Michigan legalized medical marijuana sales in 2008 and recreational sales in 2018. Since becoming legal, sales have surged throughout the sate. In just the second quarter of 2019, Michigan dispensaries sold over 11,000 pounds of marijuana translating to $65 million in revenue. Entrepreneurs across the state are understandably excited about what this industry has to offer, but there are some important requirements that must be met before you set up a business. If your new venture requires a Michigan marijuana bond, this is your quick and easy guide.
What Is a Marijuana Bond?
Despite being legal, marijuana sales are sensitive and the industry is highly regulated. One way that Michigan maintains oversight is by requiring many businesses involved with producing, processing, distributing, or selling marijuana to obtain a to operate legally. These bonds are a form of surety bond, which exist to ensure that one party can secure payment from another. In this case, Michigan marijuana bonds guarantee that state regulators can seek compensation if a marijuana-related business breaks any state laws or rules of conduct. The easiest way to understand how surety bonds like these work is by looking at the three parties involved:
- Principal – You are the principal, along with any partners in your business. As the principal, you’re required to obtain a marijuana bond, keep it active, and pay for any claims filed against the bond. If you don’t pay, the surety will cover your debt, but afterward they have the right to collect that debt from you using any legal means.
- Obligee – The Bureau of Medical Marijuana Regulation (BMMR) is the obligee. They regulate statewide marijuana sales and require almost all businesses involved to have a bond as a condition of earning a license. If the BMMR determines the principal has broken any rules, the Bureau has the right to file a claim against the bond seeking fair compensation.
- Surety – The company that issues the Michigan marijuana bond is the surety. The surety also investigates whether claims are valid, and agrees to compensate any valid claims if the principal fails to. Even though the claim is settled at that point, the principal is still responsible for paying the surety back.
How Has Michigan Worked to Reform Marijuana Laws?
Historically, Michigan has been one of the most progressive states in the country in terms of reforming Marijuana laws. Michigan allowed medical marijuana sales before most others, particularly most other Midwestern states. In characteristically trail-blazing fashion, the state made a major effort in 2016 to reform marijuana laws and create a sustainable marketplace for the future. Those efforts led to the license and bond requirements that exist today. Further reforms are conceivable, including tweaks to the bond requirement. However, it’s highly unlikely that regulators will ever abolish the requirement entirely.
Why Do You Need a Michigan Marijuana Bond?
First and foremost, because the state mandates it. Without a bond you can’t get a license, making it illegal to conduct any business. Beyond that, bonds like these build trust in the industry. Thanks to bonds, state regulators know that new businesses in an untested industry will take responsibility if something goes wrong. At the same time, it keeps bad actors out of the industry and helps avoid incidents that could lead regulators to further limit marijuana-related businesses. Even though Michigan marijuana bonds create extra costs for you, the principal, bonds are ultimately a good thing for everyone in the industry.
How Do You Get a Michigan Marijuana Bond?
To start, confirm that you need a bond, and determine exactly what kind of bond(s) are necessary. Bond requirements vary depending on the type of business and the location, and there may be requirements imposed by both the state and the country or municipality. If you need help determining your specific requirements, reach out to the experts at Viking Bond Service for assistance. The next step is choosing a surety company to partner with. Look for one that offers exceptional service, has extensive bond options, and works with anyone regardless of credit. Since you will need a bond for as long as you operate your business, you want to find the right bond company from the start. Once you do, the last step is to submit a Michigan marijuana bond application. You will need to provide information about your personal and business finances, as well as info from any partners you have. When you apply with Viking Bond Service, expect to receive a quote back in as little as 48 hours.
How Much Does a Michigan Marijuana Bond Cost?
The cost depends on the type of bond(s) you need. Bonds have a value, meaning the total amount the surety bond company is willing to pay out for claims. The cost is a small percentage of the value, usually around 5%. That means for a $50,000 bond, the premium would cost approximately $2,500. The exact amount you pay depends on your bond application. Underwriters use the application to evaluate your credit risk and determine how likely you are to meet financial obligations. Applicants with a low credit score, a history of bankruptcy, or other credit blemishes may pay slightly more for their premiums, but in most cases they’re not denied a bond, at least not at a quality surety company like Viking Bond Service. Bonds must be renewed every 12 months, and the premium price can go up or down depending on changes in your credit, so be sure to plan for this as an annual cost.
Taking the Next Steps to Get a Michigan Marijuana Bond
Once you know you need a bond, there’s no reason to wait to apply. Viking Bond Service is here to be our guide through every step of the process. Count on us to make things as accessible and affordable as possible. When you’re ready to get the ball rolling, fill out our online application at anytime, 24/7. Our underwriters will immediately dive into your application and return a quote to you in 48 hours or less. If you still need more information, feel free to call us at 1-888-278-7389 or contact us online. We also recommend you explore a comprehensive free resource we created all about surety bonds.