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Are you a cannabis business owner in California or plan to be? If so, it’s time to get familiar with some common cannabis forms and contracts. The process of forming and growing a marijuana business is challenging with almost continually changing regulations. You’ll find yourself dealing with paperwork regularly, from getting the initial land use permit to negotiating agreements with vendors.
It can be difficult, but with an experienced and dedicated marijuana business attorney to review everything, you can comply with the state and local laws and reduce your legal risk as best you can.
As a long-time marijuana advocate and San Diego attorney, Jessica McElfresh can guide you through all of the red tape. Call McElfresh Law at (858) 756-7107 or contact us online to schedule a consultation.
You need a California state license to operate a cannabis business. But you’ll begin at the local level by applying for a license or permit. You have to get local approval for a cannabis business first. Only once the city or county authorities approve the land use will California issue a license.
A conditional use permit lets you use your property in a way not automatically allowed by zoning and land use ordinances. You have to get permission to use the land for a cannabis business. Some municipalities don’t allow marijuana businesses at all. Others will grant permits, but each has its own rules and process.
McElfresh Law helps you meet a municipality’s many technical requirements. We make sure you have a robust application and will represent you before local officials throughout the review process. We also prepare you for the local hearing process. You might hear opposition to your plans. But that doesn’t mean you won’t get the permit you need to move forward.
You need to draft several documents to form a cannabis business in California. McElfresh Law can set up a corporation, limited liability company, or partnership.
Formation documents may include:
Forming an LLC requires an operating agreement, which is a contract that describes:
An attorney should draft or negotiate any operating agreement. Because of the cannabis industry’s unique aspects, you can’t rely on generic versions you find online.
If you form a partnership, you’ll need to cement your rights and responsibilities in a contract. Shaking hands and making plans isn’t enough. Through a general or limited partnership agreement, you and your partner describe how you’ll share the profits, losses, and tax liability. You decide how long the partnership lasts when it dissolves, and more. In a limited partnership agreement, investors – limited partners – don’t operate the business.
Master growers have extensive knowledge and skills related to growing cannabis. Many of them have master’s degrees and years of horticulture experience. When you hire a master grower as an employee or consultant, you need a contract to protect your business.
You might be a small cannabis business, but you can’t do everything yourself. As a business owner, you’ll still need employment contracts and an employee handbook.
Not everyone you hire needs to be an employee. At times, you might prefer to hire an independent contractor. It’s important to talk with a lawyer about this distinction and how to hire contractors per California law. Also, the contract you’ll need for these workers will differ from employment agreements.
A non-disclosure agreement is also called a confidentiality agreement. As a cannabis business owner, you’ll want your employers, consultants, and independent contractors to sign an NDA. This keeps your business operations and intellectual property secret. An experienced lawyer can craft enforceable NDAs.
Social media influences are the new celebrity. You might consider working with an influencer as part of a marketing and advertising campaign. But you have to be careful. Define your relationship with an influencer in a contract compliant with California law. You’re also responsible for making sure the influencer understands what they can and can’t do to promote your product under California or federal laws.
Distribution agreements are essential in California’s cannabis industry. The terms of these agreements can vary depending on the circumstances. Some situations call for more aggressive contracts than others. A cannabis business lawyer makes sure your distribution agreement is thorough, legally compliant, and protects your business.
Cannabis businesses can’t rely on generic property leases. Your lease must address California cannabis laws. A lawyer makes sure you have a comprehensive lease, whether you’re the tenant or property owner.
Businesses create offering memorandum to bring in investors. It’s also called a private placement memorandum. It’s a document that includes:
If your business wants investors, work with a marijuana business lawyer to create an informative and accurate offering memo.
The subscription agreement is the contract between the investor and the business. It defines the number of shares available, the price, and the investor’s position in the company. In a limited partnership, the investor becomes a limited partner who can’t control how the general partners run the business. Because an investor has a stake in your business, a lawyer should review this agreement.
When a business borrows money, it signs a security agreement. The lender acquires a legal interest in a specific property or asset, called collateral. If you default, the lender can seize the collateral. The security agreement outlines the loan terms, including the amount and repayment schedule.
Are you interested in buying or selling a cannabis business? Sale agreements are complex documents, no matter the industry. In the case of a marijuana business, there are unique factors. Work with a lawyer experienced in cannabis-related sales agreements to avoid violating the law.
A term sheet specifies the terms of purchase. An experienced marijuana business lawyer should prepare a term sheet to avoid ambiguity and reduces risk during a transaction.
Term sheets include:
Depending on your sale position, you may need a lawyer to draft or review the terms sheet. Never sign anything before getting a legal opinion.
Starting a cannabis business takes careful planning. You need to know what you’re getting into and the challenges you’ll face, such as permits, licensing, and contracts. Working with an experienced marijuana business attorney like Jessica McElfresh is the best way to limit risk and build a successful venture.
McElfresh Law routinely works with marijuana businesses and local governments throughout the state. Based in San Diego, we help you from the very beginning, including developing your business plan, bringing on investors, finding a suitable location, getting local permits, and getting a state license. No matter where you are in the life of your business, we’ll guide you through all the complexities of cannabis forms and contracts.
Reach out online or call (858) 756-7107 to schedule your initial consultation.
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