Since recreational marijuana became legal in California in 2016, the industry has experienced explosive growth. For prospective business owners in the Bay Area, the process of entering into this marketplace can seem daunting. Read on for some general information on how to go about creating a retail marijuana business in California and how business attorneys can help.

Choose a Business Name and Entity Type

When selecting a business entity, the most common options to choose from are either a sole proprietorship, partnership, limited liability company (LLC), or corporation. The type of business entity you create will determine how your business and its participants are taxed, as well as your ability to transfer assets and ownership interests. The type of entity you create will also determine your personal liability and possibly the type of license you may obtain from the necessary state and local agencies in order to legally set up your retail marijuana business in California.

Register Your Business

In California, new businesses must register with the Secretary of State’s office. This includes filing the organizational documents and paying the appropriate fees. Many of the necessary forms and instructions for completion can be found at the California Secretary of State’s website.

Entities that are required to register include corporations (including for-profit and nonprofit), limited liability companies, limited partnerships, and limited liability partnerships. Entities that may register with the state include general partnerships. Sole proprietorships are not required to register.

Obtain Proper Licenses and Permits

Bay area business owners should be aware that simply filing documents with the California Secretary of State alone does not provide the business with the necessary licenses to conduct business in the retail cannabis market. In California, there is a dual licensing system and cannabis businesses must obtain a city and county license or permit before the business can apply for a state license.  

After obtaining the appropriate local licenses, cannabis business owners must then apply for a state license through the state’s Department of Cannabis Control. At this stage, consultation with an experienced local business attorney is advised, as local cities and counties often differ in the required steps the business must take to obtain the required licensing.  

In addition to these required business licenses, prospective business owners in this market must also register with the California Department of Tax and Fee Administration (CDTFA) for a seller’s permit. Cannabis cultivators, processors, manufacturers, retailers, and distributors making sales are required to obtain and maintain a seller’s permit before applying for a license through the Department of Cannabis Control.

The Employer’s Responsibilities

If you plan on having employees for your business, you will need to register your business as an employer and obtain a federal Employer Identification Number (EIN).  Obligations to an employer include payroll taxes, wage withholding requirements, state disability insurance, unemployment insurance, workplace safety and health regulations and equal employment opportunity.

Professional Legal Counsel in the Bay Area

For years, the attorneys at Coepio Legal have been helping business owners in the Bay Area as they navigate the complex world of starting a business and maintaining good legal standing.