Does my California Cannabis Business have to be a nonprofit?

Posted by Margolin & Lawrence on October 10, 2017

The short answer is yes, for now. Until the law changes, you need to operate as a nonprofit. You should also prepare yourself for for-profit operation so that your business is not caught off guard when the law does change. There is a great deal of misinformation and misunderstanding about how cannabis businesses are allowed to be organized in California.  California Health & Safety Code § 11362.765 is the law of the land, stating in part: “nor shall anything in this section authorize any individual or group to cultivate or distribute cannabis for profit.”  Note that this section was not repealed or replaced by any provisions in SB 94 (our Guide to SB94 is available here). Appellate decisions have interpreted this language to mean that all cannabis cultivation and distribution in the state is required to be conducted on a non-profit basis, and that anyone cultivating or distributing cannabis “for profit" is subject to criminal sanctions (currently a misdemeanor in most cases, with potential jail time and fines).

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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.