Running a cannabis business comes with challenges not faced by operators of typical non-cannabis
businesses. These challenges range from not being able to have a bank account and having to operate with purely cash – to having to spend thousands of dollars to rent and improve a building just to be able to apply for a license, not knowing if you will actually get one. There are also certain tax rules that are applicable to the industry that cause taxes to be a lot higher for a cannabis business when compared to a similar non-cannabis entity.
One of the most important financial decisions you can make for your cannabis business is selecting the right accountant to handle your monthly financial preparation and even more important, your year-end taxes. Having proper books and records from the beginning will make running your business a lot smoother process.
Of course, we are always available to assist you in any way and would love to be able to help every company in the industry, but with over 40,000 businesses, that is obviously not possible.
It is for this reason that we are giving you the list of questions below to use as a guide when interviewing and hiring an accountant for your cannabis business to make sure that you are getting a representative that is qualified and the best fit to represent your company.
1) How long have you been working with companies in the cannabis industry and how many
clients do you currently represent?
The cannabis industry is not a typical industry and does not run like most other businesses.
Accountants that have been working in the cannabis space for several years and with many clients
have more experience helping business owners overcome the challenges and obstacles that come
with operating a cannabis business.
2. In which legal states do you have experience working with cannabis clients?
Each state is like snowflakes, there are no two with laws and rules that are exactly alike. From
different residency requirements to whether or not IRS code 280E applies.
3. Do you have a good network of cannabis industry professionals?
Hiring an accountant that has a strong network within the industry will be incredibly valuable as
your business expands. This will give you access to additional resources for vendors, suppliers
and other professionals that your business will need to be successful.
4. What kind of clients have you worked with in the industry (Retail, Cultivation, etc.)?
Each type of business in this industry faces different challenges and has different tax rules that
affect them. Try to find an accountant that has experience across the vertical spectrum working
with the various license types - Retail, Cultivation, Processing.
5. Do you hold any formal certifications (Enrolled Agent, CPA)?
Enrolled Agents and CPAs (Certified Public Accountants) have passed testing by the IRS and are
required to keep up with continuing education on a yearly basis. They are also qualified to
represent clients under examination and audit to federal and state taxing agencies.
6. Do you have a public accounting background?
Accountants that have worked in public accounting are exposed to many businesses and
industries, which means they are experienced with the various corporate, debt and equity
structures that are common to this industry. This also usually means a strong tax background
which will come in handy when preparing the year-end taxes due to the financing methods used
to form a lot of cannabis companies.
7. What is your approach to 280E and how does that affect my cannabis business?
IRS Code 280E limits the deductions available to your cannabis business when calculating your
taxable income at the end of the year. If you are not hiring someone that understands how to best
apply this code to your business type, you may be costing yourself extra money at tax time.
8. Do you have any current industry clients that we can speak with that will recommend your
services?
With this being such an important decision for your company, asking for a referral from a current
client of your potential accountant will add some confidence to your decision. By speaking with
a current client, you can get validation of not only the quality of work, but also find out how it is
to work with them on a regular basis.
Important Upcoming Tax Deadlines
July 15, 2020 – ALL Business and Personal Tax Returns and Extension Filing Deadline
July 31, 2020 – Second Quarter 2020 Payroll Taxes Due