Best LLC Formation Services for Cannabis Vendors

Our List of the Top-3 Cannabis LLC Formation Services

Best Overall — Zenbusiness

Zenbusiness is an excellent formation service to start your first Cannabis LLC. It’s one of the cheapest, incredibly transparent, and contains all the necessities to launch your business, even in the Starter package.

Zenbusiness offers three packages: 

• Starter ($49/year), which contains only necessary documents, annual reports' manager, and a registered agent;
• Pro ($199/year), which is the most balanced and tops your formation with things like EIN, worry-free compliance, and all the business licenses;
• And Premium ($299/year), which has the fastest processing and shipping times.

Zenbusiness team takes its job very seriously and will help you obtain all the essential permits and licenses as a cannabis vendor. Plus, it will remind you of the important license renewal deadlines, so your business will remain in good standing with the state.

Is It Difficult to Start an LLC For Cannabis Business?

An LLC is one of the easiest business entities to form, regardless of the industry. Its formation steps usually include the following:

• picking a name for your business;
• appointing a registered agent service;
• file in the essential paperwork: the Articles of Organization and Operating Agreement;
• obtaining the documents needed for financial operations and taxation: Employer Identification Number (EIN) and banking resolution;
• for specific business industries, including cannabis business, you also need to obtain federal and local licenses;
• registering documents with the Secretary of State;
• holding an initial meeting.

And then, you only need to provide the state with annual or biennial reports and pay taxes.

The best part is: you don’t even have to do it yourself!

There are a lot of online LLC services that will do the job for you and keep your business compliant with the state.

LLC Benefits for a Cannabis Vendor

Starting an LLC for a cannabis business is not only easy but also packs a lot of benefits for you as a vendor:

• Personal liability protection. Your LLC is a separate legal entity. It has a different tax ID and contact address (that’s why you need a best-rated registered agent for an LLC, as it will receive all the legal docs on your behalf). This also means that the company’s assets are separated from yours, and, in case of any legal repercussions, your company will be responsible for them, and no one will come after your possessions. 
• Pass-through taxes. A multi-member LLC is taxed like a general partnership, and a single-member LLC is taxed like a sole proprietorship. Both of these means that if you have a physical presence in the state, your cannabis store itself will not pay taxes. Instead, all the profits pass through the entity, and you will pay only income tax as an owner when you file your tax report. The pass-through model helps avoid double-taxation and is overall more flexible for entrepreneurs.
• Management flexibility. You can start an LLC yourself and be the sole owner and manager. Or, you can cooperate with a team and delegate each member specific responsibilities and shares percentage. Overall, LLC has more management options than traditional corporations and is less regulated, which is why it’s so appealing to business owners.

Plus, registering a cannabis business gives you more credibility because it means that you have passed all the state regulations and won’t avoid paying taxes. The latter might be especially appealing to investors and potential vendors, should you want to look for them.

What are the Licensing Requirements for a Cannabis Vendor?

There are currently 36 states where medical marijuana is legalized (2). And the licensing requirements vary significantly from state to state and even between counties. Some states will hold a certain application period and will give the licenses to everyone who needs them. Others are much more restrictive.

Plus, different states appoint different departments for licensing a cannabis business (3). So you might contact a local clerk to find out how to obtain permits in your city of operation.

Generally, LLC for cannabis business might need a license in one of the following categories:

• Cultivation and growth. This heavily regulated industry will require a significant amount of investments, a detailed site plan, and proven horticulture knowledge and skills.
• Retail businesses. The main requirements for a retail business are additional security for a cannabis store. Also, the state may ask you to limit the amount of final product sold to a single individual. Plus, some states, such as Nevada, require business owners to have at least $250,000 in liquid assets, and if you plan to obtain several business permits, you need to have enough funds for each establishment.
• Manufacturing edibles. If you plan on manufacturing edibles, some states might require that you do this at the commercial kitchen. You must produce cannabis oils and butter used for edibles on-site as well.
• Investing. If you want to act as an investor for a cannabis business, you might need to follow additional statutory and regulatory provisions as well, depending on the state.

And note that almost all states can deny you a license if you have been convicted before or have a bad track record.

If this amount of information and regulations seems overwhelming, don’t worry:

You can always seek some help from reliable online incorporation services. Most of them can help you obtain permits for a small fee or have convenient tools to show you essential documents for your industry.