Other Necessary Permits for Starting Your Marijuana Collective

Other necessary permits, and/or local/ city permits.

You may want to check the annual fees or taxes in each of the cities you are able to grow in.  Outside of your DBA filing and seller's permit the only other legal permit your collective may need is one from your city. 

To get your permits just go into your local town hall or city office and go to the business licensing office.  Most likely all that is required is permission from their zoning department.  Just tell them you are running a business out of your home; you do not need to tell them the specific nature of your business.  Be as vague as possible without arousing suspicion, but be prepared to answer a few questions about how your business may effect those in your neighborhood.  Be sure to answer all questions with the assurance that your business will be as respectful as possible to those that live near you and your local community.  The zoning department mainly just wants to know if you're selling stuff out of your house, or if you'll be holding inventory in your home, etc.  Just tell them you are running a home based business over the internet and be sure to let them know you won't be disturbing the neighbors.  

What happens next is usually just some paperwork for the city, and a small annual fee based on sales, which is usually only x cents per thousand dollars.  It is not even recommended that  you get the city permits until you absolutely have to (i.e. until you are sure you are generating revenue from your collective), otherwise it may just be more paperwork to keep track of and fees to pay.

Tomorrow I will take a break from the all the paperwork and give some tips on how to run your medical marijuana collective on a budget and maximize revenue.

Incorporating Your Medical Marijuana Collective in CA

Forming a Corporation

It has been stated in the Attorney General guidelines (see sidebar for link) and many dispensary owners have also told me that they formed their business structure under a non-profit corporation, particularly a mutual benefit corporation.  This is not necessary and requires a more in-depth description of your business operations.

Instead it is much easier to run your business as a not-for-profit, as stated in the AG guidelines.  A not-for-profit organization is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals.  This means you can still pay yourself and employees a reasonable salary and have your expenses covered for the business.

Keep in mind that starting a corporation requires you to pay a minimum franchise tax of $800 per year every year after your first year of incorporation.  This tax is covered so long as you pay more then $800 in taxes per year.  This form of business is recommended for someone looking to start a collective with patients other then close friends in order to limit the liability of the collective owner.  If you only plan on having only a few patients, such as close friends you may want to consider only filing for a DBA at your county office (see previous post).  By filing only for a DBA you don’t have to worry about paying the minimum $800 in tax each year, which may be better if you don’t plan on making very much in revenue each year from your collective, and/or if you don't plan on expanding and serving new patients outside of people you know.

After following the previous steps for naming your business (posted April 4th) you are ready to file your articles of incorporation (see sidebar for link to form). The fee for filing your articles of incorporation is $100 in California.

When filing for a DBA or Corporation in your local county you are usually required to publish your new business in a local paper once a week for 4 consecutive weeks.  The workers at your local county clerk's office can usually recommend a paper that will do this if you file in person and ask.  In Oakland you can get it done by a paper on the same block as the county office for $40 (the paper will send the county office all the necessary paperwork and your proof of publication by mail to the address you listed on your application, so you don’t need to take anymore action on this).

If you filed your articles of incorporation to become a c-corp now you will need to make an s-corp election.  An s-corp election allows you to pay any taxes incurred by the business on your individual tax return and at your own tax rate, this will be beneficial to most, saving you time on taxes, and usually a lot of money (you don’t have to hire a corporate tax accountant to file your taxes, and may pay a lower tax).  Collective owners/ legal Marijuana Growers I have met say this step is all a formality, as you will not likely pay much in taxes since you are running your collective in the legal not-for-profit manner.  The only taxes you will have to pay are any local taxes on businesses and your state taxes, which we will get to later.

Filing for a dba and getting your dba published in a local paper can be done in one day if you go in person to your county clerk’s office.  The time it takes for your articles of incorporation to be processed can be found here: http://www.sos.ca.gov/business/be/mail-processing-times.htm

As soon as I get a moment I will post up some sample articles of incorporation, dba forms, and sellers permit forms from collective owners.


Tomorrow will be a short post on local permits you may need to file for your collective, and then we will get into setting up your grow and running your collective.

Getting a Seller’s Permit for your Marijuana Collective

Getting a seller's permit for your business is free and easy (because they WANT you to pay taxes).  So, here's how you go about doing it:

A Seller’s permit is filed with the state board of equalization in CA you can find the information here http://www.boe.ca.gov/info/reg.htm 

and your local BOE field office here http://www.boe.ca.gov

I recommend going in to hand in your forms, or getting the forms at the office as they will be extremely helpful in helping you fill everything out.  Again, (refer to past posts) when mentioning what type of business you are in I recommend leaving out anything to do with marijuana and just saying you will be running a retail operation.  You can also fill out the forms online at the BOE website and mail them in.

Here is some information about using your seller's permit for your marijuana collective:

1. This permit is needed any time a tangible good is sold in the state of CA, which applies to your collective, even though technically there are no sells of mmj going on, just money being paid for the cost of production and labor.  But, nonetheless CA wants you to pay taxes on your hard earned crop, and so you must pay sales tax on all your distributions of mmj to the patients of your collective.
2. You will want to have your seller’s permit stored in a safe place with your other records, but keep a copy with you any time you are doing a sell to someone in your collective.  In case you get stopped you can show the officer your Doctor’s recommendation (if he asks for it) and your seller’s permit, to show that you are selling the legal amount (in most counties 8oz per patient on the premises) and are recording sales in order to pay taxes on them. 
3. For every sale be sure to keep records, and/or receipts.  They should say who the sale was made to (can remain anonymous, but you may want proof to show that they are a qualified patient and are a member of your collective.  It should also say, how much mmj was given, how much the monetary contribution was from the patient for reimbursement towards labor and other expenses (I'll give the calculations for this in a later post), and where the sale took place (this is necessary because CA is split into 4 districts, each with its own sales tax, and when you file your taxes at the end of the year they will want proof of where your sales took place so they know how much sales tax to charge you for your sales.

In later posts I will go into more detail about record keeping, and what I have seen done by collective owners both legally and illegally.  Tomorrow's post will cover - Incorporating your Medical Marijuana Collective for those of you that choose to so.

Creating A Small Business DBA for your Marijuana Collective

First you will probably want to look at the local laws in your county.  If you have several friends in mind that are medical marijuana patients, but live in other counties and would be able to grow consider the laws in all your counties.  Knowing how law enforcement handles marijuana cases in each of your counties will allow you to choose the best spot for your grow and for your collective. 

Some counties have restrictions on the amount of patients that can be involved, and some have size restrictions on how large a space the grow can take up, or if outdoor growing is allowed or not.

Check here for updates on local county guidelines:

 

http://www.safeaccessnow.net/countyguidelines.htm

OR

http://www.canorml.org/prop/local215policies.html

Keep in mind that although as of now there are no legal limits that can be placed on patients as long as you can prove that the amount you are growing is reasonable for the amount all the patients in your collective require for medicinal purposes.  In general all counties should respect the old laws of 6 immature plants, OR 12 immature plants per patient (remember it’s OR, not and, so you can only have one or the other per patient).  Some counties have less restrictive laws as well and may allow more plants per patient and/or possession of more dried bud per patient.

Now onto starting your collective

The easiest way to start anything is to ask someone who has already done it and do what he/she did.  So, that’s what we did.  We asked a friend of ours that runs a collective how he did it, and here are the steps he told us to take.  They may not apply to everyone, but they should apply to your average person looking to start a collective.

The first step is to file for a DBA (Doing Business As) with your local county.  This is your first step towards legally forming a marijuana collective and protecting yourself and your crop from the law. 

As stated earlier you DON’T NEED:

A grower’s certificate

Medical Marijuana Card, State ID Card, Cannabis Card, etc

Naming Your Business

First you need to name your business, the easiest thing to do to make sure that your business name is not taken or liable for trademark infringemnt, etc is to simply use your last name, such as “Chris Hernandez’s retail distribution” or “Jessica Parker Company.”  Keep in mind at this time (due to mmjs controversial status) that it is probably best not to mention collective, dispensary, or marijuana anywhere in your application or business name.  You will want to make a name specific as possible in order to make sure it is not taken (which is reason to get your s-corp application rejected) but also to keep it vague and open-ended so as not to limit the type of business you can do, it also really doesn’t matter for this type of collective as the only ones who may ever see the name of your business are going to be the patients in your collective and usually not the general public.  Your corporation can also do business under several DBAs (“Doing Business As” described later), you just have to file for each of them.  Doing business under another name allows you to keep your corporate name more secretive and also to do business under a more marketable name, that may otherwise be taken.  You can do checks at your local county office for free before you hand in your dba form to make sure that the name you chose is not taken.  You also may not use, inc, corp, company, etc in your name if you are doing a dba.  For an s-corp you may do a free name search by mail go to: http://www.sos.ca.gov/business/be/mail-processing-times.htm and get the form for your name search, you may then pay a $10 fee to reserve the name of your corporation.

Forming a DBA (Doing Business As)

For filing the dba it is recommended that you go into your local county office so that you can ask questions about local requirements and any other business related questions you may have about filing your paperwork.

The fee for filing a DBA depends on your county (in Oakland it is currently $29).  Before starting your business in your local county you are usually required to publish your new business in a local paper once a week for 4 consecutive weeks.  They can usually recommend a paper that will do this if you go into your county clerk’s office to file your DBA.  In Oakland there is a local newspaper on the same block as the county office that will publish your DBA for $40.  The paper will send the county office all the necessary paperwork and your proof of publication by mail to the address you listed on your application. 

Once you’ve paid the filing fee for your DBA, handed in the forms (which is done at the same time) and then gotten your DBA published in a local publication you can move onto the next step – Getting your seller’s permit.

Remember you can also always ask the person at the front desk, whom you are submitting your forms to, any questions additional questions you may have.  Try not to mention medical marijuana, instead tell them you are running a business from your home as a hobby and in a not-for-profit manner and will be doing retail sales.  Base your questions off of that description and ask away.  I’ve found most people in the offices to be very helpful when trying to figure out how to fill out the paperwork.

Tomorrow's post will show the next step of obtaining your seller's permit.  This will allow you to show that you are legally allowed to be making transactions and collecting taxes.  Remember to keep track of sales in order to prove you are paying taxes, as this is often the area where most collective owners get in trouble with the law, even though it is such an easy step.  In a later post I will show you how to easily keep track of your records.

Forming the Best Type of Marijuana Collective for You

Below is a table listing just a few of the pro's and con's of each of the 3 types of collectives mentioned in yesterdays post:

	Pro’s	Con’s
Small	·        Easier to stay off the grid ·        Less upfront costs ·        Less risk if plants kept under 99 ·        More control	·        Size limit may limit expansion and profits of collective ·        Less patients may also mean more risk to you, if you have to do the grow yourself
Storefront	·        Potential for more revenue ·        More patients ·        More opportunities for your patients to provide grows for your collective ·        More opportunities to be solicited by vendors ·        Can become well-known ·        It may be easier to meet more people in the industry that can help you	·        More exposure means more risk ·        Law enforcement, city officials, neighbors, etc will all have their eyes on you and your collective.
Delivery	·        Can serve more people then a small collective ·        Fairly easy to stay off the grid ·        Easy to pack up shop if you need to	·        More travel means more risk (law enforcement, thieves, etc.)

Hopefully the table will help you decide which type of collective you would like to start.  In my next post I will go more into the business aspect of starting the collective, which is pretty much the same process you would take to start any small business.  After that I will explain how to get all the proper documentation and permits you need to get started.