4 Highlights on Tax Accounting for Marijuana Business and Start-ups
The Marijuana industry now generates $52 billion in sales. The demand for marijuana is growing - for both medicinal and recreational use. This is why now the best time to start a marijuana business.
However, new marijuana business owners have to get around one major obstacle: Accounting. With the federal and state regulations to navigate, tax accounting for marijuana business can be very complex.
That means companies need trained accountants more than ever. Include a CPA firm such as Your Hemp CFO in your budget from inception. Maintaining meticulous records will help ensure you are able to maintain your license, banking and funding. It also will keep you out of hot water with the IRS.
Below we highlight some items that individuals and companies should think about as they get involved in a marijuana business:
Pre- revenue
As you start your journey, you'll quickly notice that it may take some time before your company starts earning revenue. For the first little while, your company will probably be incurring quite a number of expenses:
- Operational expenses (payroll, rent, travel, etc.)
- Capital expenses (equipment purchases, building out of a facility or facilities, furniture etc.)
Raising money
If you're raising money to fund your operations, your investors/stakeholders will be adamant that they can see up-to-date financial statements on a recurring cadence (monthly, quarterly, and annually).
Accounting
Tax accounting for Marijuana business is just like any other company. Your revenue (income you are generating for the service you are providing or products you are selling) minus your expenses equals your net income. If 'net income' is positive, you'll pay tax in accordance with the province you reside in.
Tax matters
If growing (no pun intended) a marijuana company isn't hard enough (with all the regulations that need to be adhered to), business owners must remember that there are other tax requirements to be aware of as well. For example, the IRS has certain limitations on when a marijuana business can deduct the cost of goods sold. Fortunately, Your Help CFO has the expertise to create a comprehensive strategy for optimizing deductions and minimizing tax problems.
Apart from providing tax accounting for marijuana business, we help start-ups:
- Entity selection for cannabis organizations
- Establishing relationships with banks
- Accounting software setup including chart of accounts
- Other accounting services
- POS system implementation and seed-to-sale tracking
- Budgeting
- Strategic tax planning
- Federal and state tax compliance
- Cost allocation and cash maintenance
Your Hemp CFO is dedicated to serving the Marijuana industry with accurate accounting solutions and money-saving tax strategies. Come grow with us!