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How to Grow Marijuana Legally in Washington State

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STEPS TO BECOMING A MARIJUANA PRODUCER IN WASHINGTON STATE

Whether you’re exploring the possibility of investing in or taking over an existing marijuana production businessor just waiting for the day the Washington State Liquor and Cannabis Board (WSLCB) reopens applications for new licensesthe information below will let you know the steps you need to take to stay in compliance with Washington’s marijuana laws.

Step 1: Plan

Once you’ve decided you want to grow cannabis to sell for recreational use in Washington, you need to hammer out a business plan. This plan should include your financing, market analysis, marketing plan, operations plan, as well as what will separate your cannabis from the competition. If you plan on buying an existing business, learn everything you can about the company and its current processes. Take your time—there are still many unknowns in the relatively new recreational marijuana market. Study the new laws and make sure your plans fall within the bounds of the state’s rules.

In order to get or maintain a marijuana producer license, the rules require that your grow shop has planned protocol for each of the following:

  • Security
  • Traceability
  • Employee qualifications and training
  • Destruction of waste products
  • Transportation of product to retailer, packager, and/or processor
  • Testing procedures and protocol

You’ll also need a description of the grow facility and an in-depth operation description, including how (and in what) the marijuana will be grown and the types of equipment, soils, and fertilizers you’ll use.

The bottom line for your business plan: be as descriptive as possible.

Step 2: Find the Right Location

Washington has very particular rules about where you can legally produce marijuana. Even if you’re buying a business and keeping its current location, it’s important to keep current on the laws. You never know when you’ll want (or need) to upgrade your location.

One nice thing about growing marijuana (as opposed to selling it as a retailer) is that you don’t have to sweat finding the most convenient place for customers. In fact, for security purposes, an out-of-the-way location can be a bonus. This can make it a little easier to abide by the state’s zoning requirements.

Primarily, you need to be sure your grow location is located at least 1000 feet from any elementary or secondary school, playground, recreation center or facility, child care center, public park, public transit center, library, or game arcade that allows minors to enter. As of June 2015, counties and municipalities have the right to enact an ordinance reducing the 1000 ft buffer to a minimum of 100 ft (with the exception of elementary schools, secondary schools and playgrounds). Olympia Ordinance 7046, for example, reduces the buffer zone in the state capital to 500 feet.

Counties and municipalities can also prohibit marijuana producers or processors in areas zoned for residential or rural use. Moses Lake, for example, limits producers and processors to specific industrial areas. Some Washington cities don’t allow marijuana businesses at all, including Leavenworth, Poulsbo, Pomeroy, Othello, and Richland.

Local authorities will also be notified of where you plan to open up shop and have an opportunity to object. Also, you’ll need to make sure the location can meet the following specifications:

  • For indoor producers, your cannabis grows must take place within a fully enclosed, secure indoor facility or greenhouse with rigid walls, a roof, and doors.
  • Outdoor produces may grow cannabis in “non-rigid greenhouses, other structures, or an expanse of open or clear ground fully enclosed by a physical barrier.”
  • Outdoor cannabis grows must be enclosed by a “sight obscure” wall or fence at least eight feet high.

Step 3: Get the Money

What makes growing weed more difficult than other businesses is that entrepreneurs may be hard-pressed to find financing options through traditional methods. Due to federal banking restrictions, banks may not want to offer a small-business loan to a “risky” venture existing in federal gray area. As a result, you may need to seek out investors.

Originally, I-502 rules dictated that all financiers must be Washington residents, living in-state for at least three months. Legislative changes have relaxed somewhat since then. It’s possible to apply to the WSLCB to accept funds from an out-of-state financier. You’ll have to submit an Application for Additional Funding to the WSLCB and receive approval. Out-of-state financiers have to be US residents.

Step 4: Choose a Business Entity

In a perfect world, you could start a brand new marijuana grow business and choose the business entity type that’s the best fit for you. Unfortunately, the WSLCB isn’t currently accepting applications for new marijuana producer licenses.

It’s not all bad news though—you can invest in or buy an already-licensed marijuana grow business. Over a thousand producer licenses have been issued in Washington to different types of businesses. Before investing in or buying a business, it’s important to understand and carefully consider the impact that a business’s entity type will have on your operations.

If you’re considering a sole proprietorship, realize that you personally will have unlimited liability. You are the business. There is no legal separation between you and your personal assets and the assets of your business. What this means for you is that you are personally responsible for all debts or actions on behalf of your business. Your assets are on the line in the case of a lawsuit or unpaid bills.

If you are operating an LLC, there is limited liability. This means that your personal assets are generally protected in case your LLC were to be sued or fall under any other financial or legal burden. It’s usually only the assets of your LLC that would be at risk, not yours personally. However, the corporate veil can be pierced and your assets can be at risk with poor business habits. For instance, if you were to put a personal dinner on your business account, or buy a big screen TV under your company’s name and take it home, this would give a plaintiff a foothold in coming after your personal assets. So with an LLC, your personal assets are protected, but it is not ironclad, bullet-proof protection.

If your business operates as a corporation, you will benefit from limited liability as well. The personal assets of shareholders who have purchased stock are usually only responsible for their own stock investments. The corporation, since it is considered its own separate business entity apart from shareholders and owners, is legally responsible for itself. Debts, etc. do not fall onto the shoulders of individuals, but rather onto the corporation as a whole, separate entity. A corporation’s corporate veil can also be pierced, so you need to take in the same considerations as with an LLC when deciding which entity is right for your cannabis business.

For more information on differences between an LLC and a corporation, click here.

Step 5: Hit All the Requirements

No government authority will be kind to you if you start growing cannabis without meeting all the requirements. Before flicking on your grow lights, the top regulatory requirement on your list needs to be obtaining a marijuana producer license. If you’ve completed the previous four steps, you should be in a good position.

The marijuana producer license application is only a small addendum to the Master Business License application. Even if you’re not filling out the application (if you’re investing in or buying an existing marijuana business), you’ll still need to have some of the same key information readily available, including:

  • Criminal background checks on financiers, owners, and their spouses
  • Government-issued identification for all financiers, owners, and their spouses
  • A financial statement accounting for all money invested in the business
  • Copies of bank statements and recent tax returns

After you’ve obtained your marijuana producer license and gotten your grow shop in order, you should finally be ready to turn on the lights and let the weed grow.

Requirements for Selling Marijuana in Washington
Requirements for Processing Marijuana in Washington

What’s the cost of the Washington marijuana producer license?

In July 2018, the fee dropped from $1480 to $1381. New applications aren’t currently being accepted, but if applications open again, note that there is also a nonrefundable application fee of $250.

Can I apply for a new Washington marijuana producer license?

Not currently. The number of licenses is capped, and the WSLCB isn’t opening up applications for new licenses anytime in the foreseeable future.

Can I buy a Washington marijuana producer license from an existing business?

Not exactly. The licenses themselves aren’t transferable assets—a business can’t buy or sell a license to another business. You can, however, purchase a business entity that holds a license. When investing in or buying an already-licensed business, be sure to file a Change in Governing People, Percentage Owned and/or Stock/Unit Ownership form ($75) with the WSLCB. You may also have to submit forms (which vary depending on business entity) to the Secretary of State indicating changes in governors and owners.

Just note that when you buy a business, you don’t just get the good stuff. You also take on any debts or contracts, so be sure to do your research.

Who can hold a Washington marijuana producer license?

You have to be at least 21 years old and have been a Washington resident for at least 6 months. Business entities (like LLCs and corporations) can also hold licenses, but the entity must have been formed in Washington and all members in the business must have been residents for at least 6 months. All licensees have to maintain their residency for as long as they hold their licenses.

Is there a limit on the number of marijuana producer licenses the WSLCB can issue?

No, but the state has allotted that only so many square feet may be used in growing marijuana. It has set the initial limit at two million square feet. The kind of producer license you have will determine how many square feet of space you can use to grow cannabis. The state has broken quantities down into three tiers:

Tier One: less than two thousand square feet.
Tier Two: two thousand square feet to 10 thousand square feet.
Tier Three: 10 thousand square feet to 30 thousand square feet.

If you don’t use at least 50% of the square footage afforded to you, the WSLCB may knock you down a tier.

Can I have more than one Washington marijuana producer license?

Yes. You can hold up to three of one kind of license (such as three producer licenses).

Can I have a Washington marijuana producer license and a retailer license?

No. While you can hold both producer and processor licenses, retail is always separate. You can’t hold a retailer license AND a producer or processor license.

If I have a producer license, how much weed can I have on my premises at any given time?

If you grow outdoors, you cannot have more than one and a quarter year’s harvest on your property. If you grow indoors, you cannot have more than six months of your annual harvest on site.

Does Washington require that my marijuana-producing facility be covered by a particular kind of insurance?

Yes. Washington requires that you carry a commercial general liability insurance policy provided by a carrier with a rating of no less than A—Class VII. The WSLCB has to be listed as an additional insured on all of your general liability, umbrella, and excess insurance policies.

What kind of security requirements does Washington have for cannabis grow facilities?

Your marijuana shop must meet the following security requirements, according to the I-502 rules:

ID Badges:

All employees on licensed premises must hold and properly display an employer-issued ID badge at all times while at work.

Alarm System:

At a minimum, you need a security alarm system on all perimeter entry points and windows.

Surveillance:

At bare minimum, your shop needs to install a video surveillance camera with a resolution of no less than 640×470 pixels, and the system needs to be Internet Protocol (IP) compatible. All cameras need to be running 24 hours a day and be able to identify any individuals on the premises and any individuals approaching any of the building’s entrance points at no less than 20 feet from the premises. Copies of all footage on the premises must be kept for at least 45 days. Perimeter fencing of all outdoor grows must be in the line of sight of the cameras. In areas where marijuana is grown, the cameras need to be able to identify an individual at all times. Lights, hoods, and other grow production items cannot obscure the camera’s view.

Traceability:

You must keep extensive record of all inventories and upload records in the state’s database. The following needs to be kept completely up-to-date in the system:

  • When a plant enters the system (moved from the seedling or clone area to the vegetation production at a young age)
  • When plants are, to any extent, harvested or destroyed
  • When marijuana is transported out of the facility
  • Any theft
  • Any samples given for testing or to other licensees in hopes of making a sale
  • All sale records
  • All excise tax records
  • Other information that the board may specify at a later date

Can I give out free samples of my product?

Yes, but only to other licensees for the purpose of negotiating a sale. All samples given away must be logged into the traceability database. You can only give away 4 grams per month to any one licensee.

Can I sample my own product?

Yes, but you can only sample one gram of usable marijuana per month. The sampler must either be you or one of your employees. The sampling must be logged into the traceability database.

How do I legally transport marijuana between licensed facilities?

RCW 69.50.385 gave the WSLCB board the authority to create a licensing procedure so that common carriers can transport marijuana and marijuana products from one licensed facility to another. In other words, the person who drives your bud harvest to the processor needs to get a license from the WSLCB. The Marijuana Transportation License fee is $250.

What other permits does my marijuana business need?

Typically, quite a few more than a regular Washington business. Besides usual business permits, marijuana producers have to take in consideration how their activities affect the environment—you may need permits for air quality, water quality, solid waste handling, hazardous waste management and more. For instance, in some areas, you’re required to submit a State Environmental Policy Act (SEPA) checklist so the state can see what kind of impact your business will have. In King, Kitsap, Snohomish and Pierce Counties, marijuana producers and processors are required to submit a pre-construction application with the Puget Sound Clean Air Agency—an application that comes with a $1,150 price tag.

Some counties and municipalities have permits just for the privilege of being a marijuana business. For example, the City of Kenmore charges $500 a year for their annual Marijuana Business License.

How can Northwest Registered Agent help me?

We can serve as your Washington registered agent and receive all official mail and service of process, as well as keep you up to date on all that is required to keep your business entity active.

Registered agents are required for any business entity registered with the Secretary of State. When you hire Northwest Registered Agent as your registered agent, it’s a flat rate yearly price of $125 a year. You’ll have an online account that tracks your report due dates and when your yearly service with us is up. Any documents we receive locally for you are uploaded into your account immediately for complete viewing. If or when you get served with a lawsuit, we can email up to 4 people and your attorney at the same time for real-time complete viewing of a lawsuit. You’ll receive annual report reminders as well. Our service is the same price every year, and there are no weird fees or cancellation fees.

For more information or for WSLCB applications or forms, contact:

Washington State Liquor and Cannabis Board
PO Box 43098
3000 Pacific Ave SE
Olympia WA 98504-3098
(360) 664-1600

https://lcb.wa.gov/mjlicense/marijuana-licensing

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