Entity and Ownership Decisions
Choose an entity form with 280E consequences in mind from the outset. A pass-through structure pushes disallowed deductions through to owners as personal tax liability on income they may never actually receive in cash; a corporate structure contains that liability at the entity level, with its own distribution tradeoffs.
Ownership disclosure requirements at RLD licensing also mean the cap table needs to be settled before the application is submitted, not adjusted afterward once the license is already in hand.
Capitalization and Pre-Revenue Spending
Licensing fees, local permitting, build-out, security systems, equipment and working capital consume far more cash than most first-time operators budget for, and the ramp to steady revenue routinely runs longer than expected — whether in Albuquerque, Farmington, or a smaller market like Deming or Gallup.
Startup costs, organizational costs, capitalized build-out and other pre-operational expenditures each carry specific federal tax treatment that should be tracked from the very first invoice, not reconstructed later.
- Separate accounts for startup, organizational and capitalized costs
- Build-out costs tracked by asset class for depreciation purposes
- Working capital sized for a ramp longer than the optimistic case
- Funding properly documented — loans papered, equity recorded, basis tracked
Registrations and a Compliance Calendar
Set up federal and state tax accounts, GRT registration with the Taxation and Revenue Department, Cannabis Excise Tax registration, employer withholding accounts, and any applicable local business registrations. Build the full compliance filing calendar before the very first return is due.
Late first filings are common, entirely avoidable, and start an operator's regulatory record off on the wrong foot with both the RLD and the state's tax agency.
Accounting Setup Before Opening Day
Implement the accounting platform, a cannabis-specific chart of accounts, POS and BioTrack integration, and a documented workflow before the doors open for the first time. Retrofitting this structure after a year of unstructured transactions costs several times more than building it correctly at the start.
Write the procedures down formally. Cannabis staffing turns over frequently, and undocumented processes walk out the door with whoever built them.
Setting Realistic Financial Expectations
Model the business with the full tax reality baked in: federal tax owed on gross profit under 280E, GRT on adult-use sales, the Cannabis Excise Tax stepping upward each year toward its eventual ceiling, expensive capital, and slow wholesale collections.
A plan that only works under optimistic assumptions is not really a plan. Stress-test the model before signing a lease or committing to a build-out.
