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Banking Issues for Cannabis Businesses

Apr 28 2017, by Jessica McElfresh in Legal Blog, Marijuana Charges, Medical Marijuana

Cannabis businesses in California face a number of hurdles, both legal and social. However, one of the more significant issues holding back the marijuana industry in California is not community disagreement or current state law – it’s banking. Due to current federal banking regulations, few, if any, banks will take a cannabis business as a client. The legalization of recreational marijuana in California last November has spurred on new ventures. However, it is hard for these businesses to do their jobs and expand when they are not able to bank like other types of enterprises.

If you are involved in California’s marijuana industry and are facing obstacles, contact a cannabis lawyer from McElfresh Law as soon as possible. It is not enough to know the new law or your rights, you need an attorney who is experienced with cannabis businesses and able to navigate this ever-evolving industry so that you can be both compliant and profitable. Call today at (858) 756-7107.

Cannabis Businesses Can’t Find a Bank

The inaccessibility of banking for cannabis businesses is a problem across the country, not just in California. The reason for this is that marijuana remains a Schedule I controlled substance under federal law. And since banks and credit unions are federally insured, they have no interest in working with businesses that violate federal law and put them at risk for legal trouble. The last thing major banks or locally owned credit unions want to do is wrangle with federal authorities.

You may have thought you found a bank or credit union to work, but do not be surprised if your account gets shut down in a matter of months. This has been a consistent problem for cannabis business owners. Once their accounts grow too large or the bank learns more about the business’s practices, the accounts are no longer allowed.

Where Does This Leave Cannabis Businesses?

The inability to bank like any other type of business puts cannabis ventures in a unique and difficult position. The fact that major credit card companies also do not want to work with marijuana-related funds doesn’t help. Without a traditional banking method, you must figure out a way to:

  • Receive funds from and pay back investors
  • Pay your employees
  • Provide your employees with benefits
  • Pay your state and federal taxes
  • Purchase insurance policies
  • Pay your rent and utilities
  • Store and protect your incoming funds
  • Accurately track your cash flow, expenses, and revenue
  • Record a healthy financial history in place of a credit score

While this might seem like an insurmountable task, it is possible. Many businesses in Washington and Colorado face the same federal banking regulations and are finding ways to make it work. California marijuana businesses can do the same with the help of an experienced cannabis attorney like Jessica McElfresh.

Your Financial Options

The truth is that more marijuana businesses around the country are finding ways to bank. It often means looking for community-centered financial institutions, like credit unions, and keeping your accounts a low as possible. Some owners hold accounts that are only big enough to pay employees and taxes, ultimately keeping the bank or credit union’s risk limited. Whether or not this is possible for you will depend on the financial institutions in your area and whether marijuana-related law enforcement increases under the current federal administration.

No matter what, you will have to plan for dealing with large amounts of cash, including installing safes and sophisticated security systems and hiring security services to transport your cash when necessary. By working with an experienced cannabis attorney, you can learn more about safely working with large amounts of cash and reducing the risk of crime as much as possible.

Work With an Attorney to Avoid Money Laundering

One of the ways some cannabis businesses are working with banks is by creating multiple limited liability companies that provide specific services to the business and have names that do not associate them with marijuana. Money from the cannabis business is then paid to these servicing LLCs, which are entitled to have bank accounts. This might seem like a smart and obvious business structure, however, it is actually money laundering and can get you into a lot of trouble. If you choose this structure, you may be successful yet you also run the risk of having your accounts closed and facing criminal charges. There are ways you can keep your business funds safe, and an experienced attorney can help you navigate the complex banking system.

Call a San Diego Cannabis Lawyer Today

California’s marijuana law only changed last winter, but if you are starting a cannabis business now in order to be licensed by January 2018, then call us at McElfresh Law as soon as possible. We can help you develop your business from the ground up. Or, if you are already in business, we can help you evolve within the new recreational marijuana framework.

To learn more about how McElfresh Law can be of service to your cannabis business, call us at (858) 756-7107.

Free consultation for criminal defense cases only. Medical marijuana business consultation requires a fee.

California marijuana laws change frequently. For updated information, see the following pages: Medicinal Uses of Marijuana and Recreational Marijuana Business