No matter what you sell or offer, ventures of all kinds need some sort of license or permit in order to conduct business. Cannabis brands just have a more difficult time with obtaining a dispensary license.
Because the cannabis industry is heavily regulated, licensing for marijuana businesses is particularly complicated. Compliance requirements not only vary from state to state, they also change depending on the business category (medical vs. recreational, cultivation vs. retail/dispensary) and which city or county you operate in.
In order to operate legally, it’s important to meet all of the necessary cannabis business license and registration requirements. Here are some steps to help you get started:
Check Your State Dispensary Licensing Requirements
Many states limit the number of cannabis business licenses they issue and may only accept applications during a certain period of time. Check with your state to see what the application window is to obtain a retail dispensary license.
Each state also has their own strict requirements for standard operating procedures, training employees, and how facilities are set up. Make sure you fully understand and go through these requirements before applying for a marijuana dispensary license.
For example, according to Michelle Bodian, partner at Vicente LLP and Casey Leaver, director of regulatory compliance at Vicente LLP, the state of Connecticut requires the following in order to be granted a cannabis business license:
- Retrieve property documentation, including the right to occupy and blueprints
- A workforce development plan that is approved by the Social Equity Council (SEC)
- A Social Equity Plan that is approved by the SEC
- A Security Plan
- Policies for preventing diversion and the misuse of cannabis
- A labor peace agreement
- A seed to sale contract — this is not something that you will have access to until the final license has been issued
Most states also have a residency requirement where you must be living in the state for a certain period of time before you can apply for a business license.
Understand Local Zoning Requirements
Most cities have their own rules and license and permit processes for cannabis businesses. Zoning ordinances generally prohibit marijuana facilities near schools and even churches, so this is another important factor to consider when choosing a place to set up your business.
Another thing to note is that some cities and counties do not allow marijuana facilities, even if both recreational and medical cannabis are legal within the state. For example, in California:
- 44% of cities and counties allow at least one type of cannabis business
- 56% of cities and counties do not allow any type of cannabis business
- 61% of cities and counties do not allow any retail cannabis businesses
Register for the Appropriate Dispensary Licenses and Permits
The kind of licenses you need depends on the type of business you operate. According to Wolters Kluwer, here are a few examples of how licensing differs based on the business category:
- Cultivation: Growing cannabis is heavily regulated. An operation like this will require significant initial investment and a vigorous site plan review, and practical and proven horticultural knowledge.
- Retail: As a retailer, some states may require that you’re able to provide adequate product and building security in place. They may also limit the amount of product that can be sold to one individual and restrictions on your pricing.
- Edibles: When manufacturing edibles, some states require that you cook and maintain your product in a commercial kitchen. You may need to produce the cannabis butters and oils that are used in your product on-site as well.
- Investors: If you’re thinking about investing in cannabis stocks, be sure you understand where the industry is at the moment. The dynamics of the marijuana industry are rapidly changing. Those who want to invest in cannabis businesses may need to follow specific regulatory and statutory provisions as well.
Once you figure out the type of license or permit you are trying to acquire, be sure to check your state’s website for directions on how to apply. Typically, entrepreneurs can simply apply online and pay the fees associated with the application. Other times, you may have to mail in your application. The website will also include information such as when you can apply.
Entrepreneurs should also expect to undergo background checks, state inspections of your facilities, and an audit of your business plan. Typical attachments to the application may include a Certificate of Good Standing from the Secretary of State, floor plans of the marijuana facility, a tax bond, and Articles of Incorporation or a Partnership Agreement if applicable.
Some states, like Connecticut, require a pharmacist to be on site during hours of operation at a cannabis business, according to Bodian and Leaver. Connecticut also requires a key employee, such as one in a management position, to be on site during business hours. This is important because if there is ever an issue, you need to make sure you have the right staff to be able to handle the issue.
Some states also require that any employee who works for a cannabis-related business be licensed or registered. Bodian and Leaver suggest the following tips when it comes to marijuana business employees:
- Ensure all employees are registered and properly trained.
- Ensure all record-retention requirements are met.
- Ensure all requirements for the physical security of cannabis and the establishment are met.
- This includes being on-site while open or in operation, supervising deliveries, receiving alarm notifications, accessing undeliverable cannabis storage and deactivation of security system.
- If a key employee of a hybrid retailer or retailer, ensure that the following items are conspicuously posted in the establishment so they are clearly and readily identifiable to qualifying patients, caregivers and consumers:
- Cannabis establishment license
- The name of all licensed pharmacists, if applicable
- The price of all cannabis offered by the cannabis establishment as identified by their brand name as registered
- If a key employee of a hybrid retailer, ensure that the establishment has appropriate United States Pharmacopeia or comparable pharmaceutical reference materials for the purposes of dispensing, compounding, titrating, diluting, and other purposes as needed, to ensure that cannabis can be properly dispensed.
- Ensure that any other filings or notifications required to be made on behalf of the cannabis establishment.
The most important bit of advice we can leave you with is to constantly check your state website for any changes and updates to cannabis license regulations. Some states also have ongoing compliance regulations, so it’s in your best interest for you or a key employee to stay on top of this.