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September 6, 2013

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Friday 5: Things Everyone Should Know About the Business Aspects of I-502

by WSBA
marijuana law
Learn critical information for advising recreational cannabis business clients.

marijuana law

I know you’ve heard it, but it’s worth saying again…

This is still illegal at the federal level

Congress has not removed marijuana from Schedule 1 of the Control Substances Act. That being said, the Department of Justice issued a memo last week with “guidance” that suggests businesses in compliance with I-502 are not high on the list of enforcement priorities. If regulation works, the federal government has indicated that they will stay out of the way. As attorneys, there is a HUGE proviso here.  This latest guidance is not binding on local U.S. attorneys and does not eliminate the risk of federal enforcement actions, including prosecution and civil forfeiture.

Corporations are not invisibility cloaks

While a corporate name may give no indication of who its stakeholders are, the Liquor Control Board will perform a full background check on every corporate director and officer and every financial contributor, as well as their spouses. If there is an issue in your history that will make that problematic (with the exception of simple marijuana possession), you should reconsider whether to start the process.

Location, Location, Location

Location Issue #1. The permitting process requires that a location already be secured and an operating plan developed for this location. The permit is issued to a location, not just to the applying party. If you are planning on applying for a permit, you should already be shopping for a location.

Location Issue #2. The location has to comply with the I-502 provisions regarding distances from schools, teen centers, child care centers, etc. In addition, the location has to comply with local zoning regulations. Know your neighborhood and your politicians. Keep an eye on local reactions to I-502. The rules do their best to keep localities from arbitrarily blocking the establishment of recreational retail locations, but with nervous local politicians, a lot of politicking may be necessary.

Observing corporate formalities is critical

Despite the nontraditional nature of enterprise under I-502, at heart this is a business. Corporate entities are a must to limit liability, maximize profits, and run a successful business. Incorporation issues don’t end with the establishment of an entity; they continue through the life of the corporation with the observance of corporate formalities, and failing to understand this can cost your business dearly.

Consult an Attorney

To properly analyze your risk, to understand corporate requirements, and to understand the tax and administrative implications involved in starting a business under I-502, it is critical to consult a corporate attorney who understands both the cannabis industry and business law. The 30-day window to apply for licenses is scheduled to begin Nov. 18, so there is no time to waste.

1 Comment Post a comment
  1. Dec 14 2013

    I wish there was more good info like this available on line regarding I-502. The WLCB stuff reads like a legal initiative and so much of the press on this has been wild speculation presented as fact. There are very many people wanting to get into this business who are finding out that it is nothing like pot growing. We just had to turn down an ideal subtle, rural agriculture location. We had green light from city, county, zoning and property owner to run water lines from a well and set up gas controlled, light sealed rooms… city planning told us we needed ADA compliant restrooms. This was in a shed with no plumbing that we wouldn’t have let anyone into. The laws are set up by lawyers, not farmers. Growers with good abilities are being forced back into the now oversupplied blackmarket. The ganj standard is plummeting to pre-1980’s levels right now… I predict economic disaster.

    Reply

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