How To Start a Collective in California

How To Open a Dispensary
MattJacobsen

How To Start a Collective in California

Starting a legal collective in California is not a difficult process but is the first process required on opening a storefront dispensary or delivery service.

A collective is an organization compliant with state law and made up of of legally qualified patients along with their primary caregivers that receives medicine exclusively donated from its members and disburses it exclusively to its members.

Non Profit collectives are the legal formations for medical marijuana dispensaries.

California Health and Safety Code §11362.775 authorizes patients and caregivers to “associate within the State of California in order collectively or cooperatively to cultivate marijuana for medical purposes”. Unfortunately, the law gives no further clarification as to what constitutes a collective or cooperative association. The nature of these associations is evolving in step with California law and legal precedents.

In August 2008, the California Attorney General created guidelines for medical marijuana that state that “a properly organized and operated collective of cooperative that dispenses medical marijuana through a storefront may be lawful under California law,” provided the collective substantially complies with the AG’s guidelines.

California Health and Safety Code Section 11362.765(a) states nothing in the law authorizes the growing or distribution of medical marijuana for profit. This law does not require the establishment of a statutory nonprofit corporation as described in California Corporations Code Section 5000. However, operators are recommended to organize a medical cannabis collective as a California mutual benefit nonprofit corporation, as discussed in greater detail below.

Regardless of however thew collective is organized, a medical marijuana collective needs to operate in a “not-for-profit” manner. Any business, no matter its legal organization can operate in a not-for-profit fashion by reinvesting excess revenue (after salaries and other overhead) in services for members, advocacy for patients’ rights, or other noncommercial activity. Harborside Health Center is a wonderful example of this.

Many collective operators choose to incorporate their collectives as California Nonprofit Mutual Benefit Corporations, as described under California Corporations Code 7110, et seq. Doing so gives the collective a bona fide nonprofit identity, something that resonates with elected officials, law enforcement, media, and neighbors. This is a sensible choice for most operators, and increasingly the norm for new facilities.

These laws are new, and they are still being defined but the great thing is that as long as you are in compliance with the law in California you are golden. Make sure you know the law inside and out so you can avoid making any mistakes once you are up and running.

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