November 16, 2011

Four Legalities To Consider Before Starting A Dispensary In California

November 16, 2011
Medical Marijuana Sign

Medical Marijuana SignFour Legalities To Consider Before Starting A Dispensary In California

by Danielle Rodabaugh

Even though growing, selling and using medical marijuana have been legal in California since 1995, laws that regulate the state’s dispensaries often fell within legal gray area. To help prevent future complications, Gov. Jerry Brown signed AB 1300 on August 31 as a way to strengthen individual cities’ ability to regulate medical marijuana dispensaries.

AB 1300 will allow local authorities to determine where dispensary owners can and cannot set up shop – they even have the power to refuse to allow any medical marijuana dispensaries within city limits. The law will go into effect January 1, 2012, at which time it will be increasingly important for dispensary owners to verify that they’re meeting all local requirements that regulate the industry.

1. Pay attention to deadlines

California’s medical marijuana dispensary licensing process isn’t complicated by accident. You need to fully understand the exact laws that will apply to your business, when they take effect and when you’ll be expected to fulfill them. Applicants must pay close attention to when different documents are due to the government agency licensing their business. Otherwise you could end up wasting a lot of time and money before you even get your business started.

2. Check to see if you need a surety bond

It’s no secret that federal, state and local government agencies look for ways to regulate risky professions and provide financial protection for consumers. One such way they achieve this is through the use of surety bonds. You probably haven’t even heard of this risk-mitigation tool that is required before business owners can even apply for a business license.

So far Colorado is the only state that enforces a medical marijuana surety bond requirement, which means this isn’t yet a concern for California dispensary owners. However, since individual cities will have the power to regulate dispensaries at their discretion once AB 1300 goes into effect, they could choose to require medical marijuana surety bonds as protective financial buffers. Be aware that a new surety bond requirement is highly likely in the near future.

Marijuana Dispensary Jar3. Register and license your business

The business licensing process can be frustrating for entrepreneurs and other new business owners looking to start up a new enterprise for the first time. Licensing laws and the corresponding process will vary depending on where exactly in California you plan to set up shop. The Small Business Administration outlines five crucial steps to registering a business in preparation for getting your license.

  • Determine the legal structure of your business.
  • Register your business name.
  • Obtain your federal tax ID.
  • Register with your state revenue agency.
  • Obtain licenses and permits.


As mentioned previously, you’ll have to contact local government agencies to access the specific forms you’ll have to fill out before you will be approved to operate in California.

4. Document all inventory and sales accurately.

Unfortunately, some medical marijuana dispensary owners have taken advantage of their position by conducting illegal business transactions. To avoid claims of unlawful distribution, dispensary owners should record each business transaction. Create patient sign-in sheets, inventory checklists, employee time cards and transaction records to keep your business organized and ensure it operates within lawful parameters.

Failing to seriously consider the possible legal implications of operating a medical marijuana dispensary could leave you and your finances at risk. If you don’t register and license your business appropriately and then operate it according to law, you could face legal action, large fines and even jail time, depending on the severity of the claim. So be smart, protect yourself and protect your investments. Before you open a medical marijuana dispensary in California, make sure you fully understand all legal expectations you’ll have to adhere to.

This article was written by Danielle Rodabaugh of As editor of the company’s Surety Bonds Insider blog, Danielle has been tracking developments surrounding medical marijuana surety bonds. helps medical marijuana dispensaries get the surety bonds that are required as a part of the licensing process.


Share on facebook
Share on twitter
Share on pinterest
Share on reddit
Recent & Related Posts
Recent & Related Posts