Jul 13, 2017 | Collective Operations
California has the largest medical marijuana industry in the world. It is evolving from a grey area niche business into the mainstream. The specific regulations are still being ironed out on how licensing is going to happen and include recreational set to start January 1, 2018.
State officials and various municipalities are currently crafting the framework for cultivation and retail sales. Public hearings on the new regulations take place throughout the state this summer, which will replace and update the MRCSA California system. The first batch of licenses is expected to be handed out in January.
There are potential revenue opportunities in learning how to open a medical marijuana dispensary. (more…)
Mar 5, 2017 | California Marijuana Laws, Collective Operations, Proposed MMJ Law Changes
For as long as existing medical marijuana businesses are the only ‘legal’ source for pot in California, they will remain hot property. This is especially true as they stand to receive priority when licensing time arrives. If you own a share in one, you may be thinking of convincing your partners to off-load it. But there is only problem. You have no asset to sell. Take a cuppa of whatever relaxes you while we unpick the situation with input from Hilary Bricken.
The Term ‘Collective’ Does Not Appear in the Legal Lexicon
The situation dates back to 2008, when the California Attorney General stated that making profit from selling medical marijuana was illegal. Setting aside that quaint mind-set, this meant that medical marijuana dispensaries had to be non-profits. This left medical marijuana patients with only one legal workaround. They had to form collectives that barely covered costs.
California law treats these collectives as non-profit mutual benefit corporations, or NPMBC’s. By definition, these have no equity or stock to sell. Any intelligent buyer will run miles from that situation. This is because there is nothing to pay for. Except a quasi-right to a grow-your-own, in a situation that is, at best, somewhat fluid. The only workaround is transfer of rights and obligations of membership. (more…)
Sep 22, 2016 | Collective Operations
What you need to know – we must admit, we have started/incorporated X number of entities in California over the years but even we got confused recently when looking at the California Secretary of State’s website. They have seven different forms for filing Articles of Incorporation! They are:
General Stock (From ARTS-GS), Closed (ARTS-CL), Professional (ARTS-PC), Nonprofit Mutual Benefit (Form ARTS-MU), Nonprofit Public Benefit (ARTS-PB-501c(3), Nonprofit Religious (Form ARTS-RE), and Common Interest Development (Form ARTS-CID)
This alone can be confusing. So we figured we would discuss the subject in more detail and provide specific instructions for people looking to start a medical marijuana dispensary (or various related activity) in California. You can use their template (fill-in PDF) or create your own from scratch. Both will lead to the same result – a new California entity! Almost anyone can sign/serve as the incorporator (for the most part) it is not required that the incorporator be an officer or even a future member of the organization (but it can be and is usually the case).
As you probably realize, there is more than one “right way” to organize your medical marijuana dispensary (delivery or grow). Individual lawyers throughout CA might prefer or advise different methods. The gold standard has been the “Mutual Benefit Corporation” technically, a not-for-profit model, but you don’t seek non-profit status. As such you will owe $800 minimum franchise tax fee annually to CA Franchise Tax Board. Also, if the Corporation is profitable you will pay tax. Please note that this standard will be changing the with the Medical Marijuana Regulation and Safety Act (MMRSA AB 243, AB 266, and SB 643), currently in the pipeline, and traditional for-profit entities will be allowed. We will do our best to keep you posted of technical requirements as they arise. Until then…
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Aug 9, 2016 | California Marijuana Laws, Collective Operations
One of the most common questions we get is “What does it cost to open a medical marijuana dispensary?” This is really a tricky, almost impossible question to answer. It is possible to give ball park estimates but even these can be hard to pin down. To cast a broad net, let’s say $50K at the lowest end to $1M+ for a high end sleek retail location.
Opening a storefront dispensary typically comes at a relatively high cost, especially when compared to a cultivation operation or delivery service (where you can start small and expand as necessary). The location is the biggest factor to consider and what tenant improvements/upgrades are needed. Also, with applications becoming so competitive, you may need to hire a professional consulting team to better your odds – this alone could cost above $50K (depending on location complexity of the application). The stakes are higher with a storefront and you could lose out if you open in the wrong place (and don’t plan properly).
The Major Expenses, and How to Manage Them
– Legal Compliance The Medical Cannabis Regulation and Safety Act created a spider’s web of things to do before the first joint or edible slides across the counter. We recommend you find an experienced consultant to help you.
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Mar 14, 2016 | California Marijuana Laws, Collective Operations, Proposed MMJ Law Changes
California (and the rest of the U.S.) seems to have a prevailing reticence to allow anybody to turn an honest profit out of medical marijuana. You can grow your herb and share it with your friends in one or other non-profit arrangement if agreed to by your state. Under the not-for profit model “profits” are not allowed. With new legislation in play, traditional for-profit entities will be allowed to operate MMJ businesses. So what about existing not-for-profits (mutual benefit corporation) that want to transition to a for profit business? Hilary Bricken wrote an explanation for Above the Law concerning how we got into this mess. This set us to thinking about where to go from here.
As states like California realize that by collecting sales tax on MMJ they are de facto recognizing it as a business, the question arises how to migrate a not-for-profit interest to a full-blown company that will sell for a good return once the floodgates open, and the anti-medical marijuana brigade shuts up shop. The problem is you cannot sell something unless you own it.
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Dec 18, 2015 | Collective Operations, MMJ News
Banking on standard tax deductions from your marijuana business? Don’t count on it.
Four states and the District of Columbia have legalized recreational marijuana. While that may be a good thing for state tax collections in Colorado, Washington, Oregon, Alaska and Washington, D.C., the federal level is an entirely different story.
The issue is that the feds still regulate marijuana as a controlled substance. That means it’s illegal, on the federal level, to sell or possess the drug. That legal status also gums up the works when it comes to the application of tax laws.
A memorandum from the I.R.S. chief counsel, numbered 201504011, spells out in more detail the legal position of the feds.
No Tax Deductions for Controlled Substances
The relevant I.R.S. tax code section is 280E, which specifically forbids deductions for any business that traffics controlled substances. The I.R.S., on a regular basis, uses the code language to deny requested tax deductions for marijuana businesses.
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