How to Get a Cultivation License in California in 2020

Looking to get a cultivation license in 2020?

This guide breaks down our proven process for how to get a cultivation license in seven steps:

1. Prepare a work plan
2. Prepare a site and facilities plan
3. Prepare a business plan
4. Obtain supporting state agency approvals
5. Obtain local approvals
6. Obtain state cannabis licenses
7. Maintain permits and licenses

Helping cannabis entrepreneurs enter the industry is what we do best.

Chances are, you’re going to face significant hurdles along the way.

Regulations are constantly changing, and all it takes is a few simple errors to delay a project for months or even years.

With that said, we’ve gotten pretty good at streamlining the process and minimizing the headaches.

Whether you’re starting your first cannabis business or want to expand an existing one, this article is for you.

Keep reading to learn our 7-step process for how to get a cultivation license in 2020.

We’re also going to cover which combination of cannabis licenses can help you accomplish your goals.

Let’s dive in!

5 TYPES OF CANNABIS LICENSES

Did you know that getting a cultivation license is just one of several ways to capitalize on the green rush?

You can also get licensed for…

• Manufacturing: Extraction, infusion and packaging
• Distribution: Supply chain management 
• Testing: Quality-control services
• Dispensary: Retail stores

Plus, most of these have sub-categories with their own unique advantages, disadvantages, and accompanying legislation.

At the end of this guide, I’m going to explain how to stack these licenses into a vertically integrated business model. 

But first, you’ll need to decide where to set up shop…

WHAT STATE SHOULD I START MY MARIJUANA BUSINESS IN?

The federal government no longer prosecutes cannabis businesses that are in compliance with state regulations, so the more robust the state’s laws, the safer you’ll be from prosecution.

California, Florida, Michigan, Colorado, and Washington have all passed some form of legislation that allows cannabis businesses to operate. 

Florida, however, issues very few cannabis licenses, and when they do, it’s usually to well-financed, vertically integrated companies. 

California and Michigan, on the other hand, allow small businesses to occupy many links in the supply chain.

In other words, you don’t need big financial backing or powerful political connections to enter the industry. 

HOW TO GET A CULTIVATION LICENSE IN 7 STEPS

Each type of cannabis business has its own unique requirements.

For example, cultivators need to obtain a license from the Department of Food and Agriculture, manufacturers need to apply to the Department of Public Health, and retailers, distributors, microbusinesses, and testing labs need to apply to the Bureau of Cannabis Control. 

At the same time, certain licenses are harder to obtain and others are more expensive to fund.  

Many clients have no idea how much money it actually takes to get a cultivation license. 

Believe it or not, a single greenhouse facility can easily cost $1 million!

In order to streamline how to get a cultivation license, we’ve turned it into a simple 7-step process:

1. Prepare a work plan
2. Prepare a site and facilities plan
3. Prepare a business plan
4. Obtain supporting state agency approvals
5. Obtain local approvals
6. Obtain state cannabis licenses
7. Maintain permits and licenses

By the end of this guide, you should have everything you’ll need to take your first steps towards starting a cannabis business. 

Now for a deep dive into our proven process for how to get a cultivation license in 2020:

STEP #1: PREPARE A WORK PLAN 

The first step towards obtaining a cultivation license is to put together a master checklist for the entire process. 

Unless you’re starting from ground zero, you should already have some of the required essentials in place, including:

• A clear direction for your business
• Existing operations
• Acquired property
• Available capital
• Formed entity

However, if you’d like some help with defining your goals, selecting a property, standardizing procedures, and demonstrating financial stability, we can help with that too. 

Want to Learn more? Check out how to create a winning work plan.

STEP #2 : PREPARE SITE AND FACILITIES PLANS

The second step is to assemble detailed site and facilities plans. 

If you already have a plot of land and basic improvement plans, we can use them to generate a digital map of the site. 

However, if you don’t have plans or haven’t yet settled on a site, we can help survey prospective locations.

We use precise GPS instruments to analyze every aspect of the property, including:

• Property corners
• Bodys of water
• Access roads
• Topography
• Parking lots
• Walkways
• Trees

Finally, we use these data points to generate 3D models that clearly demonstrate how you plan to operate. 

Our consultants also evaluate for zoning and land use restrictions that may disqualify the property, inhibit workflow, or otherwise make the plot too expensive to maintain.

Want to Learn more? Check out how to pick a site and develop a facilities plan.

STEP #3: PREPARE A BUSINESS PLAN

The third step is to put together a viable business plan that communicates success. 

Regulators won’t grant approval to applicants who fail to demonstrate a thorough understanding of what it takes to run a successful business. 

Your business plan essentials should include:

• Demonstrating knowledge of the required permits and licenses
• Compliance inspections and audits
• Tracking and trace compliance
• Community relations
• Financial projections
• Safety and security
• Entity structure
• Odor control
• Operations

If you plan to attract investors, we can incorporate elements like market research, cash flow analysis, customer demographics, and exit strategies. 

Want to Learn more? Check out how to create a winning cannabis business plan.

STEP #4: OBTAIN SUPPORTING STATE AGENCY APPROVALS

The fourth step is to acquire the necessary permits and licenses from the following state agencies:

• Department of Tax and Fee Administration (DTFA)
• State Water Resources Control Board (SWRCB)
• Department of Fish and Wildlife (CDFW)
• Secretary of State (SOS)
• CalFire

In order to earn their approval, you’ll have to provide business entity documentation. 

Although it’s technically possible to operate a cannabis business as a sole proprietor, it’s best to apply as an entity like a for-profit corporation (S-Corp, C-Corp), mutual benefit nonprofit corporation (MBNPC), or a limited liability corporation (LLC). 

Our consultants can help you decide which entity best suits your needs and assist you with the application procedure. 

You’ll also need to acquire the relevant environmental approvals, which can be especially challenging for cultivators. 

For example, indoor cultivators who are discharging waste into a municipal sewer or onsite septic field will need to apply for a Cannabis Discharge waiver from the SWRCB, as well as a 1602 waiver from the CDFW.

Mixed-light/outdoor cultivators, on the other hand, will need to obtain a Cannabis Waste Discharge Permit from the SWRCB, a 1602 waiver from the CDFW, and possibly a permit from CalFire.

Plus, additional permits may be required depending on the need for property development, and mitigation can be costly. 

Luckily, our consultants are trained to identify problematic environmental features during field assessments that would otherwise cause costly permits and mitigation. 

STEP #5: OBTAIN LOCAL APPROVALS

The fifth step is to submit your site plans, business plans, and agency approvals to the local city and county governments. 

First, you’ll need to obtain a land use permit from the Planning Department.

Cannabis businesses require a “discretionary” conditional use permit (CUP), meaning that applicants must present their plan in a public hearing. 

The proposal is then either approved or denied based on a vote from the planning commission or city council, but this is just the first step… 

You’ll also most likely need certifications, permits, and licenses from other local departments, possibly including another round of environmental assessments.

This process can be long and costly if regulators decide that there are significant environmental impacts. 

Knowing this ahead of time, you can usually find ways to reduce potential impacts before you apply. 

STEP #6: OBTAIN STATE CANNABIS LICENSES

The sixth step towards getting a cultivation license is to obtain state approval. 

Fortunately, at this point you should have everything you need to meet the state’s requirements. 

All that remains is to fill out and submit a few documents, including:

• Labor Peace Agreement (<20 employees)
• Business and Operations Plan
• Premises (Site/Facilities) Plan 
• Property or Lease Agreement
• Live Scan Background Check
• Neighborhood Context Map
• Business Entity Formation
• Surety Bond ($5,000)
• Local Approvals 
• Seller’s Permit
• Security Plan 

Cultivators will also need to submit the following documents:

• Cultivators Waste Discharge Permit or Waiver
• Hazardous Materials Record Search
• Verification of Water Source
• 1602 Permit or Waiver

STEP #7: MAINTAIN PERMITS AND LICENSES

Once you’ve obtained your cultivation licenses, permits, and approvals, the seventh and final step is to comply with ongoing regulations. 

All licenses are issued with an agreement to participate in continued monitoring and reporting, including meticulously tracking inventory. 

Local and state regulators will regularly inspect your business, and many approvals require annual renewal. 

As a licensee, it falls on you (or your consultant) to make sure that everything is up-to-date and in compliance.

HOW BE GREEN LEGAL CAN HELP YOU GET A CULTIVATION LICENSE IN 2020

Be Green Legal can take the helm on all fronts, including planning, proposals, and legislative maintenance.

Most importantly, though, we don’t take shortcuts or use cookie-cutter templates. 

Each client gets a fully customized business plan because each cannabis business faces unique obstacles. 

At the same time, our proven 7-step process provides a battle-tested framework for success. 

Our consultants have been assisting businesses with every phase of the permit and licensing process for decades, and together can help you set up a cultivation business that will maximize opportunities and minimize costs. 

HOW TO COMBINE LICENSES AND BUILD A VERTICALLY INTEGRATED CANNABIS BUSINESS

California offers an ideal opportunity for entrepreneurs of all sizes to occupy multiple stages of the cannabis supply chain, including:

• Manufacturing: Extraction, infusion and packaging
• Cultivation: Flower and cannabis biomass
• Distribution: Supply chain management 
• Dispensary: Retail stores

The only stage that’s off limits to vertical integration is testing services, and that’s because regulators need to ensure that they’re unbiased in their analysis and reports.

Understanding how these different pieces fit together will help you decide which licenses to acquire in order to maximize long-term potential.

BENEFITS OF BUILDING A VERTICALLY INTEGRATED BUSINESS

Vertical integration can boost ROI by allowing you to control as many variables in the supply chain as possible. 

Here are just a few benefits to building a vertically integrated cannabis business:

• Greater demand for your products
• Greater exit strategy potential
• Lower supply costs
• Greater profits

Even if you initially focus only on cultivating, it can pay off big time to already have the necessary licenses when it’s time to expand into manufacturing and distribution.

VERTICAL INTEGRATION STRATEGIES

Our recommendation is to focus on one, or a combination of, the following strategies:

1. MICROBUSINESSES

California regulators have created what’s called a Type 12 Microbusiness. 

If you fit the output requirements of a medium-sized grow, then you can create a complete farm-to-table experience for your customers. 

The only catch is that you’ll have to operate at least three different licensed cannabis activities in order to qualify (cultivation, manufacturing, distribution, or retail). 

One of the main benefits of a microbusiness is that, other than having a 10,000 sq ft cap on canopy space, you’re allowed to scale without limitations.

An example of an easy-to-scale microbusiness for startups would involve retail, distribution, and some level of manufacturing. 

2. MULTI-LOCATION INTEGRATION

You may not be able to accomplish all of your vertical integration goals in a single city or region. 

For example, the Emerald Triangle in northern California is ideal for cultivation but has few retail opportunities. 

In this situation, it would make sense to establish stores in places like Los Angeles and San Diego where there are bigger retail markets, and base your cultivation operations in northern California. 

3. PARTNERSHIPS, JOINT VENTURES, AND ALLIANCES

Although you may be able to obtain all the necessary licenses for vertical integration, it can be challenging to manage the entire supply chain yourself. 

In fact, covering all the steps without partners may be risky and impractical from a regulatory perspective. 

That’s why if you really want to scale, it helps to have joint ventures and specialists at each level. 

Fortunately, the emerging cannabis industry is full of eager entrepreneurs who are willing to join forces.

If you want to learn more about the value of starting a vertically integrated cannabis business, our Vertical Integration eBook breaks down all the opportunities in greater detail. 

It also explains how to get your foot in the door with unique, highly specialized licenses.

GET YOUR FOOT IN THE DOOR WITH SPECIALIZED LICENSES

Large-scale projects aren’t the only route to take if you’re brand new to the cannabis industry. 

California legislators have created a variety of specialized, service-based licenses that cost less and are easier to get approved, including:

• Packaging and Infusion (subset of manufacturing)
• Nursery & Processing (part of cultivation)
• Transport (limited distribution)

These options allow you to test the waters without having to overcommit on time, money, or manpower. 

For example, manufacturing and testing tend to be costly to get approved and require up to $1 million worth of equipment. 

Retail, delivery and distribution, on the other hand, are less costly and easier to build out but cost more for branding, marketing, and logistics. 

At the same time, getting a cultivation license can come with a ton of environmental hurdles and building permits. 

Ultimately, the best decision for many first-time cannabis entrepreneurs is to start small and grow gradually. 

YOUR NEXT STEPS

Are you ready to take a step forward and explore opportunities within the cannabis industry?

After investing in our official discovery process, our experts will help to identify your best fit in the market based on your goals, skillset and location. We will help you determine the steps required to evolve your ideas into a fully-licensed, operational and profitable business. 

Our discovery packages are designed to help you get started whether you just want solid insights to make more informed decisions or a more complete analysis to share with your partners: covers the following:

• Business strategy session
• Opportunity analysis
• Property search and acquisition strategy
• Property suitability assessment fit, search and acquisition strategy

The discovery process will help determine your needs for the following:

• Build-out
• Operations
• State licenses
• Property selection
• Business plan
• Marketing & go-to market strategy
• Local permit applications
• Real estate purchase/lease
• Compliance

We will lead the charge so you can stay laser-focused on your brand, customer experience and product development. Be Green Legal has helped hundreds of cannabis entrepreneurs build profitable businesses.

Ready to move forward? Let’s get started.

Have some questions first? We’d love to hear from you! 

Check out how we helped Green Pro Enterprises navigate some very sticky red tape and come out victorious. 

This Cannabis Business Overcame the Obstacles and Got Licensed | Be Green Legal from Be Green Legal on Vimeo.

Here is a detailed history of the Cannabis Laws in California.

1. Brief Review

Over past 21 years, California has experienced a major shift in policy related to production, distribution, possession, and use of marijuana. While it became legal in 2018 to produce, distribute, and possess both medical and adult use marijuana, it is important for any cannabis cultivators who want to know how to get a cultivation license in California to understand the evolution of state law and how it is radically changing the industry

a. The Compassionate Use Act (CUA) – Starting in 1996, California voters approved Proposition 215, also known as the Compassionate Use Act (http://www.canorml.org/medical-marijuana/patients-guide-to-california-law), which exempts patients from prosecution for a controlled substance if they obtained a recommendation from their doctor to use marijuana for their medical needs. This law marked the first time in U.S. history that a state legalized marijuana in opposition to the U.S. Controlled Substances Act. However, no supporting requirements were included indicating how much or where this marijuana would be grown, whether patients could distribute marijuana to other patients with a doctor’s recommendation, what permits or licenses would be needed, whether taxes should be paid, and many other questions.

b. The Medical Marijuana Program Act (MMP) (http://www.canorml.org/laws/sb420.html) – The MMP was subsequently passed in 2004 by California legislature (http://www.legislature.ca.gov). The law allows each patient to possess up to eight ounces of dried marijuana and cultivate six mature or twelve immature marijuana plants, unless a local ordinance, or doctor authorizes more. In addition, the MMP established the right to collective and cooperative cultivation of medical marijuana. In 2008, then State Attorney General Jerry Brown issued a white paper (https://oag.ca.gov/news/press-releases/atty-general-brown-issues-medical-marijuana-guidelines-law-enforcement-and) further clarifying that a collective or cooperative could only be considered legal if it incorporated as a California mutual benefit non-profit corporation. The California State Board of Equalization, now known as the California Department of Tax and Fee Administration (DTFA) (https://www.cdtfa.ca.gov/industry/cannabis.htm) also determined that marijuana providers would need to first obtain a seller’s permit and then pay sales tax for retail transactions. Yet this system still did not address how marijuana businesses should interact with each other, or with the city and county governments in which they were located. The latter issue culminated in a California Supreme Court decision in 2013 (http://www.canorml.org/medical_marijuana/RiversideRuling.pdf) giving local governments the power to zone medical marijuana dispensaries and other cannabis businesses out of existence (http://articles.latimes.com/2013/may/07/local/la-me-medical-marijuana-20130507).

c. The Medical Cannabis Regulation and Safety Act (MCRSA) (http://www.canorml.org/news/A_SUMMARY_OF_THE_MEDICAL_MARIJUANA_REGULATION_AND_SAFETY_ACT) – In October 2015, California state legislators and the governor approved the MCRSA, a significant milestone in regulating marijuana. Essentially, the law established a robust dual licensing system that requires all cannabis businesses in the industry to obtain a state license appropriate to their activities. In addition, the MCRSA requires licensees to first obtain approval from the local government where their business is located (https://static.cdfa.ca.gov/MCCP/document/Comprehensive%20Medical%20Cannabis%20Regulation%20and%20Safety%20Act.pdf). After almost two decades of operating in a legal gray area, the MCRSA finally gave cannabis operators a clear path for legally operating their businesses at the local and state levels.

d. The Adult Use of Marijuana Act (AUMA, Proposition 64) (http://www.canorml.org/news/what_will_be_legal_and_what_wont_after_Prop_64) – November 2016 marked a new paradigm for the cannabis industry in California with the passage of Proposition 64, or the Adult Use of Marijuana Act (https://www.cacities.org/Resources-Documents/Policy-Advocacy-Section/Hot-Issues/Adult-Use-of-Marijuana-Act/AUMA-FAQ_Final.aspx). This new law allows and regulates the adult use of marijuana for recreational purposes, distinguishing the entertainment value from those who use the drug for medicinal purposes. This new law approves a similar licensing structure as that proposed under MCRSA and allows users to purchase and possess up to one ounce of dried marijuana, or eight grams of concentrates, or any combination thereof.

e. The Medical and Adult Use of Cannabis Regulation and Safety Act (MAUCRSA) – In June 2017, California legislators and the governor approved the Medical and Adult Use of Cannabis Regulation and Safety Act (https://www.calgrowersassociation.org/understanding_the_maucrsa). This law streamlines the policies for both medical and adult use into one system the only requires an M or A used as designation. While adult and medical licensees can only sell to other businesses with the same M or A a designation, this law allows greater flexibility with regard to vertical integration opportunities.

f. The U.S. Controlled Substances Act (CSA) – The federal Controlled Substances Act (https://www.deadiversion.usdoj.gov/21cfr/21usc/) The Controlled Substances remains in effect for the foreseeable future as the federal government continues to grapple with the debate over rescheduling marijuana. While cannabis is both recreational and medical legal in half of the U.S. states, federal prosecution remains a concern.

g. The Cole Memo and Farr Rohrabacher Amendment (https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf) (https://mjbizdaily.com/rohrabacher-blumenauer-amendment-extended-december) – These two significant federal legislative documents have served to relive cannabis businesses from federal prosecution if they adhere to state medical and recreational laws. Until attorney general Jeff Sessions recently rescinded the Cole Memo, https://mjbizdaily.com/marijuana-businesses-rush-decipher-sessions-decision-legal-experts-advise-caution/, this document redirected federal policy away from prosecution of cannabis businesses in states with a robust regulatory system that polices the cannabis industry. Similarly, the Farr Rohrabacher Amendment has eliminated federal funding for prosecution of medical and adult use businesses in compliance with state and local cannabis laws. While it remains to be seen what will happen next at the federal level, states that have legalized cannabis are holding steadfast in supporting their respective cannabis regulations and even U.S. Congress members have indicated similar support http://www.newsweek.com/marijuana-supported-americans-except-sessions-republicans-778530.

h. Takeaway Message – A well-defined and executed state and local regulatory system significantly reduces the likelihood of federal prosecution.

2. How cultivating marijuana has changed under California law

a. Proposition 215 (http://www.canorml.org/medical-marijuana/patients-guide-to-california-law) and SB 420 (http://www.canorml.org/laws/sb420.html) created a business landscape for the California cannabis industry marked with limited legal structure, no access to institutional banking systems, minimal oversight except police, and little incentive to pay taxes. The only legal entity structure was the collective and cooperative model, which has no established legal framework for the transfer of goods and services between collectives. Consequently, every transaction between parties (for example: grower selling to dispensary) is technically an illegal transaction unless they are both members of the same collective. With a small number of individuals, the collective model would work. However, with over 39 million people in the state of California, it is impractical for a collective to be liable for every cultivator from whom they receive products.

b. The state’s new licensing structure under MAUCRSA (https://www.calgrowersassociation.org/understanding_the_maucrsa) establishes a clear framework for how businesses within the legal cannabis industry should operate and interact with each other. Three state agencies, including the Bureau of Cannabis Control (http://bcc.ca.gov/), Department of Food and Agriculture (http://calcannabis.cdfa.ca.gov/), and Department of Public Health (https://www.cdph.ca.gov/Programs/CEH/DFDCS/Pages/MCSB.aspx), are responsible for administering 26 license types issued to cannabis operators active in every activity involved with creating consumable cannabis products. Cannabis is first produced by a licensed cultivator who then transfers the harvested crop to a licensed distributor, or licensed manufacturer is slated to be extracted as a concentrate product. The distributor then conducts a quality assurance/control process, including facilitating testing with an independent licensed cannabis laboratory, before transporting retail-packaged products to licensed cannabis retailers.

c. While it was possible for cultivators to sell cannabis directly to the dispensary in bulk, cannabis regulations require products to be tested and packaged before they are transported to a retail store or delivery service. Cultivators wishing to retain the same control over packaging and distribution will need to obtain their own distribution license or conduct their own marketing programs and contract with a distributor for testing, packaging, and transport. At the same time, retailers will no longer have the option to package their own cannabis products, store and display bulk cannabis, or give away free products to adult users.

 

3. Steps you will need to take to get a cultivation license in California

a. Local Approval – While it is now possible to get a cultivation license in California, operators must first obtain approval from their local city or county government to operate at their location. Cities and counties in California are the primary authority regulating the use of land. Cannabis businesses, therefore, need to obtain approval to operate on a property. A good cannabis consultant will have experience in obtaining land use permits and business licenses, which require a business plan, floor plan, site plan, security plan, community relations plan, and financial analysis.

b. Environmental Permits and Assessments – For cultivators and other cannabis businesses effecting change on the environment through land development, you will need one or more of the following:
i. Water Board permit or waiver (https://www.waterboards.ca.gov/water_issues/programs/cannabis/),
ii. 1602 Permit or waiver (https://www.wildlife.ca.gov/Conservation/Cannabis)
iii. Environmental Assessment (http://resources.ca.gov/ceqa/guidelines/Appendix_G.html)

c. State Cultivation License – Once you have received local approval, you can apply for a state cannabis cultivation license. Cultivators must obtain a license from the Department of Food and Agriculture (http://calcannabis.cdfa.ca.gov/), while manufacturers need to apply to the Department of Public Health (https://www.cdph.ca.gov/Programs/CEH/DFDCS/Pages/MCSB.aspx), and retailers, distributors, microbusinesses, and testing labs will need to apply to the Bureau of Cannabis Control (https://aca5.accela.com/bcc/Welcome.aspx).

4. Anticipated marijuana dispensary start-up costs
a. There are many steps needed when trying to figure out how to get a cultivation license in California and each takes significant time and effort. You can complete these steps yourself if you have the skill and experience to do so, or hire a cannabis consultant to help you. Whichever way you choose, it is important to ensure that preparation of your permitting and licensing documents is completed accurately and with a strategy in mind of how your business will operate. Errors, omissions, or lack of preparation will lead to processing delays or rejections from regulatory agencies, as well as a poorly run business.
b. Costs for a cannabis dispensary license can be broken down into basic categories you can use to decide whether this is the venture for you:
i. State cannabis cultivation license fee – $65 – $4,435
ii. State cannabis annual fee – $560 – $38,350 (Depends on income)
iii. Local approval fees – $5,000 – $30,000 (Depends on project/license activities)
iv. Environmental permits and assessments – $0 – $30,000 (Depends on project)
v. Consulting fees – $20,000 – $, 40,000 (Depends on task size and quantity)

c. Project costs for other cannabis businesses vary but follow a similar list.

For more information please contact us to set up a half-hour consultation with one of our expert cannabis consultants.