Opening a Medical Marijuana Dispensary
Jan. 13, 2022
Basic collective law
You hear about medical marijuana dispensaries being "Little cash cows" making hundreds of thousands of dollars a month. Don't believe everything you hear or read on the internet. There are many lawyers advertising themselves as "420 lawyers" representing that they can guide you through the permitting process at many cities that will allow you to open up and start servicing patients in a short period of time. Operating a medical marijuana collective dispensary is not always as easy as that. There are strict guidelines that must be followed in how the business entity is set up and many cities in California still have city wide bans on medical marijuana collective dispensaries.
Historically, in the 1990s California voters approved Proposition 215 calling it the Compassionate Use Act (Or CUA) of 1996. Proposition 215 modified the California Health and Safety Code relating to the possession, cultivation and use of marijuana, and says that certain provisions of the code to shall not apply to a patient who possesses or cultivates marijuana for the personal medical purposes upon the approval of a physician. In 2003, the Legislature enacted the Medical Marijuana Program Act. The express purpose of that act was to clarify the scope of the application of the CUA and to promote uniform and consistent application of the CUA, and enhance the access of patients to medical marijuana through collective, cooperative cultivation. Over the last decade, hundreds of dollars have been spent on litigation against the cities and counties in an effort force them not to ban medical marijuana collective dispensaries within their local jurisdiction. In addition, the question of whether marijuana of any kind – medical or not – is legal under the Federal Controlled Substance Act is still under consideration in the Courts.
It is important to note that a collective is not a sure bet. While some well-run collectives in the right area do well financially, others manage to squeak by month to month. There are collectives that pay just enough to pay for medication, rent and employee wages with no spendable income to pay for attorney's fees. It is also important to remember that medical marijuana collective dispensaries are required to be non-profit and that labor and wage laws apply to them the same as any other business. Often, collectives rely on "Volunteers" to operate the collectives where the volunteer under takes various functions such as a bud tender or office help. Those who wish to venture into the medical marijuana collective dispensary business should keep in mind that it is not a money tree and your legal fees can be substantial.
While most Californians will state in private conversations, that they "Really don't care" about the issue in general and feel that someone suffering from cancer or some other disease should be able to improve the quality of their life using medical marijuana, and while the majority of voters in California as well as the legislature in California chose to give people who suffer from illness that can be helped by the use of medical marijuana, many people in local positions of power or influence have preconceived notions that are totally opposed to the concept medical marijuana collective dispensaries. These are local city managers, city council members, county counsels, city prosecutors, police officers, police chiefs and local judges. Many of them could care less about what state law says. They just don't want it in their back yard. In addition, few judges have been willing to "Pull the trigger" and rule in favor of medical marijuana collective dispensaries. The wheels of justice are turning but very slowly.
Consult with a financial consultant that knows the financial issues of operating a non-profit enterprise and lawyer who knows how to legally set up the structure of a medical marijuana collective. Failing to properly structure the collective can result in the operating member being accused of a felony. Don't start a collective based upon the notion that it is trouble free cash cow. It's a tough business now and will be for some time.
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Growing medical marijuana is a science and an art. The relationship between the people who grow the product and the people who dispense the product is key to avoiding sever legal troubles, but having top shelf product is a key to a good business. There are a thousand ways that a "good grow" of medical marijuana can be turned to garbage unfit for human consumption. Having contacts with good providers who are willing to become members and how to set up your lease are all important to setting up a successful non-profit operation that can support management members.
Have a good lawyer
Operating a medical marijuana collective dispensary is a high risk business. Having a relationship with an experienced lawyer who is familiar with all the issues concerning medical marijuana is essential. Your lawyer should know how to set up the business entity, know how to obtain permits, be familiar with land use litigation if the city or county in which you decide to do business if the city or county becomes unworkable, be able to defend the managing member and the employees if local criminal prosecution becomes a problem and be able to deal with federal prosecution and/or property seizure issues. The lawyer should be familiar with all of these issues and be willing to deliver top level service.
Local Permitting Land Use Litigation Involving Medical Marijuana Collectives