How to Start a Marijuana Business in California in 10 Steps

If you're an aspiring cannabis business owner, check out our guide on how to start a marijuana business in California in 10 steps. As the largest legal cannabis market in the world, the state has a highly competitive market. With an unlimited number of licenses available and no residency requirement, it's always a good time to start up your cannabis business in the Golden State.

Keep in mind, only about a third of the state’s cities and counties allow for commercial cannabis activity. However, licensing is available year-round. In addition, towns and cities are expected to join in on the green rush over time. Here's a step-by-step guide on how you can start becoming a cannabis job creator today!

1. Choose an Entity Type and Business Name

What type of business license are you looking to obtain? Are you interested in starting a medical or recreational cannabis business (or both)? Do you have a business name? California has several license types you can choose from including the following:

• Cannabis cultivator
• Cannabis retailer
• Cannabis manufacturer
• Cannabis distributor
• Cannabis testing laboratory
• Cannabis micro-business

Cannabis business licensing fees are based on either the size of the business or the estimated gross revenue. For more information, refer to the following state regulations:

• Cannabis Cultivation Fees
• Cannabis Manufacturing Fees
• Cannabis Distribution, Labs, Microbusinesses, Events Fees

2. Register with the Secretary of State

Once you’ve chosen your business name and entity type, you may register with the Secretary of State's office and pay any related fees. Find the relevant forms on the California Secretary of State’s website.

• Entities Required to register: Corporations (including profit and non-profit), Limited Liability Companies (LLCs), Limited Partnerships (LPs), Limited Liability Partnerships (LLPs), and Cannabis Cooperative Associations (CCA)
• Entities that may register: General Partnerships
• Entities not requiring registration: Sole proprietorships

3. Register a Fictitious Name

If necessary, you must register a fictitious business name if it's different from your business’s legal name. Some counties and cities may have specific naming requirements that may require you to change your business name. Check your county's website for business name requirements and register a fictitious name with the county clerk/recorder.

4. Obtain Local Approval

California’s dual licensing system requires business owners to register with the Secretary of State and get city, county, or city and county approval. Check with your local city and county to determine the local permit requirements and other authorization needed.

5. Obtain a Seller’s Permit and Cannabis Tax Permit

While not necessary for all business entities, a majority require obtaining a seller's permit if they plan to make cannabis sales. Cannabis retailers, cultivators, processors, manufacturers, distributors, and micro-businesses need to register with the California Department of Tax and Fee Administration (CDTFA) to obtain a seller's permit.

Cannabis distributors must also register with the CDTFA to obtain a cannabis tax permit and pay cannabis taxes.

6. Obtain State License(s)

In order to open up a business, business owners must apply for and obtain a license from the appropriate state agency. There are three state agencies* in charge of licensing cannabis commercial activity. The three licensing agencies include:

• Bureau of Cannabis Control (Department of Consumer Affairs): Licenses testing laboratories, distributors, retailers, and micro businesses
• CalCannabis Cultivation Licensing Program (Department of Food and Agriculture): Licenses cannabis cultivators and administer the Track-and-Trace system
• Manufactured Cannabis Safety Branch (Department of Public Health): Licenses manufacturers of cannabis products, such as edibles

*Currently, California's licensing process is incredibly complex, especially for vertically integrated businesses that must deal with all three agencies. Governor Gavin Newsom proposed consolidating all three state regulatory agencies into one, the Department of Cannabis Control, by July 2021.  While coronavirus set back the timeline for consolidation, changes are expected soon.

7. Employer Requirements

As an employer, you must obtain a federal Employer Identification Number (EIN). Employer obligations include payroll taxes, wage withholding requirements, matching employer withholding requirements, and employee employment eligibility requirements.

In addition, employers must consider State Disability Insurance, Unemployment Insurance, and equal employment opportunity.

8. Tax Obligations

Consult the variety of agencies that administer taxes for California businesses. Ensure you are fulfilling every legal tax obligation according to the respective federal and state agency. Refer to the following tax administration agencies for more information:

• Internal Revenue Service (IRS): Federal taxes
• Franchise Tax Board (FTB): Personal income tax and corporation tax
• Employment Development Department (EDD): Unemployment insurance, employee training tax, state disability insurance, and personal income tax
• California Department of Tax and Fee Administration (CDTFA): Seller's permits, sales and use taxes, excise taxes, and other special taxes
• California State Board of Equalization (BOE): property taxes

9. Ongoing Registration Requirements

Every corporation and limited liability company is required to file a Statement of Information with the Secretary of State within the first 90 days of registering with the office and then annually for California stock corporations and foreign corporations. California nonprofit corporations and all limited liability companies must register every two years.

10. Trademarks and Service Marks

If necessary, you may register your trademark or service mark with the California Secretary of State's office. Obtaining a trademark or service mark helps to ensure you have exclusive rights to sell products and services with your name (or similar name or mark).

Cannabis Business Certification

Start your cannabis business in California by enrolling in Cannabis Training University’s industry certification program.

Learn the most up-to-date rules and regulations of your state including links to relevant applications and licensing fees. Our complete curriculum gives you a full rundown of every major area of the industry, not just your chosen business entity.

Enroll at the most renowned cannabis education program in the world. Once you get your business set up, offer your entire team the chance to get certified. A knowledgeable staff can keep your business compliant and grow it from within. Give your employees a chance to grow their career while they grow your business. Enroll at CTU today!