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3 First Steps to Starting a California Cannabis Business

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May 16, 2018

The most common question our experts get isn’t always tax related. In fact, it’s a bit more complicated. Everyone wants to know about starting a cannabis company in California.

What seems like a straightforward question usually has a much more complicated response. In this post, we’ll cover the three high-level steps you need to take to get started in California’s $3.7 billion cannabis industry. Our experts have helped dozens of companies launch in cities across California, and without these three factors, getting a license is difficult, if not virtually impossible. Here’s what you need to start a California cannabis company.

Step 1A: Find Cannabis Real Estate

As we outlined in a previous post, finding properly zoned real estate is the biggest and most important element of starting your business. If you don’t have a lease or purchased property, your cannabis license application will not be approved.

Finding real estate is made especially difficult by a city’s zoning restrictions. Often, a city will release their zoning ordinance just before announcing the opening of cannabis business applications. Commercial real estate is limited to green zone properties, and these properties are fiercely competitive among potential licensees. Our experts frequently see only ten properties available in compliant zones. Narrow those ten properties down to landlords willing to host cannabis businesses, and you’re looking at two or three spaces available to every prospective cannabis business in the city.

Secondly, a landlord willing to lease to a cannabis business is likely going to charge a premium (because they can). Budget ahead of time for a largely inflated lease price, and keep in mind that some landlords will ask for a large deposit to account for the chance that your cannabis license application might not be approved.

Step 1B: Select your Jurisdiction

We’re calling these step 1A and step 1B because these two items are really concurrent processes. Selecting a jurisdiction has as much to do with the available real estate in a district or city as other factors: tax rates, the cost of doing business, and application fees.

To reiterate: without real estate, you will not be able to operate as a cannabis business. However, there are other planning aspects that should play a role in getting your business off the ground. Select your jurisdiction carefully! Not every city allows for every type of cannabis business. Read the regulations (and check out the blog for updates as new cities come online) to see how many cannabis licenses will be available and what the selection criteria will be. Check tax rates, crime statistics, and other city-wide regulations to see how easy your life will be once you get approved.

Pro-tip: try to narrow it down to 2-3 jurisdictions before looking for real estate. This will make your life easier!

Step 3: Complete and Submit the Cannabis Business Application 

This step sounds pretty straightforward, but our experts say submitting a strong cannabis business application is a full-time task. Give yourself three to four weeks of effort to put together the best application possible. To help you, we’ve compiled our best tips from helping dozens of businesses through the process. Read our advice on how to submit a strong cannabis permit application in California before you get started.

Remember: cities update their ordinances roughly once a year. As this is the first year that cities are releasing cannabis regulations, 2018 can be considered something of a test run. If you have feedback for your respective city, be sure to submit a public comment. When these ordinances and regulations are revisited next year, these comments will be taken into account.

Questions? Get in touch with our experts to learn more about starting a cannabis business in California.

Filed Under: Business