Friday, March 28, 2014

How to Start a Legal Marijuana Dispensary in California


If you're interested in starting your own medical marijuana dispensary in California, you must first recognize the risks inherent in doing so.  Once you recognize the risks, you can work to mitigate them.  Put simply, there is no "safe" way to operate a dispensary.  By strictly complying with all applicable laws, regulations and guidelines, however, you can seriously reduce the chances that you will run afoul of the law.

Marijuana remains illegal federally, but the Obama administration has indicated that it will not seek to bust those individuals who remain in "clear and unambiguous" compliance with the laws of their state.  Unfortunately, nobody is in "clear and unambiguous" compliance with California law because California law is unclear and ambiguous itself.  The unsettled status of our law has created a "green rush" through a legal minefield.  Unfortunately, many cannabis entrepreneurs fail to take the appropriate legal precautions before wading into this new, dangerous and evolving industry. They often learn about the risks the hard way.  

When operating a marijuana dispensary, your mantra must always be "CYA" (Cover Your A**). Keeping your proverbial ducks in a row will reduce the risk of attracting unwanted attention from law enforcement. Maintaining proper, professionally-prepared documentation will also help establish your legal defenses if you are ever accused of any crimes related to the operation of your dispensary.  

Many of my clients call me after they've been raided.  They've often failed to properly cover their a**es when they were setting up and running their dispensaries.  Now they face serious criminal charges for conspiracy, cultivation, transportation, possession and sale of marijuana.  Their documentation may be improper or insufficient to establish a medical defense.  Prosecutors can prove that my clients were growing marijuana or trading it for money, but my clients cannot prove that their activities were performed pursuant to any lawfully-organized cannabis club.  

Don't make this mistake.     

Before you begin the process of forming your dispensary, you should consult with a qualified attorney (such as myself) to ensure your compliance with local laws.  Our firm offers a variety of services to cannabis start-ups, including initial consulting services, help with business formation (filing articles of incorporation, depending on the business entity that best suits your individual circumstances), obtaining a Seller's Permit and Employer Identification Number, drafting of necessary documents that your dispensary will use in daily operations (contracts, bylaws, membership agreements, etc.), ensuring continuing compliance, and training your employees on the law.  

After consulting with a qualified attorney, you must begin the process of creating your business plan.  Your business plan will include such considerations as the form that your business entity will take.  Depending on the size of your proposed project and the number of partners involved, you might choose to organize as a collective, a cooperative or a non-profit mutual interest corporation. Your attorney will explain the advantages and disadvantages of each business form.  Some types of business entities require you to file complicated documents with the Secretary of State, including Articles of Incorporation and governing bylaws.  Our firm can handle this entire process for you, or we can simply advise you if you wish to prepare and file the documents yourself.  

Once you've formed your business entity by filing the appropriate documents with the state, you must apply for a Seller's Permit and Employee Identification Number for tax purposes.  Unlike other types of "medicine", the California Board of Equalization has determined that medical marijuana is taxable and that dispensaries must pay sales taxes.  Again, we can prepare the necessary documentation for you, or else we can provide helpful advice if you wish to do it yourself.  

After your dispensary is properly formed and you have your Seller's Permit / EIN, you must begin the laborious process of drafting the various contracts and agreements for members, growers, transporters, employees, caregivers, etc.  Our firm will draft original contracts to specifically meet the needs of your unique dispensary.  

Once your shop is open and running, you must take care to ensure that your employees are adequately trained on both the law and the shop's in-house policies.  As the owner, you may be held legally responsible for crimes committed by your employees in certain circumstances.  You can also be sued or exposed to civil liability for activities that occur in and around your dispensary.  We can advise you regarding how to limit your own exposure to costly civil lawsuits and to criminal liability for crimes committed by your employees.  We can also provide regular employee training and continuing consulting services to ensure that your dispensary remains compliant with the evolving laws.  

If you've ever considered starting your own marijuana dispensary in California, call our office today to schedule a free consultation.  (714) 449-3335