Getting Into the Legal Medical Marijuana Business is Not Easy

If you are looking to start a medical marijuana business in California, or in any other state that has legalized/decriminalized the use of marijuana for medical use, there are plenty of regulatory issues facing marijuana businesses.

Typically you will need to be 18 years of age (21 years of age in some jurisdictions), be a resident of the state in which you wish to start a medical marijuana business, and ideally not have a criminal background – especially one with felony charges for conducting an illegal marijuana business!

You will likely need to raise your own start-up capital – as many financial institutions are wary of the marijuana industry – create an appropriate legal entity for the cultivation, distribution or retailing of marijuana, and then apply for the necessary licenses to operate your business.

There are plenty more regulatory issues facing marijuana businesses when you are looking to start a medical marijuana business, and many of them will be influenced by the proposed location of your enterprise.

Location! Location! Location!

Despite certain states legalizing/decriminalizing the use of marijuana for medical use, marijuana is still a banned substance under federal law. The FBI is unlikely to pay you a visit for growing a single plant on your back window ledge; but, because of the United States “Controlled Substances Act”, not every city or county has been enthusiastic about embracing state legislation.

Consequently, it may be possible that you live in a state that has introduced regulations allowing medical marijuana, but the jurisdiction in which you wish to start a medical marijuana business has created its own regulatory issues facing marijuana businesses – either prohibiting the cultivation, distribution or retailing of marijuana, or enforcing limits that would make a commercial enterprise unjustifiable.

It may also be the case that different licensing requirements, zoning regulations and management practices apply in your intended location. These may not only affect your own proposed operation, but also the buyers or sellers you wish to do business with. Consequently, it is recommended that you seek professional legal help to ensure the effort you put into your enterprise is rewarded.

Regulatory Issues Facing Marijuana Businesses in California

To highlight some of the regulatory issues facing marijuana businesses, we are going to look at how to start a medical marijuana business in California; specifically a medical marijuana dispensary in the “Green Zone” of San Francisco, the only area within the city to allow medical marijuana dispensaries. First some background info:

The current regulatory issues facing marijuana businesses in California come as a result of the Compassionate Use Act of 1996. This Act allows patients with a valid doctor´s prescription and the patient´s primary designated care provider to cultivate and possess marijuana for their own personal medical use.

An amendment to the Act allows for cooperatives and collectives to cultivate and distribute marijuana for personal medical use. However, these cooperatives and collectives must operate as “non-profit” organizations and limitations exist to the size of these cooperatives and the procedures they have to adhere to before being able to supply a qualified patient or their care provider with marijuana.

In October 2015, Californian governor Jerry Brown signed into law three bills that comprise the Medical Marijuana Regulation and Safety Act (MMRSA). This Act allows for organizations to operate “for profit” and introduces standards for regulatory oversight. Although the MMRSA is now set in California´s statute books, the first state licenses will not be issued until 2018. Until then, businesses within the marijuana industry still have to operate under the guidelines established in the Compassionate Use Act.

How to Start a Medical Marijuana Business in California

Bearing in mind that the regulatory issues facing marijuana businesses in California will change when state operating licenses are issued, and that the situation regarding individual jurisdictions remains “fluid”, these are the current guidelines for how to start a medical marijuana business in California – specifically how to open a medical marijuana dispensary in San Francisco.

First of all you need to develop a dispensary business plan. This can be used to secure funding if you need it, but most importantly it demonstrates to anybody reviewing your license application that you are serious about your business and have a plan that outlines your goals. Your income and expenditure forecasts should balance. Remember, when you start a medical marijuana business in California your operation should not be showing a profit!

You then have to legally form and register your non-profit cooperative and source a location in which you will be allowed to operate legally as a medical marijuana dispensary. Depending on the size of your business, you will have to apply for an EIN number, file articles of incorporation under the Corporations or Food and Agricultural Code, apply to the California State Board of Equalization for a seller´s permit and then apply for your business license.

Once your license is approved, you will need to install your businesses operational infrastructure. The primary regulatory issues facing marijuana businesses in California are accountability and security. You will need to have regulations in place for membership of your cooperative and ensure they are adhered to. Ideally you should hire security to ensure that your premises are secure for patients and the surrounding area is not negatively impacted by the nature of your business.

Once you start a medical marijuana business in California, you can expect to be inspected regularly (San Francisco authorities audit medical marijuana dispensaries every six months). Therefore not only is it a good idea to develop positive relationships with cultivators, manufacturers and distributors, but also local police departments and government officials.

Find out More about Getting into the Legal Medical Marijuana Business

As we mentioned at the top of the page, there are plenty of regulatory issues facing marijuana businesses and – if you intend to start a medical marijuana business in California – you should not only be looking at the current regulatory issues, but once that you can expect to manifest over the next couple of years.

For this reason, it is in your best interests to seek professional legal advice at the earliest possible opportunity. Irrespective of what branch of the marijuana industry you are proposing to enter, an attorney specialized in helping cooperatives start a medical marijuana business in California will have the expert knowledge to ensure the effort you put into your enterprise is rewarded.