An ever-increasing number of states have passed legislation legalizing marijuana for medical uses and some states have even legalized the herb’s recreational use. State laws determine who may cultivate or sell marijuana and under what conditions they may do so. At the outset, it should be noted that the cultivation and sale of marijuana are still considered federal crimes, and whatever efforts are made to comply with state and local laws will not prevent you from being prosecuted under federal law. Regardless, those starting a marijuana business can avoid most serious problems by closely following the state and local rules.

The type of licensing and documentation your marijuana business requires will depend on both the location of your operation and the sort of business you are conducting. For example, someone growing and marketing marijuana to retail businesses may require different licensing and permits than someone operating a dispensary. See FindLaw’s Marijuana and Other Highly Regulated Businesses section to learn more.

The state permits patients or caregivers to organize as a collective or cooperative. Collectives are not defined by the law. Cooperatives are effectively a kind of nonprofit organization. Since marijuana transactions are subject to sales tax, the individual or group selling or growing must also obtain a business license and remit sales tax through the use of a seller’s permit. Recreational marijuana permits are not currently available.

Many states and localities have restricted the number of dispensaries and cultivators or limit their size. Common barriers to starting a marijuana business include the high application fees, strict regulations, and stringent financial reporting and management requirements.

Be sure to check on current licensing requirements with both the state and local governments before getting started. Because marijuana businesses are heavily regulated and still run afoul of federal laws, you may want to consult with an attorney whose practice includes the representation of marijuana businesses at an early stage.