable industry.
How much does it cost to start a cannabis business in California? Let’s find out.
Starting a Cannabis Business in California – Fees and Taxes
You should be mentally prepared to fill in multiple application and tax forms if you want to open a cannabis business in California.
The first thing you should do is start a company. Once you decide on a business name and type, you must register your business with the Secretary of State. To do that, you will have to pay fees of up to $250 and provide basic contact information for your business.
In order to grow, distribute or sell cannabis in California, you will need a license issued by the state and a license issued by your city or county.
Now, some cities and counties do not authorize the sale of cannabis within their borders, so it might be a good idea to consult your local authorities to make sure your company will be allowed to operate before starting it.
Microbusinesses, distributors, retailers, event organizers, and lab testers must apply for licenses through the Bureau of Cannabis Control. Cultivators must apply for licenses through the Department of Food and Agriculture. Manufacturers must apply for licenses through the Department of Public Health.
Each license application comes at a cost. These licensing fees start at $135 and they can go as high as $44,517 for those who want to grow cannabis extensively.
Now that you have your state and local licenses in order, it’s time to take care of your employer responsibilities, such as payroll taxes, wage withholding requirements, workers’ compensation insurance, and so on.
Then, you should consult with the agencies that administer business taxes to take note of the tax obligations your business might have. Additionally, you might also want to trademark your service or product.
Believe it or not, but you just finished with the cheap part of the process. Now it’s time to pay your annual license fee for a cannabis business. This fee starts at $500, but it can go over $120,000.
Other Costs Involved
Once you settle your fees and taxes, it’s time to find a good location (for brick and mortar businesses), hire some people, externalize some services (cannabis waste management, cleaning, security & surveillance, bookkeeping, and more), and to make your products or services popular through marketing.
These costs are variable depending on your location and type of business. Cultivators and online retailers might not have to pay rent, whereas a brick and mortar dispensary will most likely spend more than $50,000 in rent per year. Distributors will need some vehicles, processors and test labs will need specialized equipment, and so on.
The Costs of Starting a Cannabis Business in California
Starting a cannabis business in California can be costly. Even though business consultation firms disagree on how much money you should invest to enter this lucrative industry, most of them agree that your financial reserves should be of at least $150,000 before starting your canna-business.
Entering the cannabis industry is expensive, but it’s also profitable. Investing in cannabis might just be the thing that sets you up for life.