Your Guide to Marijuana Bonds

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What is a marijuana surety bond?

In certain states, businesses must post a marijuana bond before they can legally operate a medical marijuana or retail marijuana dispensary, testing lab, pharmacy, or cultivation or processing facility. Businesses that transport marijuana-related products may also be required to post a bond.

Over half of the United States have legalized marijuana in some way – many for medical purposes, some for recreation. To better regulate the industry, some states, cities, and counties now require surety bonds. Marijuana bonds help keep businesses in check, ensuring they follow the law and regulations set for the industry.

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Quick Takeaways

  • In certain states, businesses are required to post marijuana bonds before they can legally operate a dispensary, testing laboratory, pharmacy, or related operation.
  • A marijuana bond adds an extra level of protection for the city or state that requires it.
  • The cost of your surety bond will depend on your specific business goals, creditworthiness, state requirements, industry experience, and financials.

How does a marijuana bond work?

A marijuana surety bond is a legal contract involving three parties:

  1. Obligee: The governing agency requiring the bond
  2. Principal: The marijuana business owner who must purchase and post the bond
  3. Surety: The company that financially guarantees that the principal will comply with the bond contract terms

Various types of marijuana surety bonds work differently. For example, if you’re required to obtain a sales tax bond (like in Colorado), you must pay taxes on time and in full for your marijuana business – or face the consequences. For a performance bond (Florida), a dispensary may need to follow strict rules for growing, inspecting, processing, testing, and packaging cannabis.

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The surety becomes responsible for any claim-worthy actions the principal takes. Let’s say a business owner breaks a law that costs a client money. That client can file a claim with the surety company to recoup their losses. The surety will investigate to make sure the claim is valid. If it is, the surety will settle the claim with the claimant.

They may pay the claimant up to the total bond amount. So if the surety bond has a bond penalty of $100,000, the surety may pay the claimant up to $100,000. However, the business owner must later repay the surety in full, plus applicable fees and interest.

The Purpose of Cannabis Bonds

You may need to post a surety bond to become licensed to operate a business that conducts marijuana-related activities. The bond will ensure you comply with state laws and industry regulations. Depending on your bond, the contract may hold you to some of the following stipulations:

  • Paying the correct amount of sales tax
  • Faithfully performing your duties
  • Keeping accurate records
  • Accurate reporting
  • Producing enough of your product
  • Ensuring quality and safety
  • Operating your business ethically and lawfully

This surety bond offers benefits for not only your customers but also the government and your business.

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Benefiting the Obligee (Government)

A marijuana bond adds an extra level of protection for the city or state that requires it. It can make governing agencies feel more comfortable granting business licenses to prospective marijuana business owners. If a business violates the terms outlined in their surety bond contract, they will be held financially responsible for any damages.

Benefiting the Principal (Business Owner)

Posting a surety bond can show consumers that you’re trustworthy and run an upstanding business.

States That Require Marijuana Bonds

Over half of the United States have so far legalized marijuana in some way, shape, or form. Here are the states that so far require some type of surety bond for businesses that wish to engage in marijuana-related activities. Even if your state or city doesn’t currently require this bond, it may in the future.

  • Alaska
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Florida
  • Georgia
  • Illinois
  • Louisiana
  • Maine
  • Massachusetts
  • Michigan
  • Montana
  • Nevada
  • New York
  • North Dakota
  • Ohio
  • Oklahoma
How much do marijuana bonds cost?

The cost of your surety bond will depend on your specific business goals, creditworthiness, state requirements, industry experience, and financials. If you have strong criteria, a surety may write your bond at a 2-5% rate of the total bond amount. If you don’t, you may pay a higher percentage.

To keep your bond costs as low as possible, try to avoid claims. Your surety may drop you if they must settle a claim for you. It may also be challenging to get bonded again in the future – especially at an affordable rate. Conversely, steadily increasing your creditworthiness may reduce your bond premiums year after year.

When do I post my marijuana bond?

You may be required to post your bond within one to two weeks upon notice of license approval. If you don’t, you could lose your business license.

How does the bond renewal process work?

Different states have different renewal requirements. Often, these types of surety bonds renew either annually or biannually. Other times, you may only need to maintain your bond for a specified period. Speak with a professional surety bond provider like ZipBonds for specific requirements and guidance for your situation.

How to Get a Marijuana Bond in Your State

We can help you find the right surety bond for your marijuana business. ZipBonds offers the fastest and most secure option for getting bonded. Our all-digital platform is intuitive and straightforward. Start your application online, or call us at 888-435-4191 to speak with an agent directly.

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About ZipBonds.com

Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”

Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.