Sep 27, 2016 9:35 AM

5 Major Risks Facing Every Weed Investor and Entrepreneur

When it comes to marijuana, it is really hard to find an investor who will risk getting involved with the plant. Numerous reports show that cannabis industry has a huge potential and can bring cannabis companies a lot of money. But if you want to invest your money in this field, you should be well aware of all the potential risks of this kind of investments. WeedLex will tell you about the five most important and crucial risks of investing in the marijuana industry.

Weed is illegal on the federal level

Whether you are a novice cannapreneur or an investment expert, you should always keep in mind that cannabis is still federally illegal. Therefore, even while your business may be completely legal within the borders of a particular state, it does not guarantee that you will not have some problems with the federal authorities at some point.

There is one more downside to marijuana's controversial status―being involved in cannabis-related business makes it way harder for you to cooperate with financial institutions and insurance companies. Most of them simply refuse to work with any marijuana-related companies. As a result, marijuana entrepreneurs have additional troubles with managing their businesses, paying taxes, and so on.

3 Things to Consider Before Making Your Marijuana Business International
3 Things to Consider Before Making Your Marijuana Business International
It is a very attractive idea to expand your marijuana business onto a worldwide scale, and it may even end up providing you with huge profits if you consider several things beforehand.

Tax rates may be times higher than for other businesses

Because of the contradictions between federal and local laws, marijuana businesses may be forced to pay more taxes than they should. And overly high tax rates may put at risk the profitability of the entire business.

According to the Section 280E of the Federal Income Tax Code, marijuana businesses are not allowed to deduct any of their ordinary and necessary expenses. As a result, their owners may end up paying times higher taxes than the similar companies that work in other industries.

Tax Law Paradoxes: Marijuana Tax Revenue Legal, Tax Deductions Outlawed
Tax Law Paradoxes: Marijuana Tax Revenue Legal, Tax Deductions Outlawed
When it comes to legalizing weed, there is a certain contradiction between the federal and local laws. While marijuana remains classified as a Schedule I drug and is illegal at the federal level, 25 states plus the District of Columbia have legalized it for either medical, or recreational purposes, or both.

Your property may be confiscated

Since marijuana is still a Schedule I drug, by investing money into the marijuana-related business, you violate the federal Controlled Substances Act. Therefore, there is a risk of criminal liability for the weed investors. Moreover, the cannabis business' assets are subjects to forfeiture, so you risk to lose not just your money, but also all the property, equipment, and even goods.

Dealing in cash is not safe

Even in the states where marijuana is officially legalized for both medical and recreational use, financial institutions still avoid getting involved with cannapreneurs. And if you do not have a bank account, it means you have no other choice but to work with cash. So, in order to keep your business (and your employees) safe, you will have to pay special attention to the problem of security.

4 Reasons to Invest in Marijuana Industry
4 Reasons to Invest in Marijuana Industry
There are many different things you can invest your money in, and, surprisingly, marijuana is also on the list. Moreover, with the legalization movement gaining momentum across the U.S., cannabis industry appears to be one of the most promising and profitable investments.

Marijuana laws differ from state to state

One of the biggest problems of the cannabis industry is the fact that each state has a unique set of cannabis regulations. From the list of qualifying medical conditions to the amount of weed allowed for possession, to the packages, every state where cannabis is legalized in some form has its own list of requirements. Besides, these rules and regulations change so fast that making a mistake seems to be almost inevitable. So, even if you are going to focus on one particular state or even city, there will be a lot of work for you and your lawyers.

You may start with exploring our state by state guide and subscribing to our newsletters that will keep you updated on the most important marijuana policy news.

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