Should you hire a small business accountant for your cannabis business? Running a business can be challenging because you have so much to keep track of.
You’re probably spending most of your day on your business, putting out fires and managing operations. Then there are the legalities of running a cannabis business. It seems like the laws are changing so frequently, it’s hard to keep up with simple things like bookkeeping.
How do you know it’s time to partner with an accountant to help you with your books? Keep reading to find out.
You’re Starting Your Business
Starting a business should be the most exciting time. It’s usually a different story for cannabis businesses. You have some many more regulations and bureaucratic hoops to jump through, it can be frustrating.
At this stage, you have a lot of critical business decisions to make that have long-term implications. For example, are you better off starting your business as an S-Corp or an LLC? How can you open a bank account, since banks are reluctant to deal with cannabis businesses? How do you know you’re setting aside enough money to pay taxes?
These are important questions that you need to know the answer to before you open your doors. It could be difficult to change or leave an expensive mess to clean up down the road.
Hiring an accountant that provides cannabis tax planning services now will help your business get off to a strong start because you have someone to help guide you in setting up your company the right way.
You’re Getting Audited
Cannabis companies present red flags for tax authorities. Many businesses operate on a cash basis, and the IRS and state department of revenue want to make sure that you’re paying your fair share. They also want to make sure that you’re not taking more than your fair share of deduction.
You should expect that your business will be audited at some point. Instead of showing up to an audit with your receipts in a shoebox, you should hire a small business accountant who can help you through the audit.
In an ideal situation, you worked with an accountant who works with cannabis businesses to prepare your taxes in question. They can make sure that your taxes are correct from the beginning. This will give you confidence that you’ll be able to get through the stress of a tax audit.
You Don’t Know Tax Laws for Cannabis Companies
Let’s face it, tax laws for cannabis companies is a daunting maze that is hard to figure out. You have a choice in your business: you can become a lawyer and figure out the laws yourself or work with someone who already knows the laws.
Where many cannabis businesses are getting stuck revolves around section 280E of the IRS code. This section is crucial for cannabis businesses. For just about every business, you’re allowed to deduct business-related taxes, which can limit your tax liability.
Section 280E makes it illegal for companies that sell or distribute drugs that are classified as Schedule I or Schedule II to take business deductions. Some companies don’t have to be concerned with it, but if you have a dispensary, you can’t take deductions.
How does this impact you? You’re going to pay more in taxes. Even if you take deductions, the IRS says no, and you go to court over the issue, you’re likely to lose your case.
You’ll want to have an accountant who can advise you as to what you can deduct and what you can’t deduct. If you assume that you can deduct expenses that you really can’t, it can impact the overall profitability of your business.
Your Business Has Employees
Do you have employees or plan to have employees soon? You’re going to pay payroll taxes as a result. You want to make sure that your business is set up to pay those payroll taxes from the beginning.
Payroll taxes can be difficult to calculate. You can’t afford to make a mistake, especially since your taxes are already scrutinized so closely.
Your best bet will be to hire an accountant who can handle payroll from setup through payroll tax representation if you fall behind.
You’re Behind on Your Taxes
When you don’t know the tax laws for cannabis companies and you’re just trying to get by, it can be easy to get behind on your taxes.
Rather than bury your head in the sand hoping the problem will go away, you’ll want to hire an accountant. They can tell you what your options are to get back on your feet.
For example, you could get on an installment plan or file an offer in compromise. The sooner you take on the issue, the easier it will be to resolve it.
You’re Selling Your Business
If you’ve made it this far without a small business accountant, congratulations. Should you have a thriving business and you’re ready to sell it, you’ll want an experienced accountant by your side.
An accountant will be able to help your business by putting your finances in order. You want to get the most value for your business, and your selling price will depend on the financials. If you can’t demonstrate that you have a profitable business, you’re unlikely to sell it for a decent price.
You Need a Small Business Accountant Now
Your cannabis company is under scrutiny by regulators at every stage of your business. You want to make sure that your business isn’t at risk simply because you didn’t know or understand tax regulations.
No matter what stage your business is in, you need to hire a small business accountant now. They can help you stay compliant with tax laws, which are complex for cannabis companies. The consequences of running on the wrong side of the IRS and state authorities are too great.
You don’t want to leave your accounting needs to chance. You want a team of experts who specialize in working with cannabis companies. Contact us today to learn about our accounting services for cannabis companies.