{"id":55820,"date":"2018-08-26t15:01:33","date_gmt":"2018-08-26t19:01:33","guid":{"rendered":"https:\/\/48e130086c.nxcli.net\/?p=55820"},"modified":"2018-10-30t16:43:21","modified_gmt":"2018-10-30t20:43:21","slug":"squar-milner-takes-on-cannabis-in-california-and-beyond","status":"publish","type":"post","link":"\/\/www.g005e.com\/2018\/08\/26\/squar-milner-takes-on-cannabis-in-california-and-beyond\/","title":{"rendered":"squar milner takes on cannabis in california and beyond"},"content":{"rendered":"
goral<\/figcaption><\/figure>\n

“every one of my cannabis clients needs multiple services and i think that\u2019s what got people excited.”<\/strong><\/p>\n

by liz gold<\/em>
\ncannabizcpa.pro<\/a><\/em><\/p>\n

when mike goral joined squar milner in january, he was brought on to start the firm\u2019s cannabis practice. headquartered in newport beach, calif., squar milner has approximately $100 million in revenue and is ranked as one of the top 50 accounting firms in the u.s. with 10 locations throughout california and the cayman islands.<\/p>\n

more cannabizcpa.pro<\/a>:<\/b> bruce jolliff: jumping into cannabis head first<\/a> | dope cfo levels up its offerings<\/a> | cannabis trends: what cpas need to know for 2018 and beyond<\/a> | podcast: rich wortmann pioneers in pennsylvania<\/a> | podcast: drew dearlove talks about the cannabis business<\/a> | five secrets to launching your own cannabis accounting firm<\/a>
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led by goral, a state and local tax specialist for more than 20 years, the firm\u2019s cannabis practice has 35 team members working with cannabis startups.
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\nthe services are similar to any other industry, goral said. \u201cwe handle the whole gamut that any company would have; we just focus our attention on cannabis.\u201d these services include bookkeeping, quickbooks and other systems setup, income tax compliance, sales and excise tax returns and consulting.<\/p>\n

\u201cmy international partner is busy as can be with canadian investors looking to invest in u.s. cannabis companies,\u201d he said, adding that mergers and acquisitions also come into play. \u201chow you structure these deals can have a big effect on how the entity gets taxed. we offer all these services for other companies but (our group) focuses on cannabis.\u201d<\/p>\n

as a salt practitioner, goral was used to helping businesses in multiple states and deciphering taxes according to jurisdiction \u2013 but as cannabis was becoming more available recreationally and medically, and as more states started to get involved, he started seeing a big need for services. cannabis business owners started talking to him about what they were facing \u2013 namely there was limited professional help to turn to regarding taxes, compliance, cash management and just everyday business questions. these businesses wanted to be legitimate, but didn\u2019t have the support they needed.<\/p>\n

\u201ci thought someone needed to study this and figure it out and help these people,\u201d goral said. \u201cit was an area that was underserved, and i jumped in head first and it\u2019s been great.\u201d<\/p>\n

that\u2019s not to say there weren\u2019t some challenges, at first.<\/p>\n

\u201cthere were certain members of the firm who were skeptical about getting into this space, it was easier to let someone else do it,\u201d goral said of his firm. \u201cbut they saw the need and demand out there. every one of my cannabis clients needs multiple services and i think that\u2019s what got people excited. it\u2019s not just doing tax returns; it\u2019s consulting and all the other work.\u201d<\/p>\n

goral has worked with everything from seed to dispensary cannabis matters as well as business issues such as funding from private equity, venture capital and investment banking; loan structuring, mergers and acquisitions, cloud-based apps and other software relevant to the cannabis industry.<\/p>\n

that said, he has some restrictions \u2013 all his clients must be licensed, meaning if you are looking for someone to help you obtain an operator license, goral is not your guy. you need to see an attorney for this and goral works with several throughout the country. his clients also need to be legitimate and compliant, following all the regulations properly. he works with $1 million clients all the way up to a billionaire. and though most of his client base is in california, he works with foreign canadian investors looking to buy companies here in the u.s. as well as clients in oregon, washington state, colorado, the east coast and even in the caribbean.<\/p>\n

\u201cfunding is always an issue for all these companies because they can never have too much money,\u201d he said. \u201call of them are seeking a few million here and there to do expansion, but mainly what they are looking for is for somebody to do their books and taxes.\u201d<\/p>\n

goral said he finds some cannabusiness owners keep it in the family, which means you have mom working on recipes for edibles in the kitchen, one cousin driving the truck on the farm and yet another relative keeping the books.<\/p>\n

\u201cwe are making sure they have real books and records so that things can be reviewed to give investors assurance the numbers are legit,\u201d he said. \u201cthey (investors) want to know what\u2019s going on with the money they just paid, so we come in, get the books done and put in policies and procedures around the cash.\u201d<\/p>\n

goral pointed to his firm\u2019s experience with casino clients, which has helped with the cash heaviness of the cannabis industry.<\/p>\n

\u201cwe talk about who is going to count the money, who is going to double count the money, who is going to have the combination to the safe and bring the money to the truck, so you don\u2019t have product and money going out the back door,\u201d he said.<\/p>\n

in terms of the california market, which goral described as on par with the canadian market, the opportunities are many and are becoming more sophisticated.<\/p>\n

\u201cwhat has really changed, is when washington, oregon and even colorado had recreational cannabis, no one really cared,\u201d he said. \u201cthe population of those three states combined is not as significant as a top 10 population state. because of that, you now have business professionals in this business, whereas before it was mom and pop grew four acres in their backyard. at most, they didn\u2019t generate that much revenue and if they broke even they were doing good. now you have private equity, venture capital and east coast money putting millions of dollars into these new cannabis companies in california because the market is so large here.\u201d<\/p>\n

still, despite the large market, funding, banking and tax compliance continue to be the biggest issues goral\u2019s clients face. and while banking is still pretty \u201cspotty\u201d as he described it in the state, those in cannabis still find a way in. for example, it\u2019s possible for a business banking customer that has been around for 15-20 years in another industry to get a bank account for their new cannabis company because that financial institution doesn\u2019t want to lose their primary business account.<\/p>\n

\u201cfrom a banking perspective, they are willing to a certain extent, to accommodate the smaller cannabis business because they want to keep the legitimate business if you will,\u201d he said, adding that in other areas that are more rural, there are not a lot of other businesses to keep the bank afloat.<\/p>\n

goral said he\u2019s continued to be impressed with the innovation that is going on in the industry in ways of growing, consuming and operating. he also said he\u2019s been surprised \u2013 if not disappointed \u2013 at the turnaround time many of the cannabis business owners want to hold onto their companies.<\/p>\n

\u201ctheir end goal is to sell out in three years,\u201d he said. \u201cno one has a 10-year goal, everyone is looking for quick money and that is one of the disappointing things. and the valuations people think they are at are beyond reasonable. some companies are being valued at 40 times their current value, other companies are being valued at 150 times earnings. that starts to get pretty outrageous.\u201d<\/p>\n

goral is excited about being in the industry but for those cpas who are thinking about jumping in, be forewarned, you\u2019ll need more than just a weekend to brush up.<\/p>\n

\u201cyou have to study up on this, it\u2019s very complex and here in california, the regulations aren\u2019t even finalized, we\u2019re going through our second set of temporary regulations,\u201d he said. \u201cyou have to study and be dedicated to it. it\u2019s a great area to be in and the cannabis community is very collaborative, but if you are not willing to put the time in, you have no business in it because it is changing too quickly.\u201d<\/p>\n