Owning and operating a small business means that you have a lot of responsibilities resting on your shoulders. You may be in charge of everything from cash register duties to maintenance work as well as accounting and product or equipment management. Additionally, you may also have employees to account for, write out schedules for, and pay a salary to. That is a lot of responsibility for one person, and the success of many small businesses relies on the health and well-being of the owner.

So, what would happen if you became ill or injured and could not perform your usual duties for the company? Without you, a small business can easily take a huge hit in revenue, sales, and productivity. A serious illness or injury may likely be the beginning of the end for a business. That is why business expense insurance (or business overhead expense insurance (BOE)) exists.

What Is Cannabis Business Expense Insurance?

In general, business expense insurance is a specific type of business insurance that protects legitimate businesses if something catastrophic happens to you and you are not able to carry out your normal duties. Without you at work daily, your revenue may decrease significantly, especially in a service-based industry where you are the primary supplier of that service rather than your employees.

Just because you are not able to work, though, does not mean that your regularly occurring debts and bills (overhead) will not need to be paid. Things such as rent/mortgage payments, utilities, loan payments, insurance premiums, and employee salary will still need to be paid. Business expense insurance helps you be able to continue to pay these overhead expenses.

For cannabis businesses, business expense insurance may be tricky when it comes to getting coverage. Due to the Controlled Substances Act as well as federal tax law, companies operating in the cannabis industry may not be as thoroughly covered by business expense insurance as other businesses in a different industry.

Federal tax laws concerning controlled substances are essential to prevent drug dealers from claiming tax deductions, but marijuana (even when used for medical treatment) falls into that category as well. You still want to be covered from financial loss from a covered event, so be sure to contact a professional cannabis business insurance company.

Can Marijuana Be Counted in My Business Expenses According to Federal Law?

Because marijuana is still illegal on a federal level (although many states in the United States have made it either partially or wholly legal) as defined in the Controlled Substances Act, the laws governing taking deductions for business expenses are complicated. A medical marijuana dispensary, for example, could not claim deductions on their federal taxes for business expenses because they are considered to be trafficking a controlled substance.

However, that tax code issue only applies to deductions against gross taxable income. Marijuana dispensaries could deduct the cost of their cannabis products from the grower because it is not counted as a business expense but rather a subtraction from gross receipts in determining gross income.

Producers in the cannabis industry also get more deductions for the cost of goods sold, and some of these deductions include things like rent and utilities as well as the marijuana plants and seeds.

Precedents have been set in the tax court in both directions when it comes to the expenses of cannabis business owners, so it is a complex issue. Getting legal advice to discuss your financial protection and business expense insurance options is a great way to know how protected your company truly is.

Do I Need Business Expense Insurance?

Business expense insurance is critical for small businesses around the country because it is a safeguard against catastrophe. No one can ever predict when they may become seriously ill or injured, so insurance for expenses for the business is like a life preserver for the company. Marijuana businesses should certainly consider investing in business expense insurance because the same issues apply to the cannabis industry that applies to others.

What Is Not Covered in a Business Expense Insurance Policy?

Certain types of business expenses are not covered, though, in this type of business insurance policy. Only fixed business expenses such as those listed above fall within the policy limits.

Items including

• new inventory
• equipment purchases
• business property improvements
• owner’s salary

are not included in the typical business expense insurance policy. You would need to have separate coverages for those items as well as any health insurance you may want to offer your employees.

Contact Our Insurance Specialists for Cannabis Businesses

If you are the owner and operator of a business in the cannabis industry and you are looking to invest in business expense insurance, contact OG Cannabis Insurance. Our experienced agents work exclusively with cannabis companies, so we understand the challenges and concerns faced by cannabis business owners like you.

In addition to helping you figure out the best type of policy for the needs of your cannabis business, we can also get you set up with a policy that covers all of the necessities for your cannabis business. We offer cannabis insurance coverages for the recreational and medical marijuana industry, including:

• General Liability Insurance
• Cannabis Product Liability Insurance
• Workers’ Compensation Insurance
• Cannabis Cultivation Insurance
• Cannabis Property Insurance
• Marijuana Dispensary Insurance
• Laboratory and Testing Facility Insurance
• Commercial Auto and Cargo Insurance
• Lounge and Club Insurance
• Special Event Insurance
• License Surety Bonds

When you are the owner of a company, it is important to have the right kind of insurance policy and know its limits. A business owner’s policy can be the reason that the company continues to prosper or falls into bankruptcy in the event of a serious incident.

Contact an experienced insurance broker such as ours at OG Cannabis Insurance to find out more about business expense insurance as well as the wide variety of other insurance coverages and options you have. Call today for a free insurance quote!