How to create a collective in California

So you and some fellow patients want to start your collective well where do you begin?

The first document that will need to be drafted is a Master Collective Agreement. This is where the parties agree to on paper associate collectively for medicinal marijuana purposes per SB 420 and the AG's guidelines.

Each of the founding members will need to sign that piece of paperwork.

The next step is to get Articles of Incorporation approved by the secretary of state of California for a non profit corporation. Getting approval for filing by the Secretary of State is the states way of approving of a corporation doing corporate activities in the state. Approved articles of incorporation would be like the birth certificate.

The cost for articles of incorporated to be filed by the Secretary of State is $45. They charge $15 for a handling fee and the $30 is for the filing itself. Don't waste you money on expedited filing. It only took me a few days to hear back from them.

The next step is to get your taxation requirements handled. It's so simple its not funny. Just goto www.irs.gov and apply for the EIN number under the corporate number issued by the Secretary of State with the approved filing of articles of incorporation. Once you get the EIN it means the company can pay corporate income taxes. While you have to be a non profit with the state with the federal government you have to pay taxes as a domestic type c corporation. Sorry no 501(3)(c) status unless you organize as a church. Paying taxes sucks, but all other business have to follow tax code too. Be smart pay them taxes if you are actually selling medicine. Also with an SS-4 most local authorities see it as a form of Federal government approval.

The next thing to do is go get a bank account. A lot of banks refuse to deal with medical marijuana collectives. I was denied twice before getting approved by Wachovia. When they asked what type of business we are we said a health club, and it's truthful. If you can't find a bank come to sacramento goto the Wachovia branch at 19th an R let them know that California Cannabis Inc referrred you. Yeah I roll with a corporate card that says California Cannabis Incorporated on it. Hydrostores give me the craziest looks!

The next step is getting the Sellers permit with the state of California. This authorizes you to pay sales tax on cannabis. When you go to the board of equalization don't be afraid to tell them it's for medical marijuana. They honestly could careless.

The final thing is a business license if your collective chooses to actively dispense cannabis. This is really a local issue so I can't be of much help here.

so every new member becomes a shareholder of the non profit corp?

How about explaining how to operate as a collective or co-op in compliance with SB420 and the AG's guidelines? That's where the rubber meets the road.

good stuff

Here is what I did at my house--
I have 8 Patients/Friends who have all signed, saying they grow their medicine at my house, because they are unable to at theirs...it also states that they come here daily to tend their own plants, and there is no $$ exchanged--
FF...what do you think of the Legality of that??

Thanks for starting the thread FF

I have a habit of approaching things from a different perspective.

If it won't bother anyone, let me run my thoughts by you all.

First thing i would do is look for the perfect location. It would be relatively convenient to a major freeway, in the center of perhaps a 100 mile radius heavily populated area (in Northern CA), where there is an available warehouse with a plentiful water supply, in the center of an economically depressed community/area, next to the Sheriff's office, and CHP, and ideally in an area that patients wouldn't mind driving to.

Low overhead and even lower prices.

This is a non-profit.

I would like to create the model by which all mmj dispensaries are measured. Is that too much to expect?

kmk420,
Post that agreement. Post their doc rec's. IMO make them get state cards and post those as well. LE can verify state cards on the spot. If the local LE are hostile to MMJ they can claim they had reason to doubt the validity of just a doc rec and hook you up.

Don't have any guns, drugs or substantial cash in the house. I would also not keep a scale around.

Vespatian said:

kmk420,
Post that agreement. Post their doc rec's. IMO make them get state cards and post those as well. LE can verify state cards on the spot. If the local LE are hostile to MMJ they can claim they had reason to doubt the validity of just a doc rec and hook you up.

Don't have any guns, drugs or substantial cash in the house. I would also not keep a scale around.

Click to expand...

I agree...except for the scale-- I read a memo from the OC Sheriff's Dept concerning their training for recognizing possible sales...and they conceded that ppl who grow, need scales to weigh their final product...and also that multiple bags were not uncommon, since many grow different strains, and keep them separated--
Damn...I have looked for that since, and haven't been able to find it...but yeah...there is legal recourse--

The post won't be deleted like before. However I cannot add further detail or answer questions regarding operating legality. I am not a lawyer and really if you need more in depth stuff than that you will need to consult other people like I have in regards to the question.

basically my advice is don't try this at home kids, do so at your own risk.

I've always wondered why guns would be an issue as long as they're legally owned?

Glad to see you creating this thread again.

I want to look at quality marijuana being grown to provide mmj patients with low-cost, quality.

How far will patients drive for half-price marijuana?

Freedom:

I thought a collective was not a formal business and as such the filing of articles of incorporation were not required. I believe they are for a co op.

I got this impression from the AG guidelines, I could be wrong, I often am.

Consulting an attorney is your best bet but attorneys have different opinions of prop 215 and how to interpret it so I think there's not just one exact correct way to start a collective and they do not have to be incorporated. Co-ops on the other hand do have to be incorporated according to the a.t. guidelines.

Great advice from someone who knows. Thanks Rowdy!

johnnyla said:

so every new member becomes a shareholder of the non profit corp?

Click to expand...

Non-profit distinction

Whereas for-profit corporations exist to earn and distribute taxable business earnings to shareholders, the nonprofit corporation exists solely to provide programs and services that are of public benefit. Often these programs and services are not otherwise provided by local, state, or federal entities. While they are able to earn a profit, more accurately called a surplus, such earnings must be retained by the organization for its future provision of programs and services. Earnings may not benefit individuals or stake-holders.[2] Nonprofit organizations may put substantial funds into hiring leadership and management personnel. In the past many nonprofits considered this to be unreasonably businesslike and money-focused, but since the late 1980s there has been a growing consensus that nonprofits can achieve their missions more effectively by using some of the same methods developed in for-profit enterprises. These include effective internal management, ensuring accountability for results, and monitoring the performance of different divisions or projects in order to make the best use of their funds and people. Those require management and that, in turn, begins with the organization's mission.

Formation and structure

In the United States of America, nonprofit organizations are formed by incorporating in the state in which they expect to do business. The act of incorporating creates a legal entity enabling the organization to be treated as a corporation under law and to enter into business dealings, form contracts, and own property as any other individual or for-profit corporation may do.

Nonprofits can have members but many do not. The nonprofit may also be a trust or association of members. The organization may be controlled by its members who elect the Board of Directors, Board of Governors or Board of Trustees. Nonprofits may have a delegate structure to allow for the representation of groups or corporations as members. Alternately, it may be a non-membership organization and the board of directors may elect its own successors.

A primary difference between a nonprofit and a for-profit corporation is that a nonprofit does not issue stock or pay dividends, (for example, The Code of the Commonwealth of Virginia includes the Non-Stock Corporation Act that is used to incorporate nonprofit entities) and may not enrich its directors. However, like for-profit corporations, nonprofits may still have employees and can compensate their directors within reasonable bounds.

The two major types of nonprofit organization structure are membership and board-only. A membership organization elects the board and has regular meetings and power to amend the bylaws. A board-only organization typically has a self-selected board, and a membership whose powers are limited to those delegated to it by the board. A board-only organization's bylaws may even state the organization has no membership, although the organization's literature may refer to its donors as "members"; examples of such structures are Fairvote[4][5] and the National Organization for the Reform of Marijuana Laws.[6] The Model Nonprofit Corporation Act imposes many complexities and requirements on membership decision-making. Accordingly, many organizations, such as the American Society of Association Executives[7] and Wikimedia,[8] have formed board-only structures. The National Association of Parliamentarians has raised concerns about the implications of this trend for the future of openness, accountability, and understanding of grassroots concerns in nonprofit organizations. Specifically, they note that nonprofit organizations, unlike business corporations, are not subject to market discipline for products and shareholder discipline over their capital; therefore, without membership control of major decisions such as election of the board, there are few inherent safeguards against abuse.[9] [10] A rebuttal to this might be that as nonprofit organizations grow and seek larger donations, the level of scrutiny rises, including expectations of audited financial statements.


Source: Wiki

The membership structure would be the ideal, but reality will show us board-only as many of these -- at the moment illegal -- dispensaries convert so they may retain full control over their dealings and affairs. Once converted they will be legal, though.

Here you go; two choices:

A membership organization elects the board and has regular meetings and power to amend the bylaws. A board-only organization typically has a self-selected board, and a membership whose powers are limited to those delegated to it by the board. A board-only organization's bylaws may even state the organization has no membership, although the organization's literature may refer to its donors as "members"

kmk420kali said:

Here is what I did at my house--
I have 8 Patients/Friends who have all signed, saying they grow their medicine at my house, because they are unable to at theirs...it also states that they come here daily to tend their own plants, and there is no $$ exchanged--
FF...what do you think of the Legality of that??

Click to expand...

This is what I have done and would suggest others to do as well. Unless, you want to go big time, then you would follow most of what is in the opening post.

GilligansIsle said:

Freedom:

I thought a collective was not a formal business and as such the filing of articles of incorporation were not required. I believe they are for a co op.

I got this impression from the AG guidelines, I could be wrong, I often am.

Click to expand...

You don't need to unless you are going big time. Best advice for a reasonable collective is kmk420kali's way posted above.

kmk420kali said:

I agree...except for the scale-- I read a memo from the OC Sheriff's Dept concerning their training for recognizing possible sales...and they conceded that ppl who grow, need scales to weigh their final product...and also that multiple bags were not uncommon, since many grow different strains, and keep them separated--
Damn...I have looked for that since, and haven't been able to find it...but yeah...there is legal recourse--

Click to expand...

The scale is an iffy, but in court it would be justified because how else would a legal MMJ patient know how much they have to be in compliance with the guidelines and SB 420 limits.

ChronJohn said:

I've always wondered why guns would be an issue as long as they're legally owned?

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Mainly because of federal illegality and additional charges of firearms present.