Company Structure, Financing, and Banking Options

CannDelta and Business of Cannabis Logos

Here’s what you need to know about registering your business, securing funding, and opening a bank account…

By Chris Lavoie, PhD | Associate Consultant | CannDelta


CannDelta, in partnership with the Business of Cannabis, has produced a 10-article series entitled “So, you want to open a cannabis retail store?” which is aimed at preparing prospective cannabis retailers with the tools and resources needed to open their own cannabis retail store. This series covers everything from initial planning, estimated start-up costs, the licensing process, location selection, staff hiring, inventory management, and much more. The goal of the series is to empower prospective cannabis retailers with the knowledge and resources needed to change their mindset from “one day” to “day one”.

Interested in accessing all 10 articles in one place? Download the CannDelta E-Book now using the sign up link at the top of this page.


In the first article of this series, you learned how to prepare for the long and exciting journey towards opening a cannabis retail store. In this article, we will teach you how to put those plans into action, by registering your company, securing funding, and opening up a bank account. You will hear from industry experts across the cannabis space, including existing Ontario retailers and executives from Trichome Financial, and Alterna Savings/Banking.


Once you have made the (fantastic) decision to pursue opening a retail store, one of the next key steps is to register your business, which will be required as part of the licensing application. If you already have an existing business entity that you plan on using to open a cannabis retail store, then you are ahead of the game, but should nonetheless follow along to learn about cannabis retail-specific guidelines.

There are three common types of business entities to consider when registering your cannabis retail business: sole proprietorships, corporations, and partnerships. It is important to understand these entity types when picking the company structure that is right for you, particularly as it pertains to exposure to liability.

Sole proprietorships

A sole proprietorship is the simplest company structure option and the easiest to set-up. As a sole proprietor, you are the sole owner of the business and will be in charge of all obligations for the company, such as hiring employees and engaging in professional contracts. While sole proprietors are privy to all of the company’s profits, they are personally liable for any debt taken on by the company, exposing them to the risk of a creditor making a claim on both their personal and business assets. Additionally, sole proprietors are vulnerable to successful lawsuits against them, wherein a third party could seize personal assets in the event of insufficient company assets. A sole proprietorship is a great option for new entrepreneurs to start off with, and as your company grows, you can transition into an alternative company structure such as a corporation in exchange for shares.


Corporations are the most common company structure type and a preferred option by most cannabis retailers in Ontario. Establishing your business as a corporation can dramatically reduce your personal liability, as you will not be individually liable for the business as a shareholder or director. The corporation owns the assets and the liabilities. Additionally, a corporation may be able to pay a lower tax rate in comparison to a sole proprietor and has the option of transferring the company’s ownership if desired.

In order to register your company as a corporation, you must file articles of incorporation (AOI) with the provincial government. You must also register a separate bank account for the corporation, and file corporate tax returns. In Ontario, corporate income is taxed at 12.5% for the first $500,000 and at 26% beyond that income threshold (as of July 2020). It is important to retain the services of professionals such as lawyers and accountants to help handle your corporate taxes.

There are important aspects of a corporation worth noting when applying to become a cannabis retailer in Ontario through the AGCO. You cannot open a cannabis retail store if the application is made by a corporation wherein more than 25% of the corporation is owned or controlled, either directly or indirectly, by a federally licensed cannabis producer. Additionally, any entity or individual associated with the applying corporation holding 10% or more of shares will need to disclose personal/corporate information as part of the licence application. The AGCO has made it clear that applicants with simpler corporate structures will likely move faster through the licensing process, which is important to keep in mind when planning your company structure strategy.


 A partnership involves more than one person making decisions for the business and is conceptually similar to a sole proprietorship, in that it gives the owners full control over the company, including obligations, profit and liability. As soon as two or more individuals enter into a formal agreement, a partnership is automatically formed. There are several types of partnerships, including a general partnership, limited partnership, and limited liability partnership, which differ in the number of obligations and liability imposed on each partner.

Notable advantages of a partnership include simplicity in setting up (time and cost-wise), and tax advantages. In the event, your business loses money, a partnership company structure will allow you and your partner(s) to offset personal income with the business loss to lower your personal income requirements. Much like a sole proprietorship however, partners are exposed to more liability than if registered as a corporation. Moreover, a partnership exposes you to the negative consequences of one of your partner’s actions, so it is imperative to choose a partner wisely and to have legal representation review your partnership agreement before executing.

It is important for new entrepreneurs to understand the different options for structuring their business, particularly as it relates to exposure to personal liability. Talk to current retailers, consultants, accountants, and lawyers to determine what is best for you.


 In the first article of this series, we covered the expected start-up and annual ongoing costs for opening and operating a cannabis retail store. These estimates were generated through market research, and in interviewing numerous cannabis retailers in Ontario. The projected start-up cost range is $250,000 to $1,4000,00, which includes licensing fees, real estate, construction and renovation, interior design, professional contractors, security installation, and the initial inventory purchase. The projected annual operational costs ranged between $1,600,000 to $8,600,000, which includes licensing renewals, real estate, staff salaries, inventory orders, insurance, professional contractors, banking, and service provider subscriptions.

While securing sufficient capital to launch a cannabis retail store can be difficult, there are numerous funding options and strategies available to help start your business.


The most attractive option for funding your retail venture is to use personal cash and assets to cover as much of the costs as possible. These funds can come in various forms, such as personal savings, personal credit facilities (unsecured lines of credit), loans secured against owned real estate, and any other easily liquidated assets such as stocks and bonds. While these funds may sufficiently cover the costs for some entrepreneurs, for most, it will not.

Partnering Up

If personal funds and contributions from family and friends don’t cover the necessary start-up capital, electing to find a business partner is a great way to reduce your financial obligations and hit the ground running faster. We discussed the logistics of forming a partnership or corporation earlier in this article, which are great options for maximizing your financial prowess while minimizing your individual liability. You can also decide to partner with an existing licensed cannabis retailer, which although would likely result in you having less equity, income, and control over the retail operation than desired is a viable option for getting in the game quicker.

 Financing Options

Once you have exhausted your personal resources to secure funding, going to credit lenders and investors is a great option for quickly (relatively speaking) obtaining sufficient start-up capital. It can be difficult to find financing options as not all lenders are comfortable providing financing options to cannabis companies. Nonetheless, there are a growing number of lenders who are warming to the idea of financing cannabis ventures, and it is important for prospective retailers to compare available financing options to find the one that is most beneficial for your business needs.

One of the leading lending companies in the cannabis space is Trichome Financial (TFC: CNSX), which was founded in 2017 and is headquartered in Toronto, Ontario. Trichome provides customized financing solutions across the Canadian cannabis industry value chain to support growth for new companies. We caught up with Jeffrey Bennett, Vice President of Investments at Trichome to provide perspective on Trichome’s lending strategy, due diligence process, and tips for prospective retailers looking to engage with Trichome.

Can you give an estimate on the amount of funding cannabis retailers typically seek?

“Every applicant’s capital requirements are different. Depending on the number of locations, capital expenditure budget for buildouts and forecasting around inventory management we see estimated start-up costs that range roughly between $500K – $1 million per store in most regions. The request for funding would then be a function of the difference in equity capital that an applicant has raised themselves along with any additional working capital buffers.”

What are the attributes of the strongest applicants who come to Trichome seeking funding?

“We look to finance applicants that bring to the table a combination of proven business and leadership experience operating successful retail or similar ventures as well as cannabis knowledge as it pertains to product selection and consumer trends.  We’re looking for applicants that understand how to run a profitable enterprise in a low margin, competitive environment and have the technical capabilities to adapt to the ever-changing retail landscape.  Applicants that have a well thought out plan with regards to location, branding, product selection, inventory management, staffing and capital allocation should fare well in what we expect to be a highly competitive retail market in Ontario.”

 Is Trichome in a position to seek equity from clients?

“In the case of financing retail cannabis ventures, Trichome’s mandate is to provide non-dilutive debt financing to help entrepreneurs appropriately launch and scale their business.  We do not take direct equity stakes in retail operators, however, as part of our structured transactions we may seek to share in the upside return through equity kickers or similar instruments.”

 What is your projection for the future of the Ontario cannabis retail marketplace?

“Ontario has over 100 cannabis stores licensed to open and another 500+ stores in progress. If the AGCO is able to maintain their goal of 20 new Retail Store Authorizations a month we’ll have close to 200 stores open by the end of this year. Depending on what estimates you read, there’s mention of Ontario supporting upwards of 1,000 retail cannabis stores. (For reference, in 2019 the LCBO reported 666 stores across the province). We believe there’ll be an inflection point where the market becomes oversupplied and the best operators who really understand the customer, provide a superior experience, manage costs, and maximize the tools available to them (i.e. click & collect, delivery, etc.) will come out, on top, as winners.”

In speaking at the Torkin Manes cannabis retail symposium in February 2020, Jeffrey along with Trichome CEO Michael Ruscetta gave clear guidelines on what prospective clients need when seeking funding: 1) a retail operator licence (ROL); 2) a business plan; 3) engagement of relevant consultants; 4) real capital contribution; and 5) realistic expectations.


Much like credit lenders, many of the big banks are hesitant to work with cannabis entrepreneurs due to the infancy of the marketplace. This can present a major roadblock for prospective cannabis retailers in need of basic banking necessities such as payroll, checking, and credit accounts. The lack of banking options has even led to some retailers resorting to a cash-only business, which puts them at a significant risk of theft. Even when cannabis retailers can find a bank or credit union who will, they are often subject to major fees that do not necessarily apply to other business types. Nonetheless, there is an increasing number of banking options for cannabis retailers, prospective retailers should research all available options and understand the application requirements ahead of time.

One of the leading banking options in the cannabis space is Alterna Savings and Alterna Bank, which was founded in 1908 and is headquartered in Ottawa, Ontario. Alterna is both a full-service credit union and a federally regulated bank and is a leading financial services provider in the cannabis sector and was one of the very first Canadian financial institutions to support the cannabis industry. Their services include basic bank accounts, payment processing (wires, merchant services, and ETF’s for cash management), credit cards, financing, as well as a partnership with Brinks for cash secure cash transfers. Prospective cannabis retailers looking to work with Alterna should come prepared with all licensing documents, a business plan, a list of key personnel/investors, and initial capital secured.

We caught up with Brian Lawson, Senior Vice President of Alterna Savings, to provide perspective on Alterna’s banking options, due diligence process, and tips for prospective retailers looking to engage with Alterna.

Can you provide a background on Alterna’s involvement in the Canadian cannabis industry?

 “Alterna Savings is really leading the way in financial services for the Canadian cannabis sector. For over four years, Alterna has been providing products and services to support the regulated medical marijuana and recreational cannabis industry – offering banking services to legal cannabis businesses, when other banks would not.

Alterna is experienced in building meaningful relationships with a significant amount of cannabis partners such as accounting firms, law offices and compliance organizations. This establishes us with the insight to help understand the unique challenges of the cannabis sector. We also have a proven track record within the cannabis industry and understanding retail operator licenses as we are well-versed in the application and processes.”

Can you provide advice for prospective retailers looking to engage with Alterna?

 “Now that the Retail Operator License Application is open to all, it’s vital that those looking to enter the market are prepared for the increasingly competitive landscape. If you’re interested in banking with Alterna, pull together your existing license or documents supporting license application, a full business plan, legal documentation, and details on your initial capital. We’ve developed a process, with a dedicated team and due diligence, that allows the AGCO to complete applications under in a time-efficient and successful fashion. As a result, 96% first-round lottery winners and 81% of second-round lottery winners – opened bank accounts with Alterna.”

What type of services does Alterna provide to cannabis retailers?

 “Alterna offers a product suite to equip cannabis retailers with resources such as bank accounts, cash management, convenient payment solutions, credit card options, wealth, and investment advice. Alterna continues to evolve its services with input from producers, retailers, and ancillary businesses in the cannabis industry, to ensure needs continue to be met within the rapidly growing sector.”


In this article, we highlighted three major company structure options to consider when registering your business: sole proprietorships, partnerships, and corporations. We also covered strategies for securing sufficient start-up capital, along with banking options for your business. You should now be fully equipped to put together a solid business plan that covers your target company structure and potential sources of funding. In the next article of this series, we discuss strategies for finding the best location for your retail store, including first-hand insight from the Blakes Commercial Real Estate team.


Prospective and current cannabis retailers needing support should reach out to CannDelta for a free consultation. CannDelta is a Toronto-based regulatory and scientific cannabis consulting firm that can be reached at info@canndeltav2:8890 or toll-free at 1 (877) 274-6777.