What marijuana/cannabis businesses can you start in California?
Under the new regulations, enacted as of November 8, 2016, California started to be open for recreational marijuana businesses as of January 2018. What marijuana/cannabis businesses can you start in California?
The new laws and procedures set by California have provisions for:
- Retail marijuana stores
- Marijuana product manufacturers
- Marijuana cultivators
- Marijuana testing facilities
- Marijuana Distributors
As of right now, these new regulations allowed the State of California started issuing licenses by regulators starting with temporary operating permits beginning January 1, 2018. Currently, the state has not indicated when they will open the application period to would-be entrepreneurs.
What can I do right now?
To get ahead and be prepared for when the state will start licensing marijuana businesses, you can consult with us, for a fee. You should also:
- Read through the regulations, and determine what business type you’d like to have.
- If you’re serious and want to determine what moves you can be making right now to get a leg up on the competition for licenses – get a paid consultation with us and let our expert associates review your situation and instruct on the intelligent moves you could be making now to increase your chances of obtaining your licenses.
How To Open a Marijuana Retail Store in California
The state allows potential business owners to open a marijuana retail stores in California. Whether this is possible or not will hinge entirely on the city and/or county of choice, as the state allows the local municipalities to ban or place moratoriums on whether to license marijuana retailers for operation or not.
- Setup your Marijuana Business Corporation.
- Create a Marijuana Retail Business Plan.
- Determine your potential location(s) and investigate whether licensing is even possible in the prospective cities or counties. Many cities have made operating cannabis businesses illegal under their city laws.
- Acquire the necessary licenses to operate your cannabis store or other operation and be completely legal and compliant.
- Install the operational infrastructure to be in accordance with all regulations and then open your doors for business.
- Contract with cultivators and/or edible/extraction/infused products manufacturers to grow and produce marijuana products for you, if you don’t want to do it yourself.
How To Grow/Cultivate Marijuana Legally in California
Same as Retail Store steps, the only difference is that you will be contracting with dispensaries, delivery services and/or edible/extraction/infused products manufacturers to grow marijuana for them.
How To Start a Marijuana Delivery Service in California
Same as Retail Store steps, the only difference is that you will be contracting with cultivators and/or edible/extraction/infused product manufacturers to grow and produce marijuana products for you, if you don’t want to do it yourself.
How To Start a Marijuana Edibles, Marijuana Infused Products or Marijuana Extractions Business In California
Same as Retail Store steps, the only difference is that you will be contracting with dispensaries and delivery services to provide your products to customers as well as contract with cultivators to grow marijuana for you if you don’t want to do it yourself.
The latest marijuana industry news, laws, & frequently asked questions for California.
Some resources for you are :
What about the Federal Government making marijuana illegal?
National prohibitions against interstate cannabis commerce and federal banking and drug laws are keeping big companies at bay, which opens the door for small businesses and startups to establish dispensaries, retail stores, cultivators, processing, manufacturing and testing facilities.
The MMJ industry endures in an unclear legal atmosphere. The interpretation and enforcement of laws vary widely from county to county and location is extremely important to your success. California MMJ laws allow for “an exemption from prosecution” if you are operating under specific rules (the CA Attorney General’s medical marijuana guidelines).
Until new MRSA laws are put in place, “PROFITS” are still not allowed by the federal government. However, you can make a living wage by working as a dispensary director, employee, or grower.
The California Legislative Analyst’s Office is the state’s nonpartisan fiscal and policy adviser. It issued a paper on Tuesday, February 14, 2017, expressing doubt whether implementation of Proposition 64 will be self-funding in the early stages, or turn out a drain on the treasury.
What follows is a summary of the most relevant points, including opinions expressed by Los Angeles Times and our own thoughts. Here is a link to the official document if you would like to study the long and detailed report.
- We currently have two official approaches towards regulating marijuana in California. These are (a) the Medical Cannabis Regulation and Safety Act of 2015, and (b) Proposition 64 of 2016 for Legalized Nonmedical Cannabis.
- The State Legislative Analyst’s Office is urging cash flow restraint. While it agrees with Gov. Jerry Brown, it believes there is ‘significant uncertainty regarding the resource needs for departments to regulate and tax medical and nonmedical cannabis.’
- Its two main concerns are whether the Trump Administration will clamp down on the industry as it legally may do, and how many marijuana businesses will emerge, register, and contribute to their administrative cost by paying taxes. The Catch 22 is that merging the two systems will delay this benefit.
- According to Los Angeles Times, “the State Board of Equalization estimates there will be 1,700 dispensaries and retailers paying taxes, while the Department of Consumer Affairs, which will oversee the businesses, expects 6,000 pot shops, based on experience in Colorado.’
- In the light of this, the California Legislative Analyst’s Office reticence to support borrowing large sums of money becomes understandable. At this stage, we do not even know whether a method to license and tax sales will be in position on January 1, 2018, per proposition 64.
Preparing to apply for state medical marijuana licenses in 2018
Governor Jerry Brown signed the Medical Marijuana Regulation and Safety Act (MCRSA) into law on October 9, 2015. Composed of three separate bills—AB 266, AB 243 and SB 643—MCRSA establishes a framework for future medical marijuana regulations and a statewide licensing program for growing, manufacturing, transportation, distribution, testing, and retail dispensing of medical marijuana.
Existing businesses who demonstrate current compliance with their local jurisdictions will be allowed to continue to operate during license application review, likely in 2018.
Medical marijuana business license types
Grower/Cultivator: this license is for entities that wish to grow medical marijuana plants from seed or clone to flower and finish. Growers wishing to provide clones, but who do not intend to flower or finish plants, may apply for a specialty nursery license.
To apply to grow cannabis in California, you will need to select a license based on your grow size and lighting source:
- Tier 1: Specialty
- License 1: Specialty Outdoor. Up to 5,000 sq ft of canopy OR up to 50 mature plants on noncontiguous plots.
- License 1A: Specialty Indoor. Up to 5,000 sq ft using exclusively artificial lighting.
- License 1B: Specialty Mixed-Light. Up to 5,000 sq ft using a combination of natural and supplemental artificial lighting.
- Tier 2: Small
- License 2: Small Outdoor. Between 5,001 and 10,000 sq ft of canopy.
- License 2A: Small Indoor. Between 5,001 and 10,000 sq ft of canopy using exclusively artificial lighting.
- License 2B: Small Mixed-Light. Between 5,001 and 10,000 sq ft of canopy using a combination of natural and supplemental artificial lighting.
- Tier 3: These licenses are limited in their access to vertical integration.
- License 3: Outdoor. Between 10,001 sq ft to one acre of canopy.
- License 3A: Indoor. Between 10,001 sq ft to one acre of canopy using exclusively artificial lighting.
- License 3B: Mixed Light. Between 10,001 sq ft to one acre of canopy using a combination of natural and supplemental artificial lighting.
- License 4: Nursery.
Processor: this license allows business entities to process raw medical marijuana plant matter into a variety of medicinal products.
- Processor licenses are sub-divided into two categories based on the types of solvent being used.
- License 6: Manufacturer 1. Not using volatile solvents.
- Legislators have stated License 6 was not intended for use by edibles manufacturers. This may be subject to cleanup language.
- License 7: Manufacturer 2. Using volatile solvents.
Additional cannabis license types currently allowed under California law include:
- Tester: laboratories intending to test medical marijuana products for quality and potency will be required to apply for a tester license
- Dispensing: businesses that intend to retail medical cannabis to qualifying patients will require a dispensing license
- License 10: one retail location
- License 10A: up to three retail locations and the potential for full vertical integration
- Distributor: MMRSA requires that—while business agreements can be made directly between any licensed entities—a third-party distributor be responsible for overseeing and officially conducting any business transaction that occurs. Distributors are required track all products received, and to have them tested for quality.
- License 11. All distributors must also apply for a Transporter License (12).
- From the legislative perspective, the inclusion of the “distributor” model was a necessary compromise to address the trust deficit with people who do not believe the cannabis industry is effectively and consistently self-regulating.
- Transporter: business intending to transport medical marijuana from one licensed facility to another.
Available now from Green Rush Consulting
MMRSA emphasizes the need for medical cannabis business entities to operate in absolute compliance with all local jurisdiction laws, regulations, and standards:
“If your business is “in compliance with local zoning ordinances and other state and local requirements on or before January 1, 2018,” it may continue to operate until licenses are established.”
How we can Help with your Cannabis or Marijuana Business:
- Incorporation: Miller and Associates can create an LLC, or C Corp or S Corp for your business to help you be in compliance with the law.
- Business Plan: Miller and Associates will work with you to prepare your business plan. This crucial document explains your vision and your niche, and establishes consistent values and language that shapes your enterprise. It also prepares you to seek investment, and explain your business and growth goals to local and State regulators.
- Compliance: Our law firm can help ensure that your vision for your company is state compliant, and in-line with the goals of the State of California. We will constantly update you on the rapidly changing status of legislation and regulations in the state and your local city of operation.
- General Consulting: Miller and Associates can help you navigate the local-level zoning and regulatory politics that can prove detrimental to your business endeavor. Let ius educate you on the latest laws, policies and standards that pertain to your desired business location, and handle the legal applications, security plan, background check, and submitting all insurance and personal requirements for you.
- Standard Operating Procedures: Our marijuana business law firm can provide you with custom SOPs designed to efficiently meet your company’s specific needs.
- Security Plan: Our Cannabis Lawyers can evaluate your security plan, or create one tailored to your facility. Either way, we will make sure that your company is at all times safe, secure, and operating in full compliance.
If you are wondering how to open a dispensary in California, or how to get started legally growing medical marijuana in California, contact us today. Our goal is to give you the tools you need to understand California medical marijuana dispensary laws and the other laws affecting medical marijuana growers, processors, or retailers.
Summary of California marijuana laws
Several different pieces of MMRSA seem designed to limit big business:
- Legislated caps on the biggest cultivation licenses
- Limitations to holding multiple license categories
- Sunset clause on vertical integration – in 2026, unless this clause is renewed, businesses will no longer be allowed to hold dispensary, manufacturing, and cultivation licenses at the same time
The three bills that comprise MMRSA are only the beginning, and detailed forecasting of California’s cannabis industry is premature. That being said, the legislators who authored MMRSA have consistently indicated that they want to establish a compromise between critical stakeholders: the existing cannabis industry, law enforcement, local jurisdictions, and the public.
Key areas of focus in MMRSA are local jurisdiction and environmental responsibility. Existing and future cannabis businesses can start working now to establish a strong foundation in these areas in preparation for the state licensing process.
California Health and Safety Code 11362.775 states that medical marijuana patients and primary caregivers may “associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes”.
This provision doesn’t give these facilities complete freedom to do as they wish. In fact, collectives and cooperatives must adhere to strict guidelines in order to comply with state legislation. These requirements include:
1) File articles of incorporation under the Corporations or Food and Agricultural Code
Collectives and cooperatives are not designed to make a profit but instead are supposed to be set up as “non-profits” to benefit their members. Despite the fact that people are quick to cash in on what is being called as the “green rush”, California law specifically states that there is nothing in Prop. 215 or the MMP to “authorize any individual or group to cultivate or distribute marijuana for profit”.9
2) Obtain the proper forms
Medical marijuana transactions are subject to sales tax, which means that collectives and cooperatives must obtain a Seller’s Permit (information about which may be found on the California State Board of Equalization’s website). Depending on the city/county in which you plan on opening the facility…you may additionally be required to obtain a business license and/or a zoning permit.
3) Regulate your membership
In order to comply with state regulations, you will want to prove that you are not distributing marijuana for anything other than medical purposes. In order to do this, you should
- a) Have an application process – have new patients or primary caregivers complete a written application that provides his/her recommending physician’s name and contact information.
- b) Verify that the patient or caregiver has a valid California medical marijuana identification card or…in cases where they do not…personally contact the recommending physician and verify his/her license status.
- c) Keep copies of all I.D. cards and physician referrals. And,
- d) Require the members of your collective or cooperative to sign a contract agreeing not to distribute or use marijuana for anything other than medicinal purposes. And if you discover that members are not abiding by their contracts, revoke their membership.
4) Only buy/sell marijuana from members
California medical marijuana collectives and cooperatives are not permitted to purchase marijuana from (or sell it to) non-members. Keep in mind that the only type of legally grown marijuana is that grown by a qualified patient or his/her primary caregiver. Dispensaries are simply supposed to provide a means for facilitating and coordinating lawful marijuana transactions between members.
This means that you should record the source of all incoming and outgoing marijuana for purposes of a state audit.
5) Be mindful of your sales prices
When it comes to distributing your marijuana, you may only:
- a) provide it free to members,
- b) distribute it in exchange for services that members provide to the collective or co-op,
- c) charge fees that are reasonably calculated to cover only your overhead and operating expenses, or
- d) any combination of the above.
These rules are to ensure that you comply with your status as a “non-profit”.
6) Keep track of your marijuana
California law establishes strict guidelines under the Medical Marijuana Program “MMP” Act for how much medical marijuana a patient or caregiver may grow, possess or distribute…8oz of dried marijuana, 6 mature marijuana plants or 12 immature plants. If a person is a caregiver to more than one patient, he/she may grow, possess or transport those amounts for each patient.
Similarly, a co-op or collective may grow, possess or distribute those amounts for each member. For example, a co-op that has 10 members may carry ten times the amount authorized for one person. However, many local ordinances prohibit growing or possessing more than 99 plants, regardless of how many patients/caregivers the collective has.
Because of this, it is very important to document exactly how many members you have, as well as how much marijuana you have at any given time. Engaging in any marijuana-related activities with more than the legal amounts will increase your potential criminal liability.
7) Establish security practices
This isn’t a law, although a security plan must be shown as part of the application for both city licenses and your state cannabis license. Neighborhood complaints are the number one cause of police raids. As a result, you will want to make sure that your establishment is as “neighborhood friendly” as possible.
This includes (but is not limited to):
- having a pleasant storefront with no “offensive” signs or symbols to attract law enforcement or neighborhood protest,
- operating a well-run, clean and professional store,
- hiring security to ensure that patients are safe and that the surrounding homes or businesses are not negatively impacted by loitering or other criminal activities,
- establishing and following cash-handling practices…both for in-store sales as well as with respect to bank runs…to prevent robberies or other security violations, and
- forming and maintaining positive relationships with local police departments, governments and elected officials.
3.2. Regarding non-collective / non-cooperative dispensaries
Medical marijuana dispensaries that do not operate as a collective or cooperative are actually illegal. Owners of these “for profit” shops may be prosecuted…even if some of their customers are actually qualified patients and/or primary caregivers.
Law enforcement officers/agencies will look for signs that the dispensary isn’t in compliance with local laws by investigating operating practices such as
- merely requiring patients to designate the dispensary owner as their primary caregiver,
- carrying excessive amounts of marijuana…or supplying other illegal drugs,
- possessing excessive amounts of cash,
- purchasing from or selling to non-members, including ones outside of California, and/or
- failing to obtain an appropriate business license or pay the requisite sales taxes.
It bears repeating that the only legal authority for operating a California medical marijuana dispensary lies in Senate Bill 420. If you operate outside of these parameters…for example, by running a “for profit” business…you are violating California’s marijuana laws regarding
- possessing marijuana,
- possessing marijuana for sale,
- selling marijuana, and perhaps
- cultivating marijuana,
just to name a few.
3.3. The importance of knowing local rules and regulations
California law sets the minimum requirements for opening and operating medical marijuana dispensaries overall as a condition of the license. The local law establishes additional regulations as it deems fit. Cities and counties regulate issues such as
- how many marijuana dispensaries may operate at any given time,
- how many marijuana collectives or cooperatives may operate within a certain radius,
- whether to even issue new licenses (for example, Los Angeles, Riverside, San Bernardino and Orange County are among some of the counties that have put a hold on issuing licenses to medical marijuana dispensaries, although individual cities are free to regulate on their own),
- what hours they are allowed to operate,
- whether patients are allowed to consume or ingest marijuana on the premises,
- how much marijuana a dispensary is allowed to carry,
- where they are allowed to operate (for example, California law says marijuana dispensaries may not be located within 600 feet of a school- and local ordinances may tighten that requirement), and
- what type of security a collective or co-op must utilize.
What marijuana/cannabis businesses can you start in California? For a list of specific regulations, you can review the website for the city you intend to operate on or find the not up to date list provided by Safe Access Now that is organized city-by-city as a start for your research.
We can also be hired to research issues related to your new business. Contact our marijuana cannabis license attorney Robert Miller to discuss your needs in the industry.