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5 Things to Know If You Want to Start a Marijuana Business in California

Feb 10 2017, by Jessica McElfresh in Federal Marijuana Issues, Legal Blog, Marijuana Charges, Medical Marijuana

With an estimated 2.4 billion dollars in 2014 sales, the cannabis industry is something that many are eager to be a part of in California. Conducting business in California is especially appealing. With loosening regulations and the viability of selling marijuana for a living, this state is one of the best places to open a business dedicated to recreational and medical cannabis use. In 2015, California passed the groundbreaking Medical Marijuana Regulation and Safety Act. However, many of the components of this law have not yet been fleshed out. It is important to entrepreneurs to understand several key components before starting a marijuana business in California.

As a California marijuana business lawyer, Jessica McElfresh knows how difficult it can be to operate a business that is in compliance with current rules and restrictions. With so many laws in place, it is easy to be accused of illegal conduct. If you have been falsely accused of a marijuana crime, call our criminal defense team at (858) 756-7107. We will work tirelessly to defend your rights and protect your freedom.

1. Recent Legal Victories

In late 2015, the state of California passed a regulatory framework that affects the cultivation, distribution, transportation, and selling of medical and recreational marijuana. Unfortunately, this law will not take effect until early 2018. Medical marijuana business licenses will not be issued for at least a few months afterward. In the meantime, those who wish to start a marijuana business in California must do so in accordance with the 1996 Compassionate Act, the 2003 Medical Marijuana Program Act, and the 2008 Attorney General Guidelines for the sale of medical marijuana. Before opening a cannabis business, it is also important to understand the state guidelines related to permits, licensing, and where these businesses can exist.

2. Tax Inequality

In most cases, every dollar spent on business costs or the production of income can be put towards a legal tax deduction. However, this is not the case for marijuana businesses. Based on the current federal law, virtually no expenses associated with conducting a cannabis business are eligible for deduction. This is even true for businesses that are operated in states that have passed laws associated with selling medical or recreational marijuana. According to the Internal Revenue Service (IRS), this industry does not qualify for deductions.

3. Profits are Not Allowed

Under the Medical Marijuana Program Act of 2003, businesses that cultivate or distribute marijuana may not make a profit. While this is technically true, there are still ways for business owners and employees to make money. While the company distributing marijuana is not allowed to make a profit, executives and employees can still be paid for their services. Further, cannabis businesses may outsource services, such as business planning and management, to companies that do make a profit.

4. The Closed Loop Collective Model

According to California law, all cannabis businesses must operate within a closed-loop collective model. In essence, this means that business-to-business transactions of marijuana are illegal. While there are a few solutions to this barrier, they can only be achieved with certain measures that involve exacting accounting. What’s more, any slip up can result in hefty fees or even jail time for business owners.

5. Build a Strong Team

While it is important to operate within the limits of California’s laws and regulations, it is equally essential to surround yourself with competent and well-trained professionals. In order to survive in the world of recreational and medical marijuana in California, you must gain an edge on the market. This can only be done with a team that is dedicated to effective business tactics and quality customer service.

Consult a California Marijuana Business Lawyer

Navigating this new and exciting industry is a lot to take on, but at McElfresh Law we have the knowledge and experience to guide your business in the right direction. A capable California marijuana business lawyer will be able to evaluate your situation and help cut through the complex marijuana business landscape in California. Call the medical marijuana business licensing lawyers today or schedule an appointment.

Free consultation for criminal defense cases only. Medical marijuana business consultation requires a fee.

California marijuana laws change frequently. For updated information, see the following pages: Medicinal Uses of Marijuana and Recreational Marijuana Business