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Starting a Marijuana Business: What You Need to Know

If you live in California, you know Proposition 64, the Adult Use of Marijuana Act, recently passed late in 2016. Among other things, the law has legalized the possession and use of up to 1 ounce of marijuana and personal use cultivation of up to 6 plants per residence by an adult aged 21 or older. It also established a license regulation system for commercial production and sale of cannabis beginning on January 1, 2018. Before you think about opening a business in this industry, here are a few things you need to know.

You’ll Need a License and a Permit

In order to begin selling cannabis, you will need a permit. All businesses require a Seller’s Permit from the Board of Equalization (BOE). Applying for one is relatively simple. You can use the BOE registration process online or fill out your information in person at one of their offices. Additionally, you will need a license for commercial marijuana sales. These are not yet available for purchase, but California will begin issuing them next year, in 2018. You will either need a Type 10 or Type 10A license, which can be granted to retailers and dispensaries. The 10A restricts you to no more than 3 cannabis retail sites.

Commercial Marijuana Sales Are Still Illegal

For at least another 9 months, the commercial sale of cannabis and cannabis products are illegal. However, medical marijuana sales are allowed. If you want to begin with a medical marijuana business, you can do so in preparation of converting later to a fully stocked commercial cannabis dispensary next year. To ensure you’re not violating any state or local laws, consult an excellent attorney who is familiar with California and local regulations.

Marijuana Is Illegal Under Federal Law

The U.S. government still lists marijuana, like heroin, as a Schedule 1 Controlled Substance. This means the government could legally enforce the law by arresting people who have possessed, cultivated, or distributed cannabis. However, the Department of Justice (DOJ) issued a guidance memo to prosecutors stating that medical marijuana cases are not a priority. The current presidential administration has made noises about cracking down on recreational marijuana use. So, at least for the next 4 years, you might be at risk as a seller of a “controlled substance,” despite its eventual legality under California law.

Its federal illegality also means you will have fewer federal protections. The U.S. government, for example, oversees bankruptcy cases. If you need to declare bankruptcy, you wouldn’t be protected under federal bankruptcy laws. You also can’t deduct business expenses from your revenues for federal tax purposes.

Banking Is Difficult

Very few banks will provide services to any kind of marijuana-based business, legal or not. This will change when federal law no longer lists cannabis as a Schedule 1. However, until that day, banks and credit card companies will remain skittish about loaning you money. Your best bet is smaller, community banks and state-chartered credit unions.

Educate Yourself on the Industry

If you didn’t know there are different marijuana strains, it’s time to get educated. Scientists have been working on adapting different types of to maximize analgesic effects and minimize psychedelic qualities. Certain strains, such as many in the Sativa category, are more likely to fill you with energy, while Indica strains can put you to sleep. Being knowledgeable about the many different flavors and effects will make you a more trusted seller.

Starting a business is hard work, but adding marijuana laws into the mix can be downright scary. Talk to one of our experienced San Diego cannabis business lawyers today. We have more than 50 years of collective experience in business law, and we are familiar with both California and local regulations regarding marijuana growth and sales. Let us help your business thrive. Contact us at (858) 360-7080 or fill out our online form for a courtesy evaluation.

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