Topic: General Posts
Cannabis is clearly a high risk industry that will go through multiple legal issues. As for CPA risk this is what I would suggest...
Lower risk - medical cannabis is Federally legal. The cannabis must me treated like any high risk drug with a medical script required. The medical canabis industry is still moving through the battle of how tightly it controls the product. The Federal government has not reviewed the current business model. However, a CPA should be fine auditing and reviewing the finances of the business, although I cannot imagine an audit opinion that does not have a risk of going concern paragraph.
High risk - Recreational cannabis. Still not legal under Federal law, a CPA would have difficultly with tax and audit work. At times, the company's outside legal firm can contract for information and opinions for certain items like the setup of the business. Remember, that a CPA is required to be a registered agent with the IRS to complete federal taxes and most States also use the IRS registration for completing tax engagements within the State. If the Fed finds that the CPA was adding criminal activity, then a felony for assisting in the distribution of a federally controlled substance would provide a high likelihood that the CPA license would be withdrawn.
Next, this is a business that will have major legal action in the future. The current business model that places the drug in items that can be easily mistaken for candy or food is a major problem. Pharm industry was sued over easy to open containers for pill distribution. With the current business model, American lawyers will get a great pay day as the business grows.
Last, the industry has a complex cash model. Most banks will not associate with the business, so a secondary market has been established. This is still mostly a cash industry as professionals are not interested in having their credit cards provide a paper trail. THe security of the banking model is difficult at best.
We looked at investing in this business and the risk is far heavier than the rewards. For CPA work, tax is high risk and audit is full of issues. As with the creation of their own banking model...they will need to create their own.
Subject: Re:Re:Cannabis Industry
Interesting, so the moral of the story is - don't get involved in cannabis businesses? How about the states where it's legal? I live in Washington right on the border of Oregon. It's legal for both medical and recreational. Basically, all citizens are contstantly hunget..
Subject: Re:Re:Cannabis Industry
Great to hear from you. I lived in Camas WA on the lake just over the boarder from Portland. Graduated from Beaverton High School and U of Oregon. Oregon has always had plenty of canabus in the back yards of the residents. The story on controlled substances is that Federal Law has priority over the State Law. Congress has adjusted the law to support medical canabus, but neither HHS or USDA has defined any regulations around the law or industry. Without regulations, the courts will define the law over time through case law.
Recreational canabus' life and death will be determined by the DEA and FBI unless there is a change in Federal Law. Firm associated with these companies can be included if they are enforce the presiding law. My guess is that they will love to spend lots of time walking through the money trail at a $0 billable rate for the CPA.
If the CPA was willing to run the risk of providing services to the industry, the CPA will make a lot more money, with the same risk, by opening their own shop.