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Opening a Recreational Marijuana Dispensary

Corporate Compliance by Local Corporate Guides®

While marijuana’s designation under federal law as a Schedule I drug hasn’t changed, several states have opened their doors to commercial marijuana sales for recreational use. Interested in opening your own marijuana dispensary? It’s not an easy road to navigate. Check out the guide below to learn more about the laws, licenses and requirements for marijuana retailers.

Steps to Opening a Dispensary

1

Understand Marijuana Laws by State

When it comes to marijuana laws, the fifty states might as well be fifty different countries. There’s recreational cannabis, medicinal marijuana, CBD products and more, all of which may be subject to different laws. Sometimes, a short walk or drive is all you need to find yourself subject to vastly different regulations. For instance, in Idaho, marijuana is prohibited, even for medical use. Just across the state line in Washington, however, adults 21 and over can walk into a pot store and go home with bud, edibles, oils, and more.

To get a general idea of what sort of sales are permitted (at least by state law) across the nation, take a look at the chart below:

Number of States

Type of Marijuana Sales Permitted

States

9

recreational and medical sales Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon and Washington
24 general medical sales Arizona, Arkansas, Connecticut, Delaware, DC, Florida, Hawaii, Illinois, Maryland, Minnesota, Missouri, Montana, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, Utah, Vermont, and West Virginia
14 only CBD or low THC oils permitted for medical sales Alabama, Georgia, Indiana, Iowa, Kansas, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, Texas, Virginia, Wisconsin, and Wyoming
1 only “non-smokeable” products permitted for medical sales Louisiana
3 not cannabis-friendly Idaho, Nebraska, and South Dakota

As you can see from the chart above, only a handful of states currently allow for the sale of recreational marijuana. A few of these states, like Washington and Colorado, already have a few years of recreational weed sales under their belts. Other states, like Michigan, haven’t even gotten started yet. Michigan’s Proposal 1, allowing for recreational commercial sales, just passed in December 2018.

You may have heard that recreational weed is legal in Vermont and DC, and you’re right—but in these areas, what’s been legalized is personal use, not commercial sale. So, no opening a recreational dispensary in these locations, at least for the time being.

While the exact processes and procedures for opening a recreational dispensary vary state to state, there are a few fundamental topics you’ll need to explore and procedures you’ll need to go through, wherever you’re considering setting up shop.

2

Check for License Availability

Once you’ve decided to explore commercial pot sales, the first step is to find your state’s regulatory agency and see if licenses are currently being issued. States typically limit or cap the number of dispensaries. As such, it can be difficult to enter the field once it’s been established, as licenses tend to be snapped up fast.

For instance, in Washington, the state regulatory agency is the Washington State Liquor and Cannabis Board (WSLCB). Just a quick check of their website reveals that marijuana retailer licenses aren’t currently being issued, and there’s no plan to open up applications in the near future. This doesn’t mean your dreams of running a commercial dispensary in Washington are necessarily over, however. Washington marijuana retailer licenses are tied to the business, so while you can’t get a new license from the WSLCB (or even buy one from a business), it is possible to buy an entire existing retail business—if you can find one willing to sell.

Interested in growing, processing or retailing marijuana in Washington? Check out our page on How to Sell Cannabis in Washington State.

Michigan, on the other hand, just passed a law to allow for commercial marijuana sales, so the retail application form hasn’t even been created yet. The state regulatory agency is the Bureau of Marijuana Regulation (BMR), a subsection of the state’s Department of Licensing and Regulatory Affairs (LARA). The BMR notes that application forms are slated to be available by at least December 6, 2019—meaning it will take until at least 2020 for commercial sales to get off the ground.

3

Apply for a Retailer License

Your state regulatory agency will require a marijuana retailer license, typically in addition to any other usual business licenses. Note that states tend to view marijuana retailers as moneymakers—so licenses aren’t cheap. In Washington, an annual license costs $1480. In Michigan, exact processes and fees are still being drafted, but the initial application fee is likely to be similar to the fee for a medical marijuana provisioning center—which is a steep $6,000. There will also be an annual fee or assessment, which could be even higher.

In addition, licenses and fees aren’t just limited to the state—cities and counties may tack on fees of their own. For instance, retailers in Kenmore, Washington have to get an annual city-level marijuana business license to the tune of $500 a year. Municipalities in Michigan will be permitted by the new Michigan Regulation and Taxation of Marihuana Act to charge up to $5,000 in annual fees. What that means is that your city might add on thousands of dollars in fees on top of whatever the state requires.

4

Learn State-Specific Requirements

Your state’s regulatory agency is a great place to start to learn about the many requirements for a retail marijuana store. However, the requirements—and just the sheer amount of information—can easily be a bit overwhelming at first. If you’re not sure where to begin, below are some of the most common areas of regulation you’ll need to consider.

  • Location: States don’t want marijuana retailers next to schools, playgrounds, and similar types of areas. Usually retailers have to be a certain distance away, such as 500 or 1000 feet. Also, while the state itself may permit retailers, this doesn’t mean that every county or municipality will as well. For instance, Washington cities like Leavenworth and Pomeroy don’t allow marijuana businesses to set up shop. Michigan municipalities are permitted by the new law to limit or ban marijuana businesses, so it is as of yet unknown which parts of the state will ultimately embrace or reject the industry.
  • Security: There are typically strict security requirements for retailers—neither you nor the state wants to see your business get robbed. You’ll likely need video surveillance and an alarm system at the minimum.
  • Advertising: Signage on your business itself and any local advertising you do will likely be subject to strict regulation. In Michigan, for instance, municipalities are free to establish reasonable restrictions on public signage for marijuana businesses.
  • Inventory: There will likely be limits as to how much inventory and cash you can keep on site. There will also be specific procedures to ensure you can account for every product you have from the moment it enters your store. There will be limits on how much you can sell in a single transaction—and sometimes daily or monthly purchasing limits that will require customer tracking.
  • Transportation: Getting the product to your store from processors is another issue as well—most states require a separate transportation license to move marijuana and marijuana products between facilities.
  • Employees: States will typically have specific criteria for employees, including age and criminal background restrictions. There may be specific training requirements as well.
5

Choose an Entity Type

Because the industry is so heavily regulated, states typically require marijuana retailers to be a state-registered entity, such as an LLC or corporation. For instance, the 5 top-selling cannabis retailers in Washington State are all LLCs. Just like any other business, forming an LLC or corporation requires registering with the state, appointing a registered agent, and choosing governors (such as directors, officers, members or managers). Whether you’re starting a new business or taking over an existing one, you’ll need to keeping compliant with general state business requirements such as annual reports.

6

Find Sources of Funding

It’s probably become apparent by now that start-up costs for a retail marijuana dispensary can be pretty steep—and unfortunately, funding can be a bit tricky. Federal banking restrictions can make getting a loan difficult, so it’s likely you’ll be seeking investors. Financiers will almost certainly have to undergo both criminal and financial background checks and may need to provide copies of tax returns. Most states also have residency requirements as well. For instance, when retail shops were first permitted in Washington, all financiers had to be Washington residents. While Washington now accepts out-of-state financiers, they must be US residents and have to be approved by the WSLCB.

Ready to turn bud into bucks?

The retail marijuana industry is still relatively new, so it’s important to realize that states themselves are often still in the midst of figuring things out as they go. Much of the legislation coming out now is either modeled after existing medical marijuana laws or the commercial marijuana laws of pioneering states like Washington or Colorado. You can expect minor changes will be made to laws as states adjust to the realities of this new industry. Because marijuana is a highly regulated industry, you’ll need to be prepared for paperwork, fees and occasional roadblocks. With licensing limits and caps, you’ll also need to stay on top of things just to get your foot in the door.

Starting and maintaining any business is a lot of work. We can help. We offer business formation and registered agent services in every state, as well as wide variety of other services, from annual report filings to free business forms.

Learn More about Starting a Business!

Corporate Compliance
by Local Corporate Guides®