We’ve heard the arguments and five years ago we would have been right there with you – why worry about – or goodness forgive- even consider keeping good accounting records? Why take the risk for one in keeping a “paper trail”, and two, why bother to pay taxes when your activities are federally illegal anyway? It’s not usually a good use of common sense to pay someone who tells you what you are doing is wrong, right?
That is the mindset we’re intending to help change. No one likes paying taxes. As a sole proprietor, not only do you pay federal and state income tax, but you also pay employment taxes. For the average business owner, this could top nearly 45% or more in their effective tax rate.
To start, let’s opinionatedly state that in no way do we like the high amount of taxes anyone has to pay. However, we do support following the law, which includes tax law (and also includes laws that States enact based on popular vote that are in the best interest of their citizens, regardless if they are contrary to federal laws). More importantly though, we support upholding business best practices, ethics, positive intentions, fairness, and fiscal responsibility.
A business-like Caregiver who does not keep good financial records or file tax returns is not following these traits as any other business owner would be expected to do. That’s okay. But now is the time to change that.
By “Business-Like Caregiver”, we are referring to licensed Caregivers who produce profit with their activities. So, for example – if soil, nutrients, water, packaging, etc. cost $100 per jar of flowers and the Caregiver charges $150 (or even $105) for producing the contents of that jar, then they are a profit seeking and “business-like Caregiver”. Any excess charged for services that does not exactly cover expenses is a profit.
So why is it time for business-like Caregivers to embrace accounting? Here are a few reasons to consider…
- There is now an example to follow with commercially licensed businesses soon to be in Michigan. These businesses are required to keep complete and accurate financial records. If a Caregiver’s activities mimic a commercial Cultivator or Processor, even on a much smaller scale, shouldn’t their financial records do the same?
- An individual cannot apply for a commercial license without three years of tax returns and financial information. What if in the next 3 years, you, as a business-like Caregiver, decide to jump to a commercial aspect? Or even possibly open a recreational storefront in 2019?
We work with clients now who are planning to jump to commercial status but still remain small – 100-200 plants – what if this is something that you decide to do someday as well?
- Business best practices require good record keeping – just because growing medical marijuana is federally illegal, doesn’t mean a business-like Caregiver is exempt from following other standards. Every business owner (or business) should pay taxes. None are in any different position than another under tax law in the fact that they could consider themselves “tax exempt” (unless of course they have received tax exempt status form the IRS)!
- Tax evasion is a federal crime too – with interest and penalties. Growing responsibly within Caregiver/Patient plant counts and following State medical marijuana laws is a great thing. Evading taxes is not.
- It’s time to step it up, and come out of the shadows. This is my favorite reason. Things have come a long way in the medical Cannabis world. If a business-like Caregiver is following Michigan law, they have all documented records as they should, and are not looking for trouble to begin with (intentionally pushing or exceeding boundaries), then it’s time to come out of hiding. Keep accounting records online/digitally, where only you know the password, if a hard copy paper trail is out of the question. But consider the business and cultural aspect of acceptance in Michigan that is now here. A black market, and related negative stigma, does not have to exist in a world that is constantly creating itself.
- Because we know Cannabis and corporatism never were very friendly together. Why let big business take over this landscape? – The only reason they would is because they do things “legitimately” on paper. Beat them at their game. If Cannabis is going to be in business, help make sure it is done right. Continue to advocate for betterment.
- And finally – because accounting is like a one of a kind puzzle – telling the story piece by piece of a business in balanced numerical harmony – to help with decision making, planning, knowing financial stability, and being the supporting backbone of business operations, integrity and financial prudence. Why wouldn’t a business owner want to show that?
These are just seven reasons – but there are many more. If you are a business-like Caregiver and the points in this post hold meaning for you, please do not hesitate to reach out if you would like to discuss further. We are passionate about this industry and want to see it succeed – especially by the individuals who have helped make the foundation strong in the first place.
If you want to ease into keeping good accounting records, we created a set of tutorials to help small to medium sized business-like Caregivers learn to do their own accounting at home, in a complete, step by step format based on real life scenarios. Please visit LCSAccountingOnline.com for more information. The tutorials are written based of former growing experience and cover all common business-like Caregiver activities, plus much more.
Or, please contact us at LCSolutionsMichigan.com to speak more in-depth about accounting needs or concerns you may have.
Thanks for reading,
LC Solutions Michigan PLLC