A microbusiness license allows a licensee to conduct multiple types of commercial cannabis activity under one license. To qualify for a microbusiness license, an applicant must intend to engage in at least three of the following commercial cannabis activities:
• Retail
• Non-Storefront Retail (Delivery)
• Distributor
• Distributor-Transport Only
• Cultivation (Less than 10,000 sq. ft.)
• Manufacturer (Level 1, Type 6).7
Testing laboratories cannot be included within a microbusiness as testing laboratory owners are prohibited from owning any other license type. The BCC also provides a helpful guidance document that describes the microbusiness application process that can be found at https://bcc.ca.gov/clear/microbusiness_instructions.pdf .
BCC applications can be submitted online at https://online.bcc.ca.gov/bcc/Welcome.aspx . However, it is useful to print out a hardcopy of the application which can be found at https://bcc.ca.gov/clear/microbusiness_application.pdf to understand what information will be required and to organize said information. Page 3 of the hardcopy outlines the documents that need to be uploaded as attachments in “SECTION I – REQUIRED ATTACHMENTS/DOCUMENTS.” The microbusiness application guidance document referenced above provides some context to the requirement attachments, but let’s discuss the key attachments one by one:
1. Evidence of legal right to occupy and use the proposed premises location
This requirement is straightforward and met by uploading either of the following:
• A fully executed lease along with a statement from the property owner stating that the applicant hasthe right to occupy the property and conduct commercial cannabis activities.
• Title or deed showing that the applicant owns the property
If an applicant is renting a property, make sure the lease is in the name of the entity the applicant intends to apply under. This rule of thumb generally goes for every commercial document executed by an applicant that must be submitted as part of the licensing process.
2. Premises Diagram Form(s)
The premises diagram is a floor plan that identifies property boundaries, key operational areas such as where cannabis and cannabis products will be stored, as well as the location of security cameras. Page 2 of the premises diagram instruction form found in Appendix E or at https://bcc.ca.gov/clear/premises_diagram.pdf out-lines the areas that need to be labeled in detail. Details can also be found in CCR, Title 16, Division 42, § 5006.
Any local cannabis application will require some sort of property diagram. However, local labeling requirements may not match up with state requirements. Make sure to label any missing areas not required during the local licensing process.
A premises diagram will also serve as the base of any standard operating procedure. The layout of a cannabis business is also critical to maximizing operational efficiency. Premises diagrams can also expose potential workflow hiccups that might not be apparent while physically walking your property. It’s important, therefore, to put time and effort into a premises diagram and make sure operational components are strategically placed.
To save money, contact your landlord or the entity the property was purchased from to see if there are any pre-existing floorplans that reflect the property’s current layout. While it may be advisable to consult with a security professional about the placement of security cameras and other operational considerations, the actual premises diagram itself does not need to be any fancy.
3. Business formation documents, including all documents filed with the CA Secretary of State (SOS).Foreign corporations must include a copy of the Certificate of Qualification from the SOS.
The business formation documents requirement may feel a bit over-the-top. But, if there is any silver lining, it at least is an indirect reminder to an applicant of the corporate documents a business ought to have in place, as well as the corporate formalities that ought to be observed. Applicants may apply other business structures, but this explanation will focus on the two most common structures: corporations and limited liability companies (“LLC”).If an applicant is applying as a corporation, the following documents are required:
• Articles of Incorporation
Filing Articles of Incorporation is generally the first step in forming a corporation. They identify the name of your corporation, type of corporation, corporate address, as well as the number of shares/shareholders.
• Statement of Information
Statements of Information identify the corporation’s corporate officers and directors, corporate address, as well as the agent for service of process. They are filed annually.
• Certificate of Stock
Stock certificates are issued to shareholders and list the amount of stock owned, date of purchase or grant, shareholder signature, etc. In all likelihood, the BCC uses this information to verify that all owners have been disclosed.
• Stock Ledger
A stock ledger is a list of stockholder information that compiles the name of shareholders and amount of stock owned.
• Organizational Charts
If an applicant owns multiple corporate entities related to cannabis, it is generally a good idea to provide a diagram showing those entities and the relationship between them. Applicants should also include charts that outlines the positions that make up their company and their overall internal hierarchy.
• Bylaws
Bylaws are the rules that govern the way in which a corporation operates. It is an internal document.
• List of Board Members
A simply excel spread sheet or bulleted list should suffice here.
If you are having trouble locating your corporation’s articles of incorporation or statement of information, the State has a helpful search tool located at https://businesssearch.sos.ca.gov/ . Simply search by your corporation’s name or entity number and the search tool will provide downloadable PDFs of documents that have been filed with the state.
The documents required by an applicant applying as an LLC are similar to the documents required applicants applying with a corporation:
• Articles of Organization
Articles of Organization are the functional equivalent of Articles of Incorporation. They are the first step in forming an LLC and identify baseline information about the identity.
• Statement of Information
Statements of Information identify an LLC’s managers/members, address, as well as the agent for service of process. They are filed annually.
• Operating Agreement
An operating agreement is similar to a set of corporate bylaws: it lays out the rules that an LLC is to abide by.
If you are having trouble locating your LLC’s articles of organization or statement of information, the State has a helpful search tool located at https://businesssearch.sos.ca.gov/ . Simply search by your corporation’s name or entity number and the search tool will provide downloadable PDFs of documents that have been filed with the state.
4. Evidence of exemption from, or compliance with, the California Environmental Quality Act.
Consult with your local jurisdiction here. Documentation tends to vary from jurisdiction to jurisdiction, but the BCC does provide forms found in Appendix F and at https://bcc.ca.gov/clear/bcc_lic_025.pdf and https://bcc.ca.gov/clear/bcc_lic_026.pdf .
5. Labor peace agreement documentation
California cannabis regulations require employers with twenty or more “non-supervisory” employees to enter into a labor peace agreement.9 A labor peace agreement is a contract between an employer and a labor union. Applicants must document executed labor peace agreements, or their intent to enter into one as follows:
• If the applicant has 20 or more non-supervisory employees and has entered into a labor peace agreement, it must provide a notarized statement indicating that it has entered into and will abide by the terms of a labor peace agreement along with a copy of the signature page of the agreement.
• If the applicant has 20 or more non-supervisory employees and has not yet entered into a labor peace agreement, it must provide a notarized statement indicating that it will enter into and abide by the terms of a labor peace agreement as soon as reasonably practicable.
• If the applicant does not have 20 or more non-supervisory employees, it must provide a notarized statement indicating that it will enter into and abide by the terms of a labor peace agreement within 60 days of employing its 20th non-supervisory employee.10
6. Financial Information Form
Individuals and entities that hold a financial interest in the applicant entity must be disclosed using the form found in Appendix G and at https://bcc.ca.gov/clear/financial_information_form.pdf . While applicants should consult relevant state and local regulations, “Financial interest” is in part defined as “an agreement to receive a portion of the profits of a commercial cannabis business, an investment into a commercial cannabis business, a loan provided to a commercial cannabis business…”
7. Proof of surety bond in the amount of $5,000, payable to the State of California
The BCC’s surety bond form can be found in Appendix H and at https://bcc.ca.gov/clear/licensee_bond.pdf . Make sure that the entity that the applicant intends on applying with is listed on the bond.
8. Transportation procedures
The transportation procedures form is required by all license types. It is worth repeating, however, that cannabis goods must be transported between licensees by a licensed distributor, including between licenses owned by the applicant. Therefore, if an applicant intends to transport cannabis goods, they must include the distributor license type within their microbusiness application.
The Transportation Procedures Form can be found in Appendix I and at https://bcc.ca.gov/clear/bcc_lic_015.pdf and is a high level overview of how an applicant intends to transport cannabis goods from point A to point B. Here are some things to consider:
• Information about Motor Carrier Permits can be found at https://www.dmv.ca.gov/portal/vehicle-industry-services/motor-carrier-services-mcs/motor-carrier-permits/ . The Motor Carrier Permit application can be found at https://www.dmv.ca.gov/portal/uploads/2020/04/mcp706app.pdf .
• If cannabis goods need to be transferred between licensees within the same building or parcel, they may be transported by foot, hand truck, fork lift or other similar means.
• In terms of storing cannabis goods in the vehicle, current regulations mandate: “Cannabis goods shall be locked in a fully enclosed box, container, or cage that is secured to the inside of the vehicle or trailer. No portion of the enclosed box, container, or cage shall be comprised of any part of the body of the vehicle or trailer. For the purposes of this section, the inside of the vehicle includes the trunk.”
• All transport vehicles should be completely unmarked and cannabis goods should not be visible from outside of the vehicle (no windows etc.).
9. Non-laboratory quality control procedures
The Non-Laboratory Quality Control Procedures form can be found in Appendix J and at https://bcc.ca.gov/clear/bcc_lic_017.pdf . This form focuses on an applicant’s procedures for verifying packaging and labeling, as well standard operating procedures (“SOP”) for testing if the applicant intends to operate as a distributor.
CDPH has released the following packaging and labeling checklists that should be consulted when drafting packaging and labeling SOPs:
• Packaging Checklist for both Flower and Manufactured Products can be found at https://www.cdph.ca.gov/Programs/CEH/DFDCS/MCSB/CDPH%20Document%20Library/Packaging_Checklist.pdf
• Labeling Checklist for Flower and Flower-Only Pre-Rolls found at https://www.cdph.ca.gov/Programs/CEH/DFDCS/MCSB/CDPH%20Document%20Library/LabelingChecklist-Flower.pdf
• Labeling Checklist for Manufactured Products can be found at https://www.cdph.ca.gov/Programs/CEH/DFDCS/MCSB/CDPH%20Document%20Library/LabelingChecklist-Products.pdf .
Make sure products are properly categorized (Flower vs. Manufactured Products) to ensure that the correct regulations are being followed. Pay particular attention to making sure the labeling requirements are place in the correct location (Primary vs. Informational Panel) as well. This is a common basis for distributor and retailers to reject product.
You may be scratching your head right now wondering why the CDPH released packaging and labeling checklists rather than the BCC. The short answer is that the BCC defers (in part) to the CDPH regulations in Section 5307(d) of the BCC regulations.
10. Security procedures
As mentioned above in the discussion of the Premises Diagram, it may be advisable to consult with a security professional to put together a comprehensive security plan. The cannabis industry is an all-cash industry, and there are any number of security concerns that arise from that reality. A security consultant will not only advise to what equipment (video, alarm system, etc.) to use; they will also be able to determine that best location for security-sensitive aspects (i.e. areas where cannabis good are stored or cash is handled) of an applicant’s operation. Further, they will be able to advise as to camera placement to ensure complete coverage of the premises.
The Security Procedures Form can be found in Appendix K and at https://bcc.ca.gov/clear/bcc_lic_018.pdf . In short, hiring an outside security consultant is a worthwhile investment.
11.Delivery procedures, if your license activities include Retailer or Retailer Non-Storefront
If a microbusiness application includes Storefront Retail with a delivery or Non-Storefront Retail (Delivery), the delivery procedures must be submitted. The Delivery Procedures Form can be found in Appendix L and at https://bcc.ca.gov/clear/bcc_lic_020.pdf .
Similar to the transport procedures:
• In terms of storing cannabis goods in the vehicle, current regulations mandate: “Cannabis goods shall be locked in a fully enclosed box, container, or cage that is secured to the inside of the vehicle or trailer. No portion of the enclosed box, container, or cage shall be comprised of any part of the body of the vehicle or trailer. For the purposes of this section, the inside of the vehicle includes the trunk.”
• All transport vehicles should be completely unmarked and cannabis goods should not be visible from outside of the vehicle (no windows etc.).
However, delivery vehicles must also be equipped with GPS tracking technology that logs a history of a driver’s geographic location.
12. Inventory procedures
Inventory procedures describe how cannabis goods move in and out of a business’s inventory. Inventory procedures ensure that cannabis is delivered to consumers safely, and aim to prevent the illegal diversion of cannabis into the illicit market.
Most state and local regulations also address inventory procedures. These regulations should form the base of a business’s inventory procedures. For example, regulations often dictate that limited access areas be clearly designated throughout a facility. Access to safety and security-sensitive areas, such as where cannabis goods are stored or cash is handled, should be limited to essential employees.
Operators should also familiarize themselves with the track-and-trace system utilized by their jurisdiction and incorporate the system’s step-by-step functionality into their SOP, as well as the step-by-step functionality of any third-party technology solution a client chooses to use. Many third-party technology providers offer helpful inventory how-to guides and training which can be invaluable when putting SOPs together.
METRC is a popular track-and-trace system used across the United States. METRC recently started a YouTube channel with training videos at https://www.youtube.com/channel/UCcasu4orIpyqqEmQWWOkW0w. Their website, https://www.metrc.com/, also has helpful information for licensees. The Inventory Procedures form can found at https://bcc.ca.gov/clear/bcc_lic_016.pdf .