Cannabis Microbusiness

The Costs and Benefits of a Cannabis Microbusiness Licence

by William Restis

published February 1, 2018

This blog post will discuss the “microbusiness” license available under California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (the “Cannabis Act”). A microbusiness license is for operations that want to handle small batches of cannabis products from cultivation to retail.

A detailed description of the information necessary to apply for a microbusiness license  can be found in the Bureau of Cannabis Control’s draft regulations. Fees for a microbusiness license range from $5,000 to $120,000, and are calculated based on the expected revenue of the licensee.

Now before we go any further, here are the usual disclaimers. I’m not your attorney. This is not legal advice. You should never make legal opinions from the internet because your situation differs from the “standard.”

What Is A Microbusiness?

A microbusiness is a type of cannabis license offered by the BCC. It allows the licensee to cultivate up to 10,000 square feet of cannabis flower. In addition to growing the cannabis, a microbusiness can manufacture and distribute refined marijuana products, and even act as the retailer. To be granted a microbusiness license, an applicant must engage in at least three of the following: cultivation, manufacturing, distributing and/or retail.

Microbusiness compliance

The microbusiness license comes with a catch, and it’s a big one: compliance.

An applicant for a microbusiness license or renewal must provide a “detailed description” of its proposed operating procedures “for each cannabis activity.”

So if the microbusiness engages in cultivation, manufacturing and distribution (which includes retail delivery), it must comply with those sections of the statute. If the microbusiness enages in every step from growing to retail, it must comply with every section of the Act, and all the implementing regulations. This explicitly includes all production, packaging and labelling requirements.

In addition, a microbusiness must take measures to secure its product from theft and tampering. This means security guards and surveillance cameras. And there needs to inventory tracking procedures in place to ensure this highly regulated product is accounted. That means no cannabis missing from the books.

And all batches of cannabis products must undergo quality assurance testing before they can be sold at retail.

As I said, there is a lot of regulation that comes with operating a microbusiness. For a general overview of the Cannabis Act, see here.

An important takeaway is that the costs of compliance must be considered when penciling out the return on investment from a microbusiness license. This is because there is a lot of paperwork and oversight.

Microbusiness location

As with any California cannabis license, an applicant must go through local approval processes. This means selecting a location that is acceptable to your city or county, and satisfies their local ordinances. A microbusiness applicant will need to show local compliance and approval when seeking their license from the BCC.

When considering the location of a microbusiness (or any marijuana business), the BCC will look to the relative concentration of marijuana licensees to the population of any given area. In practice this means there are a limited number of licenses issued to cover a specific location. The more dense the population, the more licenses will be available.

Cannabis consumption on premises

California has decided to defer to cities and counties on whether customers can consume cannabis on premises. Just remember that the Cannabis Act does not allow for consumption on premises unless the city does.

Consumption on premises is only allowed if the venue is 21 and over only, and is shielded from outside view. In other words, adults only and be discreet. And cannabis can’t be sold where alcohol or tobacco is. But cannabis coffee shops appear to be permissible. A microbusiness can also sell cannabis goods at events, provided it holds
a retail license.

When deciding whether to allow consumption on premises (with city approval of course), keep in mind that “stoned driving” is just like drunk driving. Proprietors that allow consumption on premises risk legal liability. Assume dram laws apply, and consider requiring an Uber (or designated driver) for patrons that partake.

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