What Is a Marijuana Microbusiness in California?
A California marijuana microbusiness is a vertically-integrated marijuana business that perform at least three of these four activities in one facility: cultivation with up to 10,000 square feet of canopy, manufacturing (use of non-volatile solvents, mechanical extraction or infusion), distribution or transport-only distribution, and retail (storefront and delivery-only dispensary). Microbusinesses are a way for smaller operators to enter into and thrive in the California cannabis industry. The vertical-integration possibilities available to microbusinesses offer potential advantages such as:
- Reduced transportation and transaction costs
- Reduced overhead and management costs
- Optimized supply chain performance and diagnostics
- Opportunity for superior quality control
- Ability to focus/specialize products and services
Does California License Marijuana Microbusinesses?
Yes. Pursuant to the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), persons interested in starting marijuana microbusinesses must obtain microbusiness licenses. In California, a microbusiness license, also known as a Type 12 license, enables the licensee to cultivate cannabis in an area smaller than 10,000 square feet and to operate as a licensed distributor, a Type 6 and Type N manufacturer, and retailer. A microbusiness can act in part or whole as a cannabis business. Entities with California’s medium and large cultivator licenses are not eligible for a microbusiness license.
Licensed microbusinesses authorized to engage in retail sales are only permitted to serve customers within their licensed premises, or at delivery addresses that meet the requirements of the Department of Cannabis Control (DCC).
How to Apply for a Marijuana Microbusiness License in California
Completing a cannabis microbusiness license application in California requires time, work, organization, and preparation. To begin, you must be familiar with and follow all applicable local permitting procedures and ordinances. Ordinances are local government legislation established by cities and counties to impose additional obligations as required by the municipalities. They define the hours, places, and methods through which business owners operate. Ordinances are only valid in the city or county in which they are adopted. Consult your local and county governments to discover if any cannabis-related ordinances have been enacted.
Several cities and counties in California have regulations and statutes governing cannabis growing operations. Certain jurisdictions prohibit facilities used for cultivating cannabis. Local ordinances can also be helpful, particularly if you have been disproportionately affected by previous cannabis law enforcement. For instance, in order to foster a more inclusive marketplace, some California towns and counties have enacted ordinances establishing equity programs to assist those impacted by the War on Drugs. Applicants that meet these criteria may be eligible for rewards such as the following:
- Faster application processes
- Assistance during the licensing processes
- Help with operating their businesses
- Direct financial support
Equity ordinances approved by municipalities in California include:
You may contact your city or county office to learn about any equity program available for cannabis microbusiness license applicants. Ensure that your cannabis establishment will be permitted in your proposed locality and complete any requirements before submitting a microbusiness license application to the State of California.
Under California law, your cannabis operations facility cannot be situated within a 600-foot radius of the perimeter of a kindergarten or any grade 1–12 school, a childcare center, or a youth center. The facility must also comply with any distance restrictions stipulated in the ordinance of the municipality where the facility will be located as specified in Section 26054 of the California business and profession code.
To complete your application process online, visit the DCC licensing portal and create an account on the system by providing a username, password, and setting up a security question and answer. When completing the application, the applicant must choose the proper license type and classification for the cannabis activity that will take place. Applicants may select adult-use (A-license) or medicinal (M-License) type. The following information are also required:
- Business organizational structure: Applicants must identify their business organizational structure.
- Business contact information: For an individual, the applicant's first and last names are needed. If the application is a commercial entity, the applicant must provide the full legal business name. The applicant's business name must be identical to the business name stated on the company formation papers submitted to the DCC. The applicant must provide the physical address of the premises, as well as the postal address if it differs from the physical location of the premises. Additionally, the business's website address, email address, and telephone number must be included
- SSN, ITIN, FEIN: Before an application may be accepted, the applicant must submit a valid Social Security number, individual taxpayer identification number (ITIN), or Federal Employer Identification Number (FEIN).
- Primary contact person: The applicant must include the main contact's name, title, telephone number, and email address. The DCC licensing team will discuss the application solely with this individual and a company owner mentioned on the application. The main contact is the individual designated as the point of contact for licensing authorities seeking information about the company.
- Premises location: An applicant is required to attest that the proposed cannabis business premises is not located within a 600-foot radius of a school providing instruction in kindergarten or any grades 1 through 12, daycare center, or youth center that is in existence at the time the license is issued or must provide evidence that the local jurisdiction has approved a different radius.
- Limited waiver of sovereign immunity: A limited waiver documentation is required if an applicant is a federally recognized tribe or other sovereign entity. The written waiver must contain an assurance that they will comply with all applicable state laws, rules, and regulations regulating commercial cannabis operations. The applicant must establish legal authority to enter into the waiver, and the waiver must be signed and dated by the authorized person.
- California Environmental Quality Act Compliance: An applicant must submit proof of compliance with the California Environmental Quality Act, or an Exemption Form (CEQA). The proof must fall into one of the following categories:
- A copy of the applicant's license or other authorization issued by the local jurisdiction, if the jurisdiction has established an ordinance, rule, or regulation in accordance with Business and Professions Code (BPC) Section 26055(h) requiring discretionary review and approval of permits, licenses, or other authorizations to engage in commercial cannabis activity.
- Certified copies of the Notice of Determination or Notice of Exemption, as well as the CEQA documentation. If the applicant does not want to submit a copy of the license, permit, or other permission granted by the local authority, the applicant may offer one.
- If an applicant lacks the evidence specified above, or if the local jurisdiction did not create a CEQA document, the applicant is responsible for producing an environmental document that conforms with CEQA and that the Bureau may accept or certify, unless the Bureau says otherwise.
- Seller's Permit: A seller's permit number issued by the California Department of Tax and Fee Administration (CDTFA) is a required documentation. If the applicant has not yet received a seller’s permit, an attestation that the applicant has applied must be provided.
- State Employment Identification Number (SEIN): For applicants with more than one employee, the applicant's SEIN as issued by the California Employment Development Department is required.
- Labor Peace Agreement: This is applicable to businesses having a payroll of at least twenty workers. This document must include a copy of the page of the labor peace agreement that bears the union representative's and applicant's signatures. \
If the applicant does not have at least 20 non-supervisory workers, a notarized declaration stating that the applicant will enter into and adhere to a labor peace agreement within 60 days of employing its 20th non-supervisory employee must be provided.
- Cal-OSHA: If the applicant has more than one employee, this document must certify that the applicant employs, or will employ, two persons (one supervisor and one employee) who have successfully completed a Cal-OSHA 30-hour general industry outreach course provided by a training provider approved by an OSHA Training Institute Education Center.
- License types and numbers: For applicants who will be transporting only cannabis goods that they have manufactured or cultivated themselves, they are required to provide the application or license numbers and the type of licenses they hold for those activities.
- List of owners: Each owner must complete an Owner Submission form and submit fingerprint images electronically to the Department of Justice (DOJ). The applicant must complete the Department of Cannabis Control's live scan form. Live scan locations are available on the California Office of Attorney General's website. The DCC defines as owner as:
- An individual having a combined ownership stake of at least 20%.
- The chief executive officer of a non-profit organization or other corporation.
- A member of a nonprofit organization's board of directors.
- The trustee(s) and any individuals who exercise control over the trust and/or commercial cannabis enterprise owned by the trust.
- A person who is entitled to at least 20% of the earnings from the commercial cannabis business.
- A person who will be involved in the control, or management of the license applicant. This may involve the following: * A general partnership formed for the purpose of doing commercial cannabis business. * A non-member, managing member,or manager of a limited liability corporation established for the purpose of doing commercial cannabis operations. * A corporate officer or director of a commercial cannabis business.
- Entity Ownership: Trusts, businesses, or organizations that have financial interests in an applicant who may or may not qualify as owners, are considered entity owners.
- If an entity is an owner in the cannabis microbusiness: all entities and individuals with a financial interest in the entity must be disclosed to the DCC and may be considered owners of the commercial cannabis microbusiness.
- This covers all entities in a multi-tiered corporate structure, chief executive officer, members of the board of directors, partners, trustees, and all individuals who have authority over a trust, as well as managing members or non-member managers of the entity. Each entity identified as having a financial interest is required to reveal the names of people who also have financial interests, until only individuals remain.
- If an entity has a financial interest: all individuals who are owners of that entity must be considered financial interest holders of the business. This includes all entities in a multi-tiered corporate structure, chief executive officer, members of the board of directors, partners, trustees, and all other individuals who exercise authority over a trust, as well as managing members of non-member managers of the entity.
- Each entity identified as having a financial interest is required to reveal the names of people who also have financial interests, until only individuals remain
- Non-owners with financial interests in the business: Non-owners include all people who have financial interests in an application company but do not meet the DCC's definition of an owner. Except as provided in the DCC regulations Section 15004, financial interest means an agreement to receive a share of the profits of a commercial cannabis business, an investment or loan provided in a commercial cannabis business, or any other equity interest in a commercial business \
Individuals that have entered into an agreement to receive a share of the earnings include, but are not limited to, the following:
- An employee who has agreed to participate in a profit-sharing arrangement with a commercial cannabis business.
- A landlord who has agreed to share earnings with a commercial cannabis business in exchange for a lease.
- A consultant who provides services to a commercial marijuana business in exchange for a percentage of the earnings.
- A person working as an agent for the commercial cannabis business, such as an accountant or attorney, in exchange for a percentage of the earnings.
- A broker who engages in commercial cannabis business operations in exchange for a cut of the earnings.
- A commission-based salesman
- Fictitious business names: Applicants are required to provide the lists of all fictitious business names they will operate under and the addresses of the businesses.
- Licensing fee: The applicant is required to make payment for the license application fee of $1,000.
- Evidence of legal right to occupy the proposed business premises: If the applicant owns the property, a copy of the title or deed must be submitted. If the applicant does not own the property, the applicant must submit a statement from the property owner certifying that the applicant has the legal right to occupy the property for the purpose of conducting commercial cannabis operations, as well as a copy of the applicant's rental agreement.
- Premises diagram: An applicant must provide a diagram of the proposed premises, which must be drawn to scale and clearly identify the:
- Boundaries of the property. If just a part of the land is utilized for cannabis business purposes, the applicant must identify the other portions and specify their use.
- If the premises are situated on a part of the land that also contains a home, the diagram must clearly indicate the distinction between the premises and the house.
- Dimensions of all rooms and the premises.
- Entrances, exits, and walls under the exclusive control of the applicant as well as designated entrances and exits for each additional premises. The diagram must also show all common or shared areas of the property; lobbies, hallways, bathrooms, and break rooms.
- Partitions, windows, and doors on the inside.
- The cannabis activity that will take place in each section of the property must be described. Commercial cannabis activities that must be shown on the diagram include, but are not limited to, the following: storage, batch sampling, shipment loading/unloading, packing and labeling, client sales, delivery loading, extractions, infusions, growing, and/or processing.
- Areas with restricted access. Defined as locations that are used to store or hold cannabis products that are exclusively accessible to a licensee, its employees, and contractors.
- The location and number of each camera
- Business formation documents: Applicants must submit a copy of all business formation documents, depending on the kind of formation. For a business held in trust, the applicant must provide a copy of the trust. For other business structures, the required documentations are:
- Trusts: Certificate of Trust authorizing the Trustee to act as Trustee.
- General Partnership: Statement of Partnership Authority, Partnership Agreement, and Tax Forms.
- Limited Partnership: Certificates of Limited Partnership, Operating Agreements, Partnership Agreements, and tax forms.
- Corporation: Articles of Incorporation, Information Statement, Stock Certificate, Stock Ledger, Organizational Charts, Bylaws, and Board of Directors List.
- Limited Liability Company: Statement of Information, Articles of Organization, and Operating Agreements.
- Foreign Corporation or Foreign Limited Liability Company: California Secretary of State-issued Certificate of Qualification, Statement and Designation by Foreign Professional Corporation, Certificate of Registration, or Certificate of Status.
- Sole Proprietor: Filing of a Fictitious Business Name form with the local business permit agency, as well as tax documents. The paperwork must support the kind of company structure, the legal business name, and the ownership percentages of the owners.
- Financial information form: Applicants must provide a list of all investments, loans, funds, and gifts associated with the cannabis business.
- Surety Bond: A $5,000 surety bond payable to the State of California is required of the applicant. The surety bond is intended to pay the cost of destroying cannabis and cannabis-related products in the event of a breach of the license requirements.
- Operating procedures:
- Transportation Procedures: Describes the applicant's proposed method for transporting cannabis safely. If applicants do not intend to transport cannabis themselves, they must indicate that they intend to contract for transportation.
- Inventory Procedures: Outlines how the applicant will receive cannabis shipments, store its inventory, do inventory reconciliation, verify inventory records are correct and keep inventory records.
- Quality Control Procedures: Describes how the applicants will prevent cannabis products from deteriorating, how they will guarantee cannabis goods are packed and labeled correctly, and how they will ensure the product was tested by a registered Testing Laboratory.
- Security Procedures: Describes how the applicant will provide access to the premises. Additionally, it details the applicant's video surveillance system, which includes camera location and equipment maintenance. These procedures outline the applicant's security measures for all entry points, including the employment of security staff and a description of the applicant's alarm system.
- Additional papers, if necessary, based on the applicant's microbusiness activities: Microbusiness license applicants are required to follow all applicable regulations, including those issued by the California Department of Food and Agriculture (CDFA) and the California Department of Public Health (CDPH) that govern the activities in which they engage. The following items are required, depending on the kind of activity proposed by the applicant.
- Retailer or Retailer-non-storefront:
- Delivery procedures - This describes how the applicant will receive and process orders, confirm the receiving customer's age and identity, and verify that the delivery location is not on publicly owned property or in a building leased by a public agency. Additionally, the protocols must detail how cannabis products will be transported, including vehicle and GPS information.
- Distributor or distributor-transport only: A Certificate of Insurance demonstrating that general liability insurance in the aggregate of no less than $2,000,000 has been obtained, and in the amount of no less than $1,000,000 for each loss. The insurance coverage must be acquired from an insurer that complies with Business and Professions Code Section 5308.
The DCC licensing system enables you to save your application progress throughout the online application process, so you are not required to finish it in one sitting. When you are through with your application, you will be asked to sign and submit it. The DCC will not process your application until the application fee has been paid. If any part of your application has insufficient or incomplete information, you will receive an email notification from the DCC licensing team. You will be informed of the missing information in the mail from the DCC. Additionally, you will be given a time limit in which to reply. By providing the necessary information on time, you can ensure that your application is processed promptly by the DCC.
The DCC reviews microbusiness license applications in the order in which the applications are received. The application review process takes time, while DCC staff carry out the following actions:
- Ascertain the completeness of your application
- Confirm compliance with local regulations by contacting the city or county where your company is situated
- Conduct a criminal background check on your company proprietors, if applicable
- Consider if an excessive concentration exists in the area where the license intends to operate. Any excessive concentration applies when the ratio of retail licenses or microbusiness licenses to the population within the census tract, census division, or jurisdiction exceeds what is permitted under local ordinances adopted pursuant to the California Business and Professions Code Section 26200.
- Examine the information you provided to ensure that your business complies with all applicable regulations.
The DCC will not process an application that is not complete. Applications will be considered complete only if they include all required information. If an applicant fails to provide the required information within the specified period, the application is deemed abandoned. Application fees are non-refundable for abandoned applications. An applicant who has abandoned an application may reapply at any time. However, a new application and fee will be required.
Following the DCC's approval of your application, you will get an email from the DCC with information on how to pay the licensing fee. To determine the proper licensing fee, the applicant must first estimate the total income expected over the license's 12-month term. The applicant must select the appropriate tier group for their expected gross income based on the license type requested, as specified in the DCC Regulations Section 15014.
The licensing fee may be paid by cheque, money order, or credit card. Cash payments may also be done in person at the DCC office by scheduling an appointment. Cash payments are not accepted without prior appointments due to security concerns. Your license will be granted only when the licensing fee has been paid.
If the fee is paid by debit or credit card, it will be processed via the DCC's online licensing system, and the applicant will be responsible for any processing or convenience costs incurred by the third-party vendor processing the payment on behalf of the DCC. California regards non-payment of the required license fee to be cause for punishment. If it is found that the licensee paid is less than the proper licensing price, the licensee will be required to pay the remaining fee plus a penalty equal to 50% of the applicable licensing cost; however, the DCC may waive the penalty fee at its discretion.
If an application is denied, the DCC will inform the applicant in writing of the denial and the applicant's right to a hearing to contest the decision. The applicant may seek a hearing by filing a written petition to the DCC within 30 calendar days after the notice of denial being sent. If the applicant does not seek a hearing within 30 days, the applicant waives the entitlement to one.
It is important to note that an applicant may withdraw an application at any point prior to the DCC issuing or denying the license application. The applicant must submit a dated and signed written request to the DCC in order to withdraw an application. The DCC will not refund application fees for applications that are withdrawn.
A microbusiness license is valid for one year. When your license is authorized, the DCC licensing system will provide you with a link to download the license certificate. It is recommended that you place your microbusiness license certificate at the entrance to your establishment.
If applicants prefer to complete their applications in person, they may complete the Annual Cannabis Microbusiness License Application form and submit it along with the required documents to:
Department of Cannabis Control
P.O. Box 942872
Sacramento, CA 94271-2872
How Much Does a Marijuana Microbusiness License Cost in California?
Cannabis microbusiness license fees in California are based on the gross annual revenues generated by the cannabis businesses. License and application fees are:
|Gross Annual Revenue
|Less than or equal to $1,000,000
|$1,000,001 - $2,000,000
|$2,000,001 - $3,000,000
|$3,000,001 - $4,000,000
|$4,000,001 - $6,000,000
|$6,000,001 - $7,000,000
|$7,000,001 - $10,000,000
|$10,000,001 - $20,000,000
|$20,000,001 - $30,000,000
|$30,000,001 - $40,000,000
|$40,000,001 - $50,000,000
|$50,000,001 - $60,000,000
|$60,000,001 - $80,000,000
|More than $80,000,000
The gross annual revenue of a licensed premises is calculated using the gross annual sales of cannabis products and, if applicable, the gross annual revenue from manufacturing, labeling, packaging, or handling cannabis products for other licensees in the 12 months preceding the application date. Gross annual income is determined for a new license application based on gross sales and revenue anticipated over the first 12 months after licensing.
Cannabis microbusiness licenses are renewable every year. The license fee corresponding with the licensing tier category identified by a licensee based on the expected gross annual revenue over the next 12-month period will be the renewal fee.
Can Marijuana Microbusiness Licensees Hold Other Cannabis Licenses in California?
A microbusiness license already permits the holder to cultivate, manufacture, distribute, and operate a retail storefront or delivery dispensary. The licensee cannot hold a testing laboratory license or an event organizer license.
Microbusiness licensees may add a commercial cannabis activity to their license or remove a commercial cannabis activity from their license if doing so is consistent with the requirement outlined in Section 15500(a) of the Department of Cannabis Control Regulations.
Microbusiness licensees must not engage in any new commercial cannabis activity until they have paid for the modifications and received approval from the DCC. Microbusiness licenses are not transferable from one premises to another. Licensees are not allowed to operate out of new premises until they have been issued new licenses.