Frequently Asked Questions about starting a cannabis business.

At Weeds, we’ve helped new entrepreneurs license more than 100 new cannabis facilities statewide. The first step towards your cannabis empire starts with a few basic steps. Here are the most common questions we get from startup entrepreneurs.


Licensing

Microbusinesses vs. Traditional Licenses

What are the differences between micro and traditional licenses?

Microbusiness licenses are designed to help small start-up companies save money on application fees, but there are trade-offs. While you avoid per-plant fees paid by large producers, microproducers are limited to only 200 plants per cycle. Since microbusiness still have to submit the same license application and meet all the same regulations, including building codes, food safety regulations, security, banking and track-and-trace requirements as large companies, many microbusinesses will find it hard to compete with larger operators who spread those costs out over larger operations.

Microbusinesses are also prohibited from having any part of other licensed cannabis businesses.

Even with these limits, these licenses may be right for companies looking to serve a small community or someone with limited overhead.

In our experience, most applicants who begin exploring microlicenses ultimately decide to pursue traditional licenses (400+ plants) since the applications and regulatory compliance are just as intensive because other licenses give them more options for adapting the business to changing markets.

Licensing 101

How much work does it really take to get a license?

That depends. The state’s cannabis license has 9 main parts and they can take up to 90 days to approve it. Plus each county and city is required to have its own cannabis zoning codes. Some even have their own local licensing requirements that can add more time (and frustration).  But don’t worry, we’ve done this before (a lot).  Our templates, plans and services have been used to help license more than 100 new facilities in communities around the state.

At Weeds., we take you from seed to sale, building a custom licensing and work plan for your business. That usually includes your state application, technical services to help your architect or contractor obtain your local building permits, and a 300+ page policy and procedure manual customized to help you start and operate your business according to state rules. We also offer ongoing compliance services to ensure your staff are following the guidelines and that you are staying up to date on rule changes.


Can my cannabis company be registered out-of-state?

Yes. Your company can be registered in any state but you must still provide the same information in your New Mexico application, even if your registering state shields that information from public record.  For example, a corporation in Delaware may not be required to list all owners and the principal business address.  But once that company applies for a New Mexico cannabis license those details will be made public by New Mexico regulators.


Can I use another company I already own for my cannabis business?

Technically, yes – but we don’t recommend it. Because of the conflicts between federal and state law cannabis companies must have more stringent (and expensive) banking and regulatory requirements than non-regulated businesses. Combining your cannabis business and other business’ activities could open your existing business up to additional tax and legal risks. You should consult experienced cannabis tax accountants and attorneys for specific information relating to your plans (we can help you find those if needed!)


Should I set up different businesses for each cannabis activity in my vertically integrated license?

Maybe, but probably not. If you are pursuing multiple activities (production, manufacturing, retail) we recommend you consider a vertically integrated license to make licensing, compliance and operations simpler. Plus, you likely get tax advantages as a vertically integrated business (consult your tax advisor). 


Someone offered to help me fill out an application but we’re stuck. Can you help?

If you hired someone to just fill out and submit your state application, you still have a lot of work to do. In our experience, lots of attorneys and lobbyists can help fill out the application but they do not provide you with the policies, training standards and local permitting steps required before you can begin operating.

When you apply for a cannabis license in New Mexico you must attest, under penalty of perjury, that you understand the rules and have all of the 14 required policies in place at the time of application. If someone has offered to help you complete an application ask them to show you an example of what they will provide.

You also may not operate your cannabis facility without obtaining a state license, local license, new certificate of occupancy and having all required policies in place. If you are stuck or need guidance see our post “Parts of a license” to learn what is required and how we can help.

Your application is also heavily dependent on the facility you choose. Roughly half of the applicants we work with change a facility or plans at least once after measuring a building against state and local rules. (See Facilities section below).

Banking

Until Congress passes the SAFE Banking Act or legalizes cannabis federally, most banks in the Federal Reserve System will not bank cannabis companies or process cannabis transactions.

But a few banks have taken on the extra burden required to bank cannabis companies. Southwest Capital Bank was the first to do so locally. A few credit unions are also partnering with Colorado banks to provide banking services in New Mexico. It is no longer true that cannabis is not banked, but the extra auditing and compliance required means you should expect long delays in setting up your account and extra fees other businesses don’t pay.


Can I use my existing business bank account for my new cannabis business?

No. Because cannabis is still federally illegal, federal bank regulators prohibit banks from engaging in cannabis transactions unless the bank opts into enhanced compliance rules. If you use your regular bank for cannabis transactions your bank can cancel all of your accounts (including loans, other business accounts and credit cards). 

At Weeds. we help connect you with local cannabis-authorized banking programs (there are only 3 in NM) and provide you and them with the business and compliance documents they need to open your account.  Be warned: compliance checks and backgrounds for banking can take 60-90 days, so we make this one of the first parts of our service agreement with our new clients.


How do I get started setting up my cannabis bank account?

Because we work with so many cannabis companies, we have strong relationships with each of the cannabis-eligible banks.

As a part of our services, we help you gather the documentation required to apply for these special accounts, then refer you to a cannabis banker for an introductory meeting. We also provide your banker with all of your state licensing details required for their files.


I’m just getting started but I might need to add new investors/owners later. Can I do that?

Yes, but it’s complicated. Adding a new controlling person requires an amendment to your license, meaning the person must pass a background check and be approved by the state before they can join a licensed company.  Ditto for banking approvals. In most cases, we advise companies considering new investors or owners to work with their attorney to craft an investment and vesting schedule allowing new investors to provide loans that convert to equity at the company’s next license renewal date when all owners will have to go through checks anyway. There are other equally effective options as well, depending on your tax and legal structure. Again, this is one of those areas where our experienced licensing teams can help you and your attorneys balance your needs and state licensing rules. 


How long does it take to obtain a license?

As always, that depends on how prepared you are when you start and what type of application you are seeking.

By law, the Cannabis Control Division (CCD) has 90 days to act on your application after they deem it complete. But CCD does not deem an application complete to begin review until outside agencies responsible for approving your background checks, water, and health and safety protocols are complete. Local permitting and zoning can also add significant time.

See more on our new post “How long does it take?”

Owners & Controlling Persons

Each person who owns or controls your business must pass state and federal background checks in order to be associated with your license.


Who qualifies as a controlling person?

Anyone who owns a part of your company and/or is authorized to make decisions directing company operations. This usually includes anyone who is authorized to sign checks or contracts and the day-to-day manager.  In a small company, a single owner may fulfill all of these roles.  

In practice, the state has required that anyone who owns 10% or more of a licensed company be publicly listed on the license (though this could change at any time to include all persons, no matter how small their ownership).

Creditors, profit-sharing beneficiaries and other “non-decision-making” persons usually do not qualify.


What if I have a criminal history? Can I still own a cannabis company?

In most cases, yes. Unless you have been convicted of fraud or theft from a business or trafficking hard drugs (not cannabis), you are not automatically prohibited from participating in a license. However, any prior arrest or conviction may subject you to additional review and that will delay your application.

If you are concerned about your background, let’s talk.

New Mexico’s Cannabis Regulation Act included specific provisions to expunge most former cannabis convictions and the state’s newly passed expungement law allows persons to seek expungement for many other crimes. We can refer you to experienced expungement attorneys if this applies to you. The timeline for removing these records depends on each case.

Social Equity Requirements

What is a Social Equity Plan?

Let’s face it: cannabis has a lot of unique barriers (banking, background, zoning restrictions) that disproportionately prevent minorities from entering the industry as owners and operators. Gov. Lujan Grisham made equity a pillar for the state’s legalization program and the legislature requires CCD to compile demographic and social equity data on cannabis companies and facilities. 

Your social equity plan helps the state meet its goal and shows how you will work to break down those barriers in ownership, employment and other opportunities in your business. When building a plan, you disclose details on ownership, economic conditions for your business location and your hiring practices. Each year, at your license renewal, you will have to report on your progress in meeting your goals. At Weeds., we helped draft the state’s social equity provisions and created the first social equity plans for licensees. As a Weeds. client we’ll help you build relationships to execute your plan and compile the data needed to stay compliant.  


What is a Social Equity Plan?

Let’s face it: cannabis has a lot of unique barriers (banking, background, zoning restrictions) that disproportionately prevent minorities from entering the industry as owners and operators. Gov. Lujan Grisham made equity a pillar for the state’s legalization program and the legislature requires CCD to compile demographic and social equity data on cannabis companies and facilities. 

Your social equity plan helps the state meet its goal and shows how you will work to break down those barriers in ownership, employment and other opportunities in your business. When building a plan, you disclose details on ownership, economic conditions for your business location and your hiring practices. Each year, at your license renewal, you will have to report on your progress in meeting your goals. At Weeds., we helped draft the state’s social equity provisions and created the first social equity plans for licensees. As a Weeds. client we’ll help you build relationships to execute your plan and compile the data needed to stay compliant.  


Will the state require me to change ownership if I am not minority-owned?

No. Social equity plans are designed to help companies recognize and report on their diversity.  At Weeds., we work with you to craft an equity plan to help the state meet their goals by showcasing your diversity, building relationships with community college training programs, industry hiring initiatives and scholarships, and minority vendors.


What type of water rights is required to grow in a greenhouse /hoop house?

Growing in a hoop house is considered a greenhouse and would require a commercial water right. If your well is domestic, sanitary, agriculture or irrigation, it does not qualify. You can truck in water (with a water hauling contract) or lease/purchase new rights. Our team can help evaluate these options with you. (source: OSE)

Water Woes.

Can I grow cannabis using water from my domestic well?

No. Domestic wells are for personal (non-commercial) cannabis growth allowable by law, similar to water use for a garden. Domestic well permits do not allow water to be used in growing any commercial crops, including cannabis. Cannabis producers must acquire valid irrigation rights for outdoor cultivation or commercial water rights for indoor cultivation. This can take a lot of time and money (see below). (source: OSE)


I found a water right for sale. Is there a process to expedite the transfer?

No, unfortunately, this does not qualify as an emergency request pursuant to statutes 72-12-22, 72-12-24, 72-12-25, or 72-5-25 NMSA, per the State Engineer. Transferring water rights requires public notice, public hearings and patience (usually 4-6 months, minimum) and can be a very costly process. (source: OSE)


What if I am connected to a commercial or municipal water system?

If you are planning to operate out of a building in, say, Albuquerque, the Albuquerque-Bernalillo County Water Utility Authority (ABCWUA) has water rights for commercial, agriculture, and domestic use so you are just buying it from ABCWUA and you can show you are a customer of the authority.  Some cities have additional rules governing meter size and discharge. We will help you obtain the proper certification from the water authority and complete the water approval application using this documentation. (source: OSE)

Water and Energy Plan Use

Do I need a manufacturing license?

All products sold in New Mexico dispensaries (including flower) must be pre-packed in sealed containers for personal purchase and use. 

Retailers who want to roll their own pre-rolls and package flower for sale must obtain a Class 1 manufacturing license, or contract with a manufacturer to produce their products (“white label”). 

Products based on distillation (including distillates, gummies, edibles etc. ) require higher classifications of manufacturing licensing, some of which can take months to certify for safety.  If you are interested in making products for sale, let’s talk about the nuances of your plan and get the right license plan in place before you start.


There are 4 classes of manufacturing licenses. Which one should I apply for?

CCD can issue licenses for 4 types of manufacturers:

  • Class I: A licensee that only packages or repackages cannabis products, or labels or relabels the cannabis product container;
  • Class II: A licensee that conducts Class I activities, and manufactures edible products or topical products using infusion processes, or other types of cannabis products other than extracts or concentrates, and does not conduct extractions;
  • Class III: A licensee that conducts Class I and Class II activities, and extracts using mechanical methods or nonvolatile solvents; and
  • Class IV: A licensee that conducts Class I, Class II, and Class III activities, and extracts using volatile solvents or supercritical CO2.

The CCD application ties each license to a particular class. If you have multiple locations, you can group those with similar classes together on one license or submit them all under the highest class. 


Are there special requirements for licensing these facilities? What about special employee policies and SOPs?

As a manufacturer, you are producing products for human consumption so your facility is treated like a food handling facility (think commercial kitchen with extra security, training and inspections). Each manufacturer must be licensed by CCD, the State Environment Department and, in larger cities, the city’s food safety or environmental health department.

Some components must also be certified by the department of agriculture and the LP gas regulation section. Because these facilities require multiple layers of licensing, we recommend working with your consultants (including architects, landlord, equipment suppliers and construction teams) early in the process to understand the different licensing requirements for each room and piece of equipment.

Additionally, your staff must all obtain and maintain safe food handling certifications.  At Weeds. we help you design the licensing, training and compliance protocols to keep your facility safe.


Building and Landlord Issues

Almost half of your license application and compliance relates to the design and operation of your facility. Applicants usually find that this part of their license is the most complicated, mostly because very few buildings meet the strict security, zoning, environmental, utility and other requirements for cannabis facilities.

I have a state license and a lease for a building but my city says I have to get a “change of use” and lots of expensive design drawings. What is this? 

I already have a building in mind. What do I do next?

Well-meaning landlords often market their properties as “cannabis-friendly” but many can’t pass the stringent local and state rules.

Some cities have buffers between cannabis facilities and other uses (schools and daycares, usually).  Some even add things like churches, government buildings, and parks or they add unreasonable nuisance, odor, water, or security requirements (mostly intended to limit cannabis uses in a different way).  And, even if you get pass those tests, many commercial property covenants, standard leases or bank agreements prohibit using the sites for uses against federal law, even if the landlord consents. It is important that you have an experienced cannabis realtor or consultant on your team when you evaluate buildings so you aren’t locked into a lease you can’t use. At Weeds. we have a team of experienced realtors we work with to identify and evaluate properties for clients.

Every commercial building has to have a fire inspection and certificate of occupancy to show that it is safe for the intended use. In other industries, a previous tenant (think a regular retailer or restaurant) probably obtained a certificate of occupancy and the next tenant can keep using it the same way as long as the building isn’t changed too much. But cannabis is new so the first cannabis tenant (that’s you!) has to prove that the building is safe to use for this new use. That usually means you have to obtain new architectural drawings and, sometimes, new engineering drawings to prove that it meets codes and your use. The rules for passing those inspections vary from city to city so it’s important to work with experienced project managers upfront.

We help our clients evaluate potential buildings before they sign leases or contracts so you know what it takes to get it up to code and help you negotiate for those costs before you sign. If you already have a building, we have a network of professionals we work with for clients who can help you get the building and occupancy permits required to open.


I heard it can take a long time to find the right building for cannabis use. Why is that?

When you apply for your state license, you must have a premise identified that meets all local zoning and building codes, or a plan to receive required variances and permits.

When you change the use of a facility to cannabis, your facilities must receive new fire inspections and new certificates of occupancy (building inspections), even if you already have one. This often requires architects or mechanical engineers to certify that your plans meet building codes for your use. At Weeds. we work with experienced construction managers to ensure your building can meet those rules and that you understand the costs and timelines for required upgrades or renovations.

If you have not already identified a facility, we can connect you with cannabis-experienced realtors and project managers to help evaluate zoning, permitting, and construction costs before you sign the lease or note.


I am a landlord and I’d be open to cannabis tenants. Can you help?

Yes! Cannabis-ready spaces are at a premium in this market. We have worked with property owners to evaluate their properties for zoning, distance and utility capacity before listing so you can market your best assets.

Often, we can work with your realtor to identify a viable tenant in our client list, helping you close a deal before listing.


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