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