Why Are California Medical Marijuana Laws So Hazy? Part 4

By: Wallin & Klarich

Part 1
Part 2
Part 3

Today we bring you part 4 of our series of blogs surrounding California’s medical marijuana laws. Today’s blog is about the pitfalls and potential legal battles you can face if you decide to open a medical marijuana dispensary.
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Basic collective law

You hear about medical marijuana dispensaries being “Little cash cows” making hundreds of thousands of dollars a month. Don’t believe everything you hear or read on the internet. There are many lawyers advertising themselves as “420 lawyers” representing that they can guide you through the permitting process in many cities that will allow you to open up and start servicing patients in a short period of time. Operating a medical marijuana collective dispensary is not always as easy as that. There are strict guidelines that must be followed in how the business entity is set up and many cities in California still have city wide bans on medical marijuana collective dispensaries.

Over the last decade, hundreds of thousands of dollars have been spent on litigation against the cities and counties in an effort force them not to ban medical marijuana collective dispensaries within their local jurisdiction.

It is important to note that a collective is not a sure bet. While some well-run collectives in the right area do well financially, others manage to squeak by month to month. There are collectives that pay just enough to pay for medication, rent and employee wages with no spendable income to pay for attorney’s fees.

It is also important to remember that medical marijuana collective dispensaries are required to be non-profit and that labor and wage laws apply to them the same as any other business. Those who wish to venture into the medical marijuana collective dispensary business should keep in mind that it is not a money tree and your legal fees can be substantial due to federal laws and local ordinances designed to keep dispensaries from opening within their borders.
Many people in local positions of power or influence have preconceived notions that are totally opposed to the concept medical marijuana collective dispensaries. Many of them could care less about what state law says. They just don’t want it in their back yard. In addition, few judges have been willing to “Pull the trigger” and rule in favor of medical marijuana collective dispensaries.

If you decide to open a medical marijuana dispensary, consult with a financial consultant that knows the financial issues of operating a non-profit enterprise and lawyer who knows how to legally set up the structure of a medical marijuana collective. Failing to properly structure the collective can result in the operating member being accused of a felony. Don’t start a collective based upon the notion that it is trouble free cash cow. It’s a tough business now and will be for some time.

Growing medical marijuana is a science and an art. The relationship between the people who grow the product and the people who dispense the product is key to avoiding several legal troubles.
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Having contacts with good providers who are willing to become members and how to set up your lease are all important things to address before setting up a successful non-profit operation that can support management members.

Even with the best laid plans, operating a medical marijuana collective dispensary is a high risk business. Having a relationship with an experienced lawyer who is familiar with all the issues concerning medical marijuana is essential. Your lawyer should know how to set up the business entity, know how to obtain permits, and be familiar with land use litigation if the city or county in which you decide to do business becomes unworkable. It’s also helpful if your attorney has a background as a criminal defense attorney to be able to defend the managing member and the employees if local or federal criminal prosecution becomes a problem.

Posted In: Marijuana Offenses