Business License Requirements for Starting a Cannabis Dispensary

September 17, 2020 0 Comment

Business License Requirements for Starting a Cannabis Dispensary – Local and state governments put cannabis business owners through the wringer before they can start conducting their business.

This is likely because it’s a new industry, and local governments want to keep it regulated. We’ve picked out some items for you to consider while you’re pondering if you should open a dispensary or where to begin the process.

Basic Business Licensing Requirements

Any business you start requires licenses and permits. Here are some of the standard requirements to conduct business:

  • General Business License: necessary license to engage in business activities within the local jurisdiction
  • Business formation: forming an LLC or incorporating your business protects your assets from debts and liabilities that may arise from your business
  • DBA Filing: a DBA (Doing Business As) allows your business to use a different name than the name you used when filing your incorporation papers
  • Tax ID Number: this is the number the IRS uses to identify your business for anything tax-related
  • Permits: different companies need different licenses such as health and building permits

Cannabis License Requirements

As of May 2020, 12 states have fully legalized medicinal and recreational marijuana. It’s illegal in any form in 8 countries. The three categories the rest of the nations fall under are:

The laws and requirements vary from state to state. They also vary in how restrictive they are: some only states only issue a certain number of licenses to an individual at one time, and some have an open application period. 

In general, more restrictions apply to the owner, contractor, and employees of a dispensary than to your average business. If anyone has a past felony, they will likely reject the license.

Specific Requirements for the Certain States

Because requirements vary so much, we’re going to give the necessary licensing requirements of three states with different legalization laws to provide you with an idea of how their needs differ.

California – Fully Legal (Medicinal & Recreational)

The sale of medicinal and recreational cannabis is legal as long as the seller has a local and state license. There are three state licensing authorities; the agency you report to depends on the type of license you’re seeking (i.e., cultivator, dispensary, etc.).

Related Article: California’s Cannabis Dispensary Sales Tax Guide

Arizona – Mixed Legality (Legal for Medicinal Purposes, Still Criminalized)

Medical marijuana sales are run by the Arizona Department of Health Services. They accept dispensary registration certificate applications periodically. A cultivation facility must be licensed as a dispensary.

New York – Mixed Legality (Legal for Medicinal Purposes, Decriminalized)

The New York Department of Health is in charge of medical marijuana sales. Organizations must be registered with the Department to manufacture and dispense medical marijuana.

Differences in Licensing Based on Business Category

Different types of cannabis-related businesses must follow different rules. Here are some of the differences in what is required for various business categories:

  • Cultivation: you will need to prove strong horticultural knowledge, make a steep initial investment, and prepare a detailed business plan.
  • Retail: some states may require you to provide sufficient security for your product and building, and they may place restrictions on how much you can charge and how much product you can sell to one customer.
  • Edibles: you may be required to cook your product in a commercial kitchen, and you’ll likely have to produce the cannabis butter and oils you use on-site.

Employee Licensing

Make sure you’re aware of all state and local requirements for licensing and permits. Specifically, you should be mindful of what licenses are required for employees.

Some states will have different conditions for retail workers versus employees that are responsible for managerial and operational duties. Volunteers may even need licenses. 

This rigorous hiring process is why cannabis business owners are advised to be very particular about who they hire. You don’t want to go to the trouble of getting a license for someone only to have them stop showing up after a week of work.

What’s Next?

Once you’ve fulfilled all of the licensing requirements for your dispensary, you’ll be quite relieved to be through with the process. However, you aren’t done yet. Rules and regulations are continually changing, and you’ll need to renew your licenses and permits, usually on an annual basis. Zencanna can help with that process.

Zencanna has tons of useful features to help you run your dispensary; one of them is helping you maintain your licenses. Our software generates, stores, and secures the legal reports needed for auditing, so you don’t have to worry about them.

Getting permits is difficult and, trust us, you’ll only want to go through that process once. When officially starting your business, consider Zencanna. We’ll help you out. Sign-up now and get a FREE demo.


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