What Should I Know for My Cannabis Business?

Posted by Margolin & Lawrence on September 18, 2018

The logistics of running a legal cannabis operation involve many questions that may seem surprising or daunting to both current and aspiring business owners. As a California cannabis law firm, here are a few of the issues that we’ve seen cannabis businesses need answers for. If you’ve found yourself asking any of these questions about your own operation, our lawyers may be able to help.

How much can I expect to spend?

At present, the capital requirements to start a cannabis business are very high; on top of the normal costs of starting a business, like buying real estate and hiring employees, the industry is very tightly regulated, and it’s not possible to get an outside loan. That means your business has to be privately fundraised, so it’s important to figure out exactly how much money you have and how much you’re willing to spend.

The application fees alone for cannabis licensing are often several thousand dollars, and many jurisdictions require both proof of funding and a detailed business plan before they consider a cannabis licensing application complete. A cannabis lawyer can help you find this information in order to start your licensed operation.

Is my property in an eligible location for cannabis business?

Zoning requirements vary widely based on your jurisdiction and which type of cannabis activity you’re interested in, so it’s not always easy to tell whether a given property or address is eligible for a particular activity. In addition to restrictions on which zones a given activity can be located in (for instance, cannabis cultivation might be banned in commercial zones but allowed in industrial ones), many municipalities have setback restrictions that prevent cannabis businesses from being located within a certain distance of schools, parks, residential areas, or other cannabis businesses.

Interpreting the local zoning regulations to determine for what activities your business is eligible is another service that cannabis lawyers can provide.

What information do I need to apply for a cannabis business license?

Applying for a cannabis business license isn’t just a matter of filling out an application form – most state and local licensing authorities will require a large amount of information about the business and its owners, including a complete operating plan describing how your establishment will meet all legal requirements for cannabis business activity.

On top of this information, you’ll also need to have business documents such as a seller’s permit, federal employer ID number, and certificate of good tax standing in order. On top of that, most applications will require you to provide accurate financial information, insurance documentation, and enough personal documentation for each member of your business to pass a full background check.

Finding these documents and preparing them for your final application is just one service that cannabis lawyers can provide for your business.

Should I get a license for medical-use or adult-use cannabis?

At the present moment, many states and municipalities have separate regulatory regimes for medical-use and adult-use cannabis, often with very different legal requirements. For your cannabis business to succeed, you’ll need to decide which license (or combination of licenses) is best for your business, then master the licensing and compliance processes for the type of cannabis business you choose. A cannabis lawyer can help guide you through this process, from choosing the right activity to applying for a license to remaining in compliance with the law once your business is operational.

What cannabis activity should I apply for?

In addition to medical-use and adult-use, cannabis business licenses are broken down into different activities, such as cultivation, manufacturing, and retail. Additionally, many of these categories are split into subcategories such as indoor and outdoor cultivation or storefront and non-storefront retail. As with medical and adult-use cannabis, these different types of cannabis activities often have very different requirements.

Some jurisdictions also offer boutique categories with special requirements such as Microbusiness, impose restrictions on how many licenses can be granted, or limit which types of licenses a single business can hold simultaneously. For your cannabis business to succeed, you’ll need to optimize which activities to apply for – another task that a cannabis lawyer can help with.

How can I ensure that my business is licensed as quickly as possible?

Given that legal cannabis licensing is a complex, highly regulated bureaucracy currently receiving a large number of applications, it can be difficult for a cannabis business owner to predict how long it will take their business license application to be approved, or to optimize their application in order to be licensed and operational as soon as possible.

Some areas offer a fast track to licensing under their Social Equity Program, in order to ensure that business owners who are disadvantaged or disproportionately affected by the War on Drugs have a quicker path to licensed operation than other applicants. Our cannabis lawyers can help you find out whether you qualify for one of these programs.

Whether or not you qualify for a Social Equity Program, the best way to ensure that you’re licensed as soon as possible is to choose the right license for your business and make sure that the information in your application is complete and correct.

What license should I apply for if I plan to expand my operation?

Especially for new cannabis businesses, the size of a cannabis business at the time of initial licensing might not be the same as the size of the business you hope to run in two or three year’s time. However, cannabis license application fees often vary based on the size of the operation in question, and applications often require businesses to provide details that depend on the size of their operation, including what types of equipment they plan to use, their planned hours of operation, and how many employees they’ll hire (including their labor practices and management structure).

Our cannabis lawyers can help you figure out how to reflect your long-term growth plans in your licensing application, including the multi-year pro forma budgeting and income documents that many municipalities require.

Will I need to apply for additional licenses or permits?

For many businesses, the cannabis license itself is only one of a number of licenses you’ll need for a fully licensed operation. To begin with, new cannabis businesses will need to apply for their tax registrations and seller’s permits. Additionally, depending on your activity, you may need to apply for Conditional Use Permit or Land Use Permit from your local planning department before you can apply for a cannabis business license.

For some activities, like outdoor cultivation, this may require further permits, such as for diversion of water, tree removal, or environmental review. On the other hand, businesses located in cities may be required to apply for enrollment in local Social Equity or community benefits programs. Our cannabis lawyers can help you find out what additional permits you need and help you apply for them.

Provisional Licensing in California

Posted by Margolin & Lawrence on September 5, 2018

Originally, Senate Bill (SB) 1459 was written to allow the county agricultural commissioners (CACs) to include cannabis among reports about the condition, acreage, production, and value of the county’s agricultural products as submitted to the Secretary of Food and Agriculture. The bill was first introduced in the California State Senate on February 16th, 2018, by Senator Cannella (coauthored by Senators Galgiani and McGuire, Assembly Members Caballero and Wood). The impetus for suggesting that CACs report cannabis as an agricultural product was based on the National Agricultural Statistics Services assessment that “providing crop statistics is basically a way to stabilize the agricultural marketplace." Such action would ultimately facilitate the integration of cannabis cultivation into the marketplace, and moreover encourage unlicensed growers to legitimize their businesses. After passing the Assembly Appropriations Committee 13-4 on August 8th, SB 1459 then received a majority vote upon a third reading on the Senate floor.

Why You Should Consider Hiring an Attorney for Your Cannabis Business

Posted by Jenna Rompel on August 27, 2018

California is well underway in the business of commercial cannabis, and now the state has
opened its golden doors to licensing. The state is actively reviewing applications for annual state
licenses. Those who have successfully triumphed over their local jurisdiction are quickly
realizing that was only half the battle and are in process of applying for a state license. The
industry is experiencing some growing pains as it continues to transition into a regulated market,
and if you’ve felt the hurt, here are some things to consider on whether it’s time to hire a law firm
to represent your cannabis business.

Depending upon the activity applied for, the relevant agency regulating commercial cannabis at
the state level – the Bureau of Cannabis Control (BCC), California Department of Public Health
(CDPH), or California Department of Food and Agriculture (CDFA) – will contact the city or
county to verify the validity of the local license and that the business is in compliance with or exempt from the California Environmental Quality Act (CEQA), as required by state law. This should be an easy
tick off the checklist. However, we are finding the state is returning responsibility to the applicant
to provide evidence of CEQA. The language in the local ordinances, particularly in the smaller,
rural jurisdictions, can be vague and up to interpretation. Failure to provide evidence of
compliance with the CEQA, or with any of the regulations under state law and associated
governmental bodies, is subject to denial of the state license. As a result, all operations will be
forced to cease. Any operations occurring without a valid local and state license are subject to
heavy fines, as recently seen in Humboldt County, and could result in criminal prosecution. An
attorney will advise in navigating through all local and state requirements to protect your
business from shutting down.

A common issue aggravating many are problems arising due to incorrect zoning that can lead to
costly consequences. Before you sign a lease or purchase a property, verify the zoning. For
example, for those in the market for the City of Los Angeles during its second phase of
licensing, you may have noticed the maps to check zoning against sensitive use areas in each
of the 15 districts are no longer available. At the request of the Department of Cannabis
Regulation (DCR), the maps have been removed due to numerous issues arising from incorrect
zoning. Applicants were relying on the maps not realizing there may have been a school, EMMD,
or other sensitive use within the area. The city is allowing applicants the opportunity to find
another location that is in the correct zoning until at least September 13th , when this phase of
licensing closes. Finding a location in the correct zoning is no easy feat. Have the property
professionally mapped and consider hiring an attorney to negotiate the terms of the lease or
purchase contract, ensuring the property complies with all zoning and land use requirements
under the ordinance, and reducing the chance your license is denied.

If you are an investor looking to buy an existing license, beware of fraudulent deals and false
licenses. Does the license comply with CEQA? Is it in the correct zoning? What is the licensing
authority’s policy on transferring of cannabis licenses? Having an attorney do the due diligence
will help reduce the risk of your investment.

As the industry evolves, there is going to be more need for legal protection for entrepreneurs and
investors, so consider a business investment into a law firm well educated in the field of
cannabis law and protect your success.

Applying for a Commercial Cannabis License: State vs. Local

Posted by Margolin & Lawrence on August 13, 2018

Since the Department of Cannabis Regulation opened up Phase II licensing in Los Angeles a couple of weeks ago, questions have been flooding in regarding the differences between state and local licensing. While the requirements set forth in local ordinances usually reflect the laws set forth by state agencies, there are some distinctions in terms of what is required for the purposes of applying for business licensing.

LA Phase II Update

Posted by Margolin & Lawrence on June 20, 2018

Today the Los Angeles City Council held a special meeting, where a passionate and energized public audience made it clear that they want to see the tax revenue collected from the commercial cannabis industry to be reinvested into social equity programs. The specific tax revenues being discussed were the proposed “Cannabis Reinvestment Act,” as well as a provision that would increase tax rates once the cannabis industry within LA reaches an aggregate of $1.5 Billion in total gross receipts.

Meet Us In NYC

Posted by Margolin & Lawrence on May 17, 2018

Cannabis Compliance: Operating Legally in California in 2018

Posted by Margolin & Lawrence on April 10, 2018

California’s transition into a regulated market has many operators wondering what the universe of compliance looks like and where they fit into the process. In order to operate legally in California after January 1, 2018, you need both a local authorization and a state license. Temporary licenses from the state of California are sufficient to continue operating, though you will eventually need to obtain an Annual License. To date, 954 cannabis businesses in California have received Cease and Desist letters from the Bureau of Cannabis Control. While some were in error, others were operating without the required licenses for California.

It’s important to understand that licensure is not the end-all-be-all of compliance -- in fact, it is the minimum requirement for your business to operate legally. In addition to having a state license (which requires local authorization), you will need to begin thinking about how to set up your business with compliance processes that facilitate and enable adherence to state regulations for your activities: cannabis microbusiness, retail, manufacturing, cultivation or testing. The below infographic is an overview of the entire licensing/compliance process.


Where does your business fit in?


Massachusetts opens recreational cannabis licensing

Posted by Margolin & Lawrence on April 5, 2018

 

On April 2nd, the Massachusetts Cannabis Commission opened its licensing application process for cannabis businesses, marking Massachusetts’ official entry into the legal cannabis industry. Despite the relatively strict criteria that applicants must meet in order to qualify for the first round of licensing, the Boston Globe reports that almost 200 prospective cannabis operators have started their applications within the first day of the system’s opening, a definite sign that interest is high.

For the time being, applications are only open for “Priority Applicants,” a group consisting of Registered Marijuana Dispensaries – existing retail businesses which already have a certificate of registration and are in good standing with the Massachusetts Department of Public Health – and Economic Empowerment Applicants. The latter category is analogous to the Social Equity Program in the Oakland and Los Angeles cannabis licensing processes: Granting priority to certain business operators is intended as a restorative measure to benefit communities, demographics, and individuals who have been disproportionately punished by cannabis laws in the past.

According to the Massachusetts regulations on the Adult Use of Marijuana, to qualify as an Economic Empowerment Applicant, a prospective cannabis operator must meet three or more of the following criteria:

  • A majority of ownership belongs to people who have lived for five of the preceding ten years in an area of disproportionate impact, as determined by the Commission;
  • A majority of ownership has held one or more previous positions where the primary population served were disproportionately impacted, or where primary responsibilities included economic education, resource provision or empowerment to disproportionately impacted individuals or communities;
  • At least 51% of current employees or subcontractors reside in areas of disproportionate impact and by the first day of business, the ratio will meet or exceed 75%;
  • At least 51% or employees or subcontractors have drug-related CORI and are otherwise legally employable in cannabis enterprises;
  • A majority of the ownership is made up of individuals from Black, African American, Hispanic or Latino descent;
  • Other significant articulable demonstration of past experience in or business practices that promote economic empowerment in areas of disproportionate impact.

If a cannabis operator is certified as a Priority Applicant, they’ll be eligible to submit a state licensing application for all activities on April 17th. Businesses that don’t receive this priority will have to wait: Open applications for Cultivation, Microbusiness, Craft Cooperatives, Independent Testing Labs, and Lab Agents are scheduled to begin on May 1st, while applications for Retail, Product Manufacturers, and Transport businesses won’t open until June 1st. Given that the state has slated retail sales to begin on July 1st, this means that, if Massachusetts sticks to the current deadlines, applications are likely to be a very competitive, time-sensitive process.

Even if they don’t qualify as priority applicants, prospective cannabis operators should study state and local regulations to ensure that their applications are in order – as Massachusetts is still in the early stages of the cannabis licensing process, many deadlines and regulations are still subject to change. For more information on Massachusetts’ cannabis regulations, follow this blog or contact us at info@margolinlawrence.com.

Federal Cannabis Update: 2018 Spending Bill Keeps Rohrabacher-Blumenauer Amendment

Posted by Margolin & Lawrence on March 27, 2018

Last week, despite controversy, criticism from both sides of the aisle, and talk of a veto, President Trump agreed to sign the federal government’s omnibus spending bill for 2018. To the relief of many in the legal cannabis industry, the spending bill retains a provision known as the Rohrabacher-Blumenauer (or Rohrabacher-Farr) amendment, which provides limited protection from federal prosecution for state-level legal cannabis activity.

Given both Trump’s and Attorney General Jeff Sessions’ tough talk on drugs and threats to crack down on the cannabis industry, the continued presence of this amendment is a silver lining for those anxious about the future of legal cannabis. While this won’t mean a change in the federal treatment of marijuana – the amendment has been included in every spending bill since 2014 – it does indicate that the government intends to keep on its current course with regard to cannabis, as the provision has to be renewed every year to remain in effect.

Likewise, though the actual protections afforded by the Rohrabacher-Blumenauer amendment are limited, its being signed into law was, and remains, an important indication of the federal government’s shift in attitude regarding cannabis: as the LA Times reported following the provision’s first inclusion in the spending bill, “Congress for years had resisted calls to allow states to chart their own path on pot. The marijuana measure, which forbids the federal government from using any of its resources to impede state medical marijuana laws, was previously rejected half a dozen times.” In this light, the amendment was a notable pivot from a top-down to a state-level approach to cannabis regulation.

California cannabis consumers and business owners shouldn’t get too comfortable, though: not only does the amendment not change anything about the federal government’s cannabis policy in and of itself, its terms only apply to medical marijuana, not recreational cannabis. So far, the government has rejected proposed amendments that would grant recreational cannabis operations the same protection from federal intervention. For the time being, California cannabis business owners’ best bet is to stay in full compliance with state and local law as the federal situation develops.

Cannabis CBD v. THC

Posted by Margolin & Lawrence on March 22, 2018

The cannabis plant contains over 480 elements. Two of them being THC and CBD. Both are ubiquitous in modern day cannabis products, with different benefits and side-effects to each.

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.