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.

1. Learn the environment. Find out how to get from “a good idea” to opening your doors, including where you want to locate, what paperwork is required, and what funding you’ll have available.
2. Create your business plan. This road map requires a more thorough look at your planned adventure, including detailed estimated costs and revenue, security plans, potential product info and other specific details.
3. Figure out how much money is required. Create a budget of actual expenditures and when they will be needed. This includes any state and local license fees, any costs to secure a location, estimated payroll/labor costs, furnishings and building your actual inventory.
4. Secure financial arrangements. This could be a formal presentation for an investor or something more informal with friends and family. Weigh the options of taking loan(s) vs. taking on equity partners. This will come down to how much cashflow is required risk can you personally handle.
5. Create your team. Don’t hire people simply because they seem to enjoy cannabis. Instead look for professionals with extensive experiences in business, customer service, and retail skills. Employees can also focus on duties like security, state compliance, operations and administrative tasks.
6. Finalize location. While you may have already discovered a general area that appeals to you as a possible location, you’ll need more paperwork to select one lot or unit, including any needed permits or fees, any zoning considerations or requirements, and the local customer market. Also, keep in mind that the landlord will need to sign-off on the marijuana-related activities that will be taking place on the property.
7. Plan your store’s look. Discover design strategies that are unlike other shops in your community but nothing too distracting or hard to find.
8. Security/compliance. Your team will gain a lot of on-the-job experience once the doors open, but it’s critical that everyone has knowledge about these particular areas, such as checking IDs, handling cash, and keeping everything safe.
9. Finding your product. Get to know area growers and see what you like, the form it takes, and the price. Some growers may approach you as well. Employees can share their opinions as well.
10. Apply for a license. This paperwork will ask you specific details about your plans, your operations, and your expectations. It also will ask for thorough info about you and your background, and any owners/partners.

The post Ten Tips for Opening a California Marijuana Dispensary appeared first on California Medical Marijuana Information.

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.

How Membership Transfer Works with California Non-profit Mutual Benefit Corporations’s

The legislators clearly never intended this to happen easily. Section 7230 of the Corporations Code states:

• All rights accruing from membership of an NPMBC terminate on death
• In the interim, no member may transfer a right or membership in an NPMBC

However, the legislation does allow one loophole. If the NPMBC’s articles allow for it, and the local bylaws permit it, its board may allow membership transfers without limitation. This includes when a member dies, or the non-profit undergoes restructuring. The board may however only change its position on approval of all the members.

This legacy of history means few medical marijuana collectives are set up to operate this way. Hilary Bricken thinks this is because criminal lawyers structured them with a view to averting prosecution. We agree with her conclusion that marijuana NPMBC’s may not be purchased, because there is no substance over which to take title.

Hence, be careful if you have your eye on a California medical marijuana collective, and want to become the sole member in exchange for sweeteners. The local bylaws and the founding statements of the NPMBC must permit this. Or else you could lose your money, and fall foul of the California Corporations Code while you do.

The post Can You Buy a California Medical Marijuana Collective? appeared first on California Medical Marijuana Information.

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…

We currently us Articles of Incorporation of a Nonprofit Mutual Benefit Corporation [ARTS-MU] and pay $30 filing fee. You should get your formal stamped incorporation document back in 2 weeks or so but you can check processing times on their website at http://www.sos.ca.gov/business-programs/business-entities/processing-times/ That is the main document you will need to start your operations in California.

ARTICLES OF INCORPORATION

OF

SAMPLE COLLECTIVE

NAME

The name of this corporation is:  Sample Collective.

PURPOSES

This corporation is a nonprofit mutual benefit corporation organized under the Nonprofit Mutual Benefit Corporation Law.  The purpose of this corporation is to engage in any lawful act or activity, other than credit union business, for which a corporation organized may be organized under such law.  The specific purpose of this corporation is to “__________”.

{we feel it t is best to leave this statement open to interpretation. i.e. provide safe access to natural medicine, or produce medicine for patient members, etc.}

POWERS

This corporation shall have all the powers of a natural person, subject only to any limitations imposed by these articles of incorporation, the bylaws of this corporation and applicable law.  Notwithstanding any of the above statements of purposes and powers, this corporation shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the specific purpose of this corporation.

Initial Agent for Service of Process

The name and address in the State of California of this corporation’s initial agent for service of process is:

NAME

ADDRESS

CITY, CA 93000

ARTICLE I.

Notwithstanding any of the above statements of purpose and powers, this corporation shall not, except to an insubstantial degree, engage in any activity or exercise any powers that are not in furtherance of the specific purpose of this corporation.

Dated:_____________           _________________________________
{NAME}, Incorporator

That’s it – relatively simple but the CA SOS website isn’t the most user-friendly. We hope you found this information useful and we wish you the best of luck with your future ventures.

We provide consulting services to people that like more hand holding and have partnerships with a number of consultants who specialize in obtaining medical marijuana licenses/permits and can help your achieve your goals. Please email or call if you are interested.

We provide consulting services to people that like more hand holding and have partnerships with a number of consultants who specialize in obtaining medical marijuana licenses/permits and can help your achieve your goals. Please email or call if you are interested.

The post California Articles of Incorporation for Medical Marijuana Dispensary appeared first on California Medical Marijuana Information.

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.

– Premises Costs Do you plan to rent a location or go for the gold and buy your retail location? Given our current regulatory environment, there is not an easy answer. Maybe see about a lease with an option to buy, this way if things take off as you expect you can look at owning the location long term. If you want to be more nimble, use freestanding counters and storage units, as opposed to specialized fixed counters, to make it easier to move later.

– Inventory The initial (and ongoing) stock of inventory including flowers, edibles and concentrates can be expensive. Your storefront dispensary must have a variety of options available for patients (or they will seek alternative providers). However, financially speaking, we want product “just in time” for cash flow and to keep our inventory fresh. The solution is reliable suppliers that can deliver quickly, and create your display so it looks full even if it is not.

– Employment Costs – People expect decent salaries, and the government has its hands out too.  Our guidebook has loads of useful information that you really do need to know. We recommend you start your business hands-on to control your staffing cost, and try to avoid giving employment agencies recurring annuity income.

Those are the four major costs to consider when opening a storefront dispensary. Your actuals can swing quite wildly when comparing downtown urban versus a smaller rural town. The three rules of real estate are location, location, location. There is a correlation between dispensary costs and potential profitability.

Please email us if you need help and are serious about moving forward. We have a partners that work hands on with potential dispensary owners and have a stellar record with getting approvals (in multiple states).

The post Must Consider Costs When Opening a Storefront Dispensary appeared first on California Medical Marijuana Information.

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.

MMJ non-profits typically do not have owners, although they do have officers and directors who often may not receive any stipend outside reimbursement for expenses. If an organization folds by going into liquidation or voluntary dissolution, these officials often have no right to a share in the asset distribution. California is non-typical in that it allows members, officers and directors to draw salaries and share in the distribution of assets on closure.

California’s Medical Marijuana Regulation and Safety Act MMRSA introduces a new regime whereby collectives “may operate for profit, not for profit, or any combination thereof”. Many forward-thinking individuals want to move away from operating in stealth mode in a collective, by establishing and licensing a regular business.

They face two problems in attempting to do so successfully. They are (a) in the back of the queue when it comes to applying for a license when the process starts, and (b) their new organization has no trading record. If you are in this position and want to retain the benefits of the old order, here are some possibilities to consider in an uncertain regulatory environment, with specific reference to California.

Since California permits non-profits to merge with for-profit companies, it’s theoretically possible to go down that route, transfer the value in the non-profit to the larger entity, and then allow the former to die after completing the MMRSA license application process, when that clicks into place.

Alternatively, Californian law allows a non-profit mutual benefit to convert to a for-profit one. Until we have full details of the regulations behind California’s Medical Marijuana Regulation and Safety Act, it’s perhaps safer to continue in stealth mode for a while longer, while putting plans in place to move quickly when the muddy waters clear.

The post Transitioning Your Mutual Benefit Corp to a for Profit business in California appeared first on California Medical Marijuana Information.

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.

Thus, a paradox exists: a business that is technically illegal under federal law must nevertheless pay federal income tax on its revenue (see section 61 of the tax code).

Weighing Cocaine

It wasn’t always this way. Back in 1982, an illegal business could reduce its revenue by the cost of any product that it sold. Legal precedents even upheld the deductible cost of a small scale used to weigh cocaine sold by a taxpayer.

Section 280E changed all that, reversing the legal ruling that upheld the cocaine scale’s tax status.

Strangely enough, there is a tiny loophole in Section 280E for marijuana businesses. A marijuana facility can deduct the cost of purchasing or growing its product. All other business expenses (not tied to manufacturing) will be denied.

Medical Use

Even medicinal marijuana businesses have been slammed by Section 280E. However, a medical dispensary was able to gain some relief from a 2002 legal case. The dispensary convinced the court that only some of its business involved the trafficking of marijuana. Most of its business stemmed from counseling customers. Thus, business expenses attributable to the consulting side of the business were given the court’s blessing as deductible.

Later cases did not turn out as well for medical dispensaries, however. The IRS denied all attempted expense deductions of a Marin County, Calif., business in 2011. And later the same year, the IRS denied similar deduction attempts from a dispensary. However, a tax court later granted some relief to the business, saying that since its cost of goods sold represented 75% of its revenue, that amount should be deducted. A federal appellate court upheld the tax court’s ruling this year.

Cost of Goods Sold

The cost of goods sold question has become a key plank for marijuana businesses to achieve some deductions.

Marijuana businesses, both producers and resellers, must capitalize into inventory the costs that are required under Section 471 of the tax code, as well as a portion of costs associated with payroll, legal and personnel functions.

Taxpayers in the medicinal marijuana business have embraced rules under Section 263A, because they can capitalize as many of their expenses as possible into inventory.

Things become trickier when cash-basis facilities are considered. With a cash-basis marijuana facility, the IRS can permit the taxpayer to deduct from its gross income the costs that would have been applied to inventory, if the taxpayer had been on the accrual method.

For more analysis on the Section 280E issue read the National Cannabis Industry Association’s white paper and check out Tony Nitti’s Section 280E article at Forbes.

The post IRS Code Section 280E – The Tricky Questions of Tax Deductions for Marijuana Businesses appeared first on California Medical Marijuana Information.

How the Food and Drug Administration May Regulate

The FDA is responsible for protecting and promoting public health through the regulation and supervision of, among others tobacco and medication. The keyword is public health. The FDA sets standards for the manufacture, distribution and supply of both. It wants to know the American public will be safe according to those standards.

Where necessary the Federal Drug Administration may also implement post-market drug safety surveillances, whereby is must be told of every unexpected, serious or fatal reaction to a medicine. Where it considers this a possibility, it lists the product on a schedule requiring a medical doctor to prescribe the product, and the end supplier to maintain records.

The Implications for Dispensaries and Cooperatives

These are likely to remain small and independent until the mainline financial sector includes them as their clients. Clearly, they do not have the administrative capacity of a Pfizer or a CVS Health. They will have to look to software-as-a-service solution on a cloud. Some of these providers are already in place.

What makes Marijuana Seed-to-Sale software special?

The BioTrackTHC solution tracks the marijuana supply chain from the grower/farmer to the wholesaler to the supplier to the beneficiary. A number of medical and recreational dispensaries, growers and state governments already use it, because it tags and numbers marijuana plants for them, and then creates tree-grams for individual parts and even waste.

Image Courtesy Marketwatch

BioTrackTHC incorporates an anonymous customer tracking system using fingerprints and DNA, to prevent patients ‘gaming the system’ to obtain more at different doctors’ offices and dispensaries.

In the case of BioTrackTHC, the developer was operating a chain of medical centers in Fort Lauderdale, Florida, and saw the need to identify out-of-state patients coming in to ask for prescriptions for schedule drugs. One of their greatest desires was to create a legitimate solution. They currently have over 1,100 dispensaries and growers as customers who are happy with the product.

Medical marijuana is still a Schedule 1 drug, creating a need for extreme compliance. This created a sizeable business opportunity for software services. BiotrackTHC is not the only creditable MJ software provider – check out MJFreeway.com or ViridianSciences.com to see two competent competitors.

The post The New Reality: Tracing Marijuana from Seed to Bud appeared first on California Medical Marijuana Information.

MMJ businesses that are unable make deposits may accumulate large sums of cash, which is a risk. Also, having to pay cash for business expenses adds the further complication of not having a digital record available when completing tax returns. Inflows and outlays can be accidentally filed incorrectly, making accounting and record keeping difficult. Fortunately, this is avoidable.

How a Merchant Account Can Help Your Cannabis Business

Having the ability to accept “plastic” payments will increase average transaction size and total number of transactions. This will help insure you are maximizing your reimbursements and covering overhead. Luckily we found a high quality, cost effective merchant account provider for medical marijuana dispensaries (and related businesses). They are a well-established processor that has delivered cutting edge service since 2004. This cost-effective solution is performed via any smartphone. Once cleared, the funds are available within two days.

 Here is how to get started:

– Complete set-up within a few minutes by logging onto the registration page, and  providing core information

– When a customer makes a purchase, scan their credit or debit card on the spot, and send the billing information to the processor

– Receive confirmation the payment cleared, hand over the medicine and you have another happy patient

– There is no setup fees and no monthly fees.

Extended Benefits Offered 

The processing service includes a free feature allowing you to send invoices and reminders to customers. You can also sell online directly off your website by adding ‘buy now’ buttons to your pages, and prep orders knowing the payment is secure.

The processing service also includes a feature enabling clients to view orders, invoices and payments, online or through the integrated smartphone app. This really is the smart(phone) way to bank cash for cannabis. If there were a better way, we would love to know.

So What Does this Cost?

The merchant provider does not charge a setup fee, monthly fee or any other structural cost. It is strictly a pay-as-you-go affair, with credit cards fees a low 2.95% and debit cards an amazing 1.95%. Despite these rates, payments still deposit to merchant accounts within one to two business days. That’s merchant accounts for marijuana dispensaries delivered in impeccable style!

The post MMJ Dispensaries Can Accept Credit Cards appeared first on California Medical Marijuana Information.

The regulations really are little more than a bureaucratic shove to get participants past the corncob-chewing era, and out in the open behaving like the rest of the food and drug fraternity. Cutting out the legalese (the authors must be paid per word) here is the bottom line on rules for packaging under Article 7 (Licensed Distributors, Dispensaries, and Transporters) at Section 19347(a).

1. While MMJ products must be labeled and be in tamper-proof packages, these may not attract interest from children.
2. Packaging must prominently display the following in clear and legible font (could be problematic when supplying individual doses)

               – Date and place of manufacture

               – The words “SCHEDULE I CONTROLLE SUBSTANCE.”

                -“KEEP OUT OF REACH OF CHILDREN AND ANIMALS” in bold print

                – The restriction “FOR MEDICAL USE ONLY.”

3. Packaging must also display the following warnings, again in clear and legible font.

                  – A notice that “The INTOXICATING EFFECTS  OF THIS PRODUCT MAY BE DELAYED BY UP TO TWO HOURS.”

                   – The statement “THIS PRODUCT MAY IMPAIR THE ABILITY TO DRIVE OR OPERATE MACHINERY. PLEASE USE EXTREME CAUTION.”

4. Packages containing only dried flower must record the weight of medical cannabis.

5. If the product uses nuts or another known allergen, there must be a suitable warning.

6. Only generic food names may describe edible medical cannabis products.

7. Milligrams per serving, servings per package, and package total  of pharmacologically active ingredients including – but not limited to – tetrahydrocannabinol (THC) and cannabidiol (CBD) must be listed.

8. An admission (as if this were necessary) that the product contains medical cannabis. Surprise, surprise!

9. A statement about the source, and date of cultivation and manufacture.

10. Any other requirement set by the Bureau of Medical Marijuana Regulation.

11. Information about the unique identifier issued by the Department of Food and Agriculture.

The only thing lacking is where to fit all this information on a single-serving brownie in a transparent cellophane package. The jury is still out on this one, with no clear direction, and traditional farmers no doubt thoughtfully chewing on their corncob pipe stems.

The post What is Packaged inside California’s New MMJ Regulations? appeared first on California Medical Marijuana Information.

‘That should be the minimum until the federal government acts,’ Fiona Ma, a member of the board said. “This is a big problem.” She is in charge of the tax policy administration and tax collections. She envisions the state’s cannabis businesses depositing money into an account with the board. The businesses would be able to withdraw  from those accounts to pay employees and taxes through wire transfers. This would be very useful to marijuana dispensaries and allow for a simpler, new means of payment.

California becoming the first state in the U.S. to legalize medical marijuana usage – this law passed by voters in 1996. Now California is in line to legalize cannabis  for recreation purposes similar to the other four states (Colorado, Washington, Oregon and Alaska) and District of Columbia that are currently paving the way.  Because banking laws havent come up to speed, marijuana-related businesses in those areas are largely forced to operate as all-cash enterprises.

Last month, a Colorado credit union that had aspired to serve that state’s industry was denied the administrative approvals it needed from the Federal Reserve to be able to open its doors. It has filed a lawsuit, but in the mean time, most Cannabis businesses are struggling to find banks willing to accept their business.

As of August 2014, the director of the Finance Crime Enforcement Network said in a speech that 105 banks in the U.S. are known to be doing business with marijuana-related businesses, but Chris Pippett said, those businesses (despite a well-publicized Justice Department memo regarding banking for marijuana sector) are operating in a “gray area”.

“Those memos in essence state the government is not going to devote resources to prosecution. This is not permission,” he said.

Financial institutions willing to take the risk- often small credit union- can expect to find them saddled with additional paperwork. “It’s a lot more work than most banks and credit unions are probably used to doing,” Pippett said.

Also, Janet Sanchez, senior vice president of the Community Credit Union of Southern Humboldt said in California, her credit union had opened just a handful of cannabis-related accounts. “The due diligence, the ongoing monitoring, the granular reporting, the incredible financial and staff time it takes to monitor and deal with these accounts is overwhelming and not worth it” she expressed.

Ma estimates that 35% of the 300 cannabis businesses in her district are paying taxes to the tune of about $28 million a year. “That means 65% are not paying taxes; we as an agency have not gone out and enforced the law,” she said. But without banking (all cash and no paper trail) and the paper trail it leaves, enforcement is tough.

“How do we go out and audit a dispensary when they don’t have any accounts, when there are no banks, credit card wire transfer?” Ma said. Of course, paying tax isn’t exactly easy, especially since the IRS doesn’t accept cash.

“I think we can create some sort of system to deal with some of the cash,” Ma said. “As a state, we’re not subjected to (Federal Deposit Insurance Corporation or National Credit Union Administration) rules. What are they going to do, shut down the state?” Methods like the one she suggested could be a way around those challenges.

Visit the BOE site to learn more about this  cannabis banking proposal.

The post California’s BOE Wants to Bank for Legal Cannabis Dispensaries appeared first on California Medical Marijuana Information.