The Illinois Legislature passed a bill on Friday that
legalizes adult-use marijuana businesses. Entrepreneurs who want to
start a cannabis business should start preparing now in order to
ensure a place in the front of the line.
The legislation requires the Department of
Agriculture and the Financial and Professional Regulation to
begin accepting applications for early approval adult use
businesses within 60 days of new law’s effective date. These
businesses may begin selling adult use products on January 1, 2020.
This market is limited as there are currently only 55 licensed medical
dispensaries and 22 licensed cultivators
in Illinois.
A total of 75 dispensary licenses will be granted
by May 1, 2020. The dispensary license application will be made
available no later than October 1, 2019.
Below are 7 steps that you should take to ensure
that you receive a license. Application packages should be
organized, professional and easy for the regulator to find what
they need.
Apply as an Early Approval Adult Use
Businesses. Current Medical Marijuana license holders may
apply within 60 days as an early approval adult use business that
can sell adult use products on January 1, 2020. The accelerated
access to the market comes with a price. Medical Marijuana
licensees choosing this route will pay a $30,000 nonrefundable fee,
a 3% cannabis business development fee, and a social equity
fee.
Capital. Start looking for
smart capital. Your corporate structure should be simple and
representative of your capital raises. Resist the urge to give away
shares in return for human labor. Vet your investors to ensure that
the money is coming from a legal source and that the investor does
not have a criminal background. Applicants must show that they have
access to $100,000 in liquid assets.
Understand Illinois’ scoring
methodology. The Department of Agriculture and the of
Financial and Professional Regulation must utilize a fair scoring
methodology for comparing competing applications. Below are some
high-level activities that can help prepare you.
Ensure that all owners, officers, managers have the character,
veracity, background, qualification, and experience to fund the
business. Regulators will perform background checks and reject
applications in which individuals lied. Regulators also want to
know that the managers have the knowledge and expertise to run the
business successfully.
Create a business plan. The regulators will review the business
plan to ensure that adequate supplies of marijuana will be provided
and that adequate safety and security plans are in place to prevent
diversion. The business plan should show that there are adequate
funds to cover the first year operating expenses. Business plans
should also show how the business will comply with regulations
including seed-to-sale tracking, training, recordkeeping, and
day-to-day operations.
Staffing plan. Develop a staffing plan that shows how you will
ensure that qualified individuals will be running the shop, and
describe the business’ consent to enter into a peace labor
agreement with employees.
Create a security plan. The regulators will want a site plan
that shows intended security including video cameras, areas of
coverage, automatic and immediate alarms, limited access areas,
lighting coverage on the exterior and interior - focus on areas
where marijuana is transported, processed and stored.
Create bios or resumes for owners and managers showing relevant
experience and experience in the legal marijuana market
Create a community outreach and social equity plan. Create a
plan to show how you will inform the community about your business,
and give back to the community through involvement, employment
opportunities or other positive impact activities.
Identify Suitable Real
Estate. Identify real estate in a municipality that is
likely to allow the adult use marijuana businesses. This is
generally take more time than expected in that you will need to
consider minimum requirements related to the premises site
including:
Look for properties at least 1,500 feet from another cannabis
business and 1,000 feet away from schools. There may be other
minimum distance restrictions for other organizations such as
churches or drug rehab facilities,
Avoid residential areas- residences are not generally
allowed.
Ensure that the local municipality plans to allow adult use
establishments.
Understand the local zoning requirements and fire safety
requirements.
Obtain approval from the landlord to operate a marijuana
establishment.
Develop a Scaled Site Plan:
Create a site plan for your premises including all entrances,
exits, windows, and outline all areas including patient waiting
areas, sales area, and storage. Identify areas that contain video
cameras and other alarms.
Organize Your Financial
Information: Organize your tax, banking, and securities
information for the past 3 years. Make the package easy for the
regulators to review. The regulators will want to ensure that your
money was made legally and all taxes have been paid.
Try to Establish a Banking
Relationship. Banks are hesitant to provide services to
marijuana businesses as they may be charged with money laundering;
however, this is changing. Develop a relationship with a bank to
understand what they will need to provide you with basic services.
Understand that the bank will be required to file a suspicious
activity report (SAR) to the federal government when you inform
them that the account will be used for a legal marijuana business.
You should not try to falsify information as this will make matters
worse, and possibly prevent you from obtaining a banking
relationship anywhere.
Susan Ameel is a co-founder and
partner at Global Regulatory Risk Advisors, which offers a cannabis
service, THC Regs.
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