Last Tuesday, the Board of Supervisors in Riverside County approved an ordinance allowing the following commercial activities starting on 26th December: Testing, Manufacturing, Distribution and Wholesale Nurseries. There is now a 60-day deliberative period regarding the cannabis businesses in Riverside based on the newly approved ordinance. The Board also voted to allow a limited number of dispensaries and cultivators to operate in 2019. Up to nineteen dispensaries and fifty grows will be permitted in unincorporated Riverside County as decided by a 3-2 vote following a public hearing that last nearly four hours. The Board also approved an “Implementation Plan for Retail and Cultivation” uses that is scheduled for process in early January 2019. The proposal process will include pre-registration by interested applicants, and the issuance of a Request for Proposals by the Planning Department. However, there are certain conditions that will be enforced regarding additional taxation and fees associated with each of these activities as determined by the Planning Commission.
Marijuana remains a controversial issue in many countries other than the United States, and entrepreneurs interested in cannabis business may be curious about the legal status of marijuana in other nations.
Courtesy of Herbonaut, here's an infographic breaking down the legality of cannabis use across Europe:
California cannabis entrepreneurs have to go through the often lengthy and cumbersome process of applying for local and state commercial cannabis licenses. But that is only the beginning of the journey to becoming a successful, fully-compliant business in this emerging industry.
Entrepreneurs interested in operating a cannabis business in California must decide how their business will operate and what business structure will work best for their specific business goals. They must consider the commercial, legal, and tax implications that come with deciding which business structure they want to operate under.
Once entrepreneurs have decided which business structure will best work for their specific business goals, the next step is to begin the entity formation process. This process consists of deciding what the Company name will be and drafting the entity formation documents that will determine how your cannabis business will operate.
As a full-service cannabis law firm, we represent many clients who have gone through this process already. Two of the most common business structures we have seen entrepreneurs decide to start their cannabis business as have been Limited Liability Companies (LLCs) and Corporations. Although there are some similarities between both business structures, there are some major differences that entrepreneurs need to understand prior to beginning the entity formation process.
At Margolin & Lawrence, our cannabis attorneys can help you with all the formation and governing documents for your LLC, such as the articles of organization, operating agreements, and statements of information. If you decide on structuring your cannabis business as a corporation, our cannabis attorneys can help you with your corporate formation documents such as bylaws and articles of incorporation.
Additionally, we understand how important it is for new businesses to raise capital to continue to grow their business. Given that cannabis is still illegal under federal law, entrepreneurs looking to raise capital for their cannabis business need to seek private investment capital. In order to do so, there are a series of important documents private investors want to examine before they decide to invest in your cannabis business.
For instance, companies looking to raise capital need private placement memoranda (PPMs) and subscription agreements. A PPM is a legal document that is given to prospective investors when selling stock or any other security interest in a business. The PPM provides prospective investors with an in-depth look at your business, including management, analysis of operations, risks factors, financial information, among other things. The goal of the PPM is for prospective investors to be fully informed about all aspects of your cannabis business.
A subscription agreement is an agreement between a corporation and the investor (the subscriber) in which the corporation promises to sell a certain number of shares at a specific price to the subscriber and, in return, the subscriber promises to buy the shares at the agreed upon price.
At Margolin & Lawrence, our cannabis attorneys can help you and your business with any capital-raising compliance and legal representation. Additionally, our cannabis attorneys can help you decide which business structure best meets your cannabis business goals. And we can help your cannabis business remain compliant with all the governing laws every step of the way, including ongoing compliance with state and local commercial cannabis regulations and employment laws, avoiding and minimizing the expenses of civil litigation, addressing the implications of federal illegality of cannabis, and helping to informally resolve any internal or external disputes that jeopardize the business operation.
Commercial cannabis is heating up on the central coast. Here’s a look at what’s green:
The City of Goleta began accepting cannabis planning applications on August 17th. Applicants will need to obtain either a Land Use Permit or Conditional Use Permit issued by the Planning & Environmental Review (PER) Department. A Cannabis Business License will only be issued upon approval by the PER Department. Applicants are required to submit an Odor Abatement Plan and Certification approved by a Professional Engineer or Certified Industrial Hygienist. In addition, cultivators will need to show proof of consultation with Southern California Edison (SCE) showing participating in SCE’s Savings by Design Program as well as participation in the Resource Innovation Institute’s Calculate Powerscore Tool. More information on Conditional Use Permits and Land Use Permits for cannabis operators in the City of Goleta can be found here.
Cannabis Business Licenses will be valid for one year from January 1 to December 31, regardless of when the license was issued. Something to consider as we approach the latter end of the year, as all businesses will need to renew their license prior to January 1 and pay the applicable renewal fee. The amount of retail licenses the city will issue has been limited to 15. The city will review applications on a first-come, first-serve basis and will implement a waitlist for potential retailers. More information on Cannabis Business Licenses for the City of Goleta can be found here.
The City of Lompoc is open for all cannabis operators with the exception of outdoor cultivators. Currently, there is no cap to the amount of licenses the city will issue and will allow for onsite consumption. Prospective operators will need to obtain a commercial cannabis use license issued by the City. Application materials and information on the city’s laws and regulations can be found here.
Santa Barbara County is expected to open by the end of the year for new businesses. Prospective applicants will first need to obtain either a Land Use Permit or Conditional Use Permit. Permit type is dependent on whether you are located inside or outside the Coastal Zone and distance to sensitive use receptors. Check here for information on land use and zoning in Santa Barbara County. A maximum of 8 licenses will be issued for retailers and all outdoor cultivation has been prohibited in the Coastal Zone. Once you have received the applicable land use or conditional use permit, you will then need to apply for a Cannabis Business License. Application materials for a Cannabis Business License will be made available here. Supplemental information may be required such as, environmental and energy conservation measures dependent on your zone. Be sure to check through the application requirements carefully and thoroughly or consider hiring an attorney to breakdown the process.
San Francisco’s Golden Gates have opened for those interested in running their cannabis business in the City and County of San Francisco. Although the San Francisco Office of Cannabis is currently accepting applications, not everyone is welcomed to apply just yet.
Currently, the San Francisco Office of Cannabis is accepting applications only for applicants who are applying through the Equity Program or as an Equity Incubator. Those who do not meet the criteria to apply under the Equity Program or as an Equity Incubator, will need to wait to apply after the San Francisco Office of Cannabis opens applications, which they expect will open before 2019.
In order to apply as an Equity Applicant, there are numerous requirements the applicant needs to satisfy. First, the equity applicant must:
- Apply as a person, which means that a company cannot apply under the Equity Program
- Have net assets below established limits for each household (click here for more details)
- Be one of the following:
- The business owner
- Own at least 40% of the business and be the CEO
- Own at least 51% of the business
- A board member of a non-profit cannabis business where most of the board also qualify as Equity Applicants
- An individual with a membership interest in a cannabis business formed as a cooperative.
Additionally, the equity applicant must meet 3 out of the following 6 equity conditions:
- Have a household income below 80% of the average median income in San Francisco for 2017. This amount is calculated based on how many people are in your household (click here for more details.)
- Have been arrested for or convicted of the sale, possession, use, manufacture, or cultivation of cannabis (including as a juvenile) from 1971 to 2016
- Have a parent, sibling or child who was arrested for or convicted of the sale, possession, use, manufacture, or cultivation of cannabis (including as a juvenile) from 1971 to 2016
- Lost housing in San Francisco after 1995 through eviction, foreclosure or subsidy cancellation
- Attended school in the San Francisco Unified School District for a total of 5 years from 1971 to 2016
- Have lived in San Francisco census tracts for a total of 5 years from 1971 to 2016 where at least 17% of the households had incomes at or below the federal poverty level. To determine whether you satisfy this condition, please click here to see a map showing areas of significant poverty in San Francisco.
Those who satisfy the criteria to be an Equity Applicant will not have to pay the $5,000 permit fee for this year. However, equity applicants will have to pay for renewals.
Equity Incubators will also provide Equity Applicants with rent free space for 3 years or technical assistance to help Equity Applicants run their business. Once the Equity Applicant has satisfied the eligibility criteria, the San Francisco Office of Cannabis will help equity applicants partner with an equity incubator business. The Office of Cannabis will send a list of verified equity applicants, which will help equity applicants and incubator businesses find one another.
To find out more about the Equity Incubator program, click here.
Equity Applicants can apply for the following licenses:
- Manufacturing (volatile or non-volatile)
- Retail (medical and adult use)
- Delivery only retailer (medical and adult use)
- Medicinal cannabis retailer (medical only)
- Testing Laboratory
- Microbusiness (can conduct up to 4 activities: cultivation (less than 10,000 sq. ft.), manufacturing (non-volatile only), distribution, and retail.
More information about the application process and requirements can be found on the San Francisco Office of Cannabis website.
Getting a commercial cannabis license in California is complicated enough when coordinating your proposed business activities with a variety of government agencies. Depending on what activity (or activities) your business plans to conduct, every commercial cannabis license will ultimately be processed by one of three state agencies: the Bureau of Cannabis Control (BCC), the California Department of Food and Agriculture (CDFA) or the California Department of Public Health (CDPH). In addition to applying through these departments, your business may need permission from regulatory agencies that manage peripheral elements of the cannabis industry. This may include attaining water permits, landscaping protocols, motor carrier permits, and certification of processing equipment. This will, however, depend on what activities your business seeks to engage in, and will require due diligence and -in many cases - subcontract work. All license applications require the business to register for a seller’s permit with the California Department of Tax and Fee Administration (CDTFA). Every applicant must also comply with the Department of Toxic Substances Control’s database, known as EnviroStor, which tracks cleanup, permitting, enforcement, and investigation efforts at hazardous waste facilities and sites with known or suspected contamination issues. The other type of compliance required for all activities is through the California Environmental Quality Act (CEQA), which is primarily enforced by the Bureau of Cannabis Control. However, CEQA compliance was recently resolved for all licensees in an Environmental Impact Report.
Allison Margolin, founder and partner of Margolin & Lawrence, spoke on Wednesday about dosing regulations at the State of Cannabis conference in Queen Mary, Long Beach. The maximum dosage is 100 mg of THC for packaged edible products, and each serving can contain no more than 10 mg. This was established in the final re-adoption of the emergency regulations (CCR, Title 17, Division 1, Chapter 13, §40305), and while these limits may frustrate consumers with a higher tolerance, larger doses of concentrated cannabis products are allowed in non-edible forms. Under §40306 of the regulations, topical products, concentrates and other non-edible products (including tinctures and capsules) may be sold in amounts up to 1,000mg per package. a special recommendation to get a larger dose (up to 1,000mg) without medical prescription. Up to 2,000mg per package is also permitted under this provision, but only for medicinal-use customers and with appropriate labelling.