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How to Open a Medical Marijuana Dispensary Legally in California

how-to-open-a-medical-marijuana-dispensary-in-californiaWith the recent legalization of marijuana in Colorado and Washington, many people in California have entertained the idea of entering the marijuana industry. Opening a marijuana dispensary or cooperative is one of the most straightforward ways to get your foot in the door. Unfortunately, the laws for opening a marijuana dispensary in California are complex, and all marijuana based businesses are technically illegal under federal law. This article will cover some of the basic considerations for how to open a medical marijuana dispensary in California, but the venture is inherently risky and certainly subject to regulation. A lawyer should always be consulted when developing a business plan for opening a medical marijuana dispensary or cooperative to ensure compliance with state and local law.

Background of Medical Marijuana Laws in California

First, it is important to remember that all possession, cultivation, and transportation of marijuana is illegal federally under the United States Controlled Substance Act, even if it’s done in compliance with state laws. The Federal Drug Enforcement Agency (DEA) operates in the executive branch of the United States Federal Government.

The White House and DEA have given somewhat mixed signals about the enforcement of federal drug laws. Occasionally, marijuana operations in-compliance with state laws have been raided, but these seem to be happening less and less as public opinion on marijuana changes.

California has passed its own legislation regarding medical marijuana, but recreational use remains illegal. Legalization of marijuana was defeated on a statewide ballot in November 2010.

Medical Marijuana Legalization

Passed in 1996, Proposition 215 – The Compassionate Use Act – exempted certain patients and their primary caregivers from criminal liability for possessing or growing marijuana as long as it’s done in accordance with an approved medical recommendation. California patients with cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine headaches, or “any other illness for which marijuana provides relief” qualify under the law.

In 2004, the California legislature passed the Medical Marijuana Program Act, Senate Bill 420. This bill established statewide identification cards that allow holders to cultivate, possess, and transport up to eight ounces of dried processed marijuana, and six mature marijuana plants or twelve immature marijuana plants.

The law set a state-wide minimum allowed in every locality, but also allowed local laws to authorize higher allowed amounts. Additionally, very ill patients may be exempted from the limits if they obtain a physician’s statement that they need more. Moreover, Senate Bill 420 recognized a qualified right to “collective and cooperative” cultivation of medical marijuana.

How to Open a Medical Marijuana Dispensary Legally in California

The authorization for medical marijuana dispensaries, derived from Senate Bill 420, comes from California Health and Safety Code 11362.775. This code allows medical marijuana patients and primary caregivers to collectively or cooperatively cultivate marijuana for medical purposes within California.

These marijuana collective organizations must follow very strict guidelines to comply with state legislation as well as local ordinances. Here is an overview of the basic process for legally setting up a medical marijuana dispensary in California.

1. File articles of incorporation under the Corporations or Food and Agricultural Code

a. California law specifically states that neither Proposition 215 nor Senate Bill 420 authorize cultivating or distributing marijuana for profit.

2. Obtain the proper permits

a. A California Seller’s Permit must be obtained from the state, as medical marijuana is subject to sales tax.

b. Many cities and counties require additional permits, such as a business license and/or zoning permit.

3. Regulate membership in the cooperative/collective to ensure medical distribution only

a. Design an application process that require new patients or primary caregivers to complete a written application. This should include information such as physician’s name and contact information, as well as additional personal information. Keep copies of this application, all identification cards, and physician referrals.

b. Verify the information provided on the application by contacting the physician who issued the recommendation, or if a valid California medical marijuana identification card is used, verify the validity of the card.

c. In the application process, require members to sign an agreement not to distribute or use marijuana for anything but medical purposes.

4. Marijuana must only be bought or sold to/from members

a. Medical marijuana collectives and cooperatives in California may only purchase marijuana from members.

b. Only marijuana grown by a qualified patient or their primary caregiver is considered legally grown by the State of California. Cooperatives and collectives are just organizations for facilitating transactions between members.

c. Record the course of all incoming and outgoing marijuana.

5. Fees must be reasonable

a. Medical marijuana collectives and cooperatives in California are limited in the amount they can charge members. Remember, California requires them to be non-profit.

b. They can provide it for free, distribute in exchange for services provided to the collective or cooperative by members, charge reasonably calculated fees to cover overhead and operating expenses, or any combination of the above.

6. Keep track of the amount of marijuana in possession

a. Senate Bill 420 establishes possession limits for patients and primary caregivers (see above). If a person is designated as a primary caregiver for more than one patient, they may grow, possess, or transport each individual patient’s limit, added cumulatively.

b. This logic also applies to California medical marijuana collectives and cooperatives, in that they may grow, possess, and distribute those amount for each member. However, many local ordinances prohibit growing or possessing more than 99 plants as an upper limit.

Other Important Information About Operating a Medical Marijuana Dispensary in California

Neighborhood complaints are perhaps the largest reason for police raids or harassment. As such, making sure your facility is integrated and friendly to the neighborhood is essential for continued operation.

Some simple steps can help ensure good relations with your neighbors:

  • First, ensure your store has no symbols or signs that may attract law enforcement or parents’ attention.
  • Second, keep the facility clean, and hire security to ensure patients’ safety and discourage unwanted solicitors.
  • Third, make sure to create and maintain a positive relationship with local law enforcement and government officials.

Be Aware of Local Rules and Regulations

Local rules and regulations can add additional guidelines for operating a medical marijuana collective or cooperative in their territory, as California law merely sets the minimum requirements for operating such a facility. Such regulations often include how many facilities may be permitted, how close they may be, how many licenses are granted, how quickly licenses are granted, hours of operation, consumption on the premises, amount of marijuana allowed for possession, where allowed for operation, and security procedures.

The Counties of Los Angeles, Riverside, San Bernardino, and Orange County have even put a hold on issuing licenses to medical marijuana dispensaries.

Non-Compliance with Regulations Can Lead to State Criminal Liability

Facilities not run in accordance with California state and local regulations can expose the owners and employees to state criminal liability. This can include possession of marijuana, selling marijuana, intent to distribute, and even cultivating marijuana, just to name a few. These are serious charges which can lead to jail time.

For this reason, it is essential to get help from a qualified lawyer to assist you in setting up a medical marijuana dispensary in California.

Federal Criminal Liability

Again, it’s very important to emphasize that any possession, cultivation, or distribution of marijuana is still a crime under federal United States law. The penalties can include substantial jail time, fines, and seizure of property. The federal government seems mostly to be targeting collectives and cooperatives that are also violating state law, but they could chose to prosecute anyone in the industry if they wanted. 

Medical marijuana laws are constantly changing, and a skilled attorney can help ensure you minimize your legal risk. Consulting with one before, during, and after opening a medical marijuana cooperative, collective, or dispensary in California is essential to ensure compliance with the numerous and ever-changing laws.

About Aaron George

Visionary. Entrepreneur. Law school dropout. Working on bringing the legal industry online. And blogging about it.


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