Yes, under the Medicinal & Adult Use Cannabis Regulation & Safety Act, three (3) or more natural persons, who are engaged in the cultivation of any cannabis product, may form an association pursuant to this chapter for the purpose of engaging in any activity in connection with any of the following:
(1) The cultivation, marketing, or selling of the cannabis products of its members.
(2) The growing, harvesting, curing, drying, trimming, packing, grading, storing, or handling of any product of its members.
(3) The manufacturing, selling, or supplying to its members of machinery, equipment, or supplies.
(4) The financing of the activities that are specified by this section.
However, Members of a cannabis cooperative shall be disclosed to the licensing authority before the application is processed.
Members of a cannabis cooperative formed pursuant to this chapter shall be limited to cultivators who only hold a single Type 1 or Type 2 license.
Type 1—Cultivation; Specialty outdoor; Small.
(b) Specialty: (1) “Specialty Outdoor” is an outdoor cultivation site with less than or equal to 5,000 square feet of total canopy, or up to 50 mature plants on noncontiguous plots.
Type 2—Cultivation; Outdoor; Small.
(c) Small: (1) “Small Outdoor” is an outdoor cultivation site between 5,001 and 10,000 square feet of total canopy.
Collectively, members of a cannabis cooperative shall not grow more than four acres of total canopy size of cultivation throughout the state during the period that the respective licensees are valid.
No member of a cooperative formed pursuant to this section shall be licensed to operate a cannabis business in another state or country.
How Much Does It Cost?
My office can help guide you with the proper formation and corporate compliance requirements to secure a strong operation foundation. I will prepare and file your articles of incorporation with the Secretary of State, draft bylaws, minutes, obtain stock certificates, agent for service of process and all other required documents including your corporate tax identification number and sellers’ permit on a fixed fee retainer agreement of $3,500 that includes all formation costs of approximately ($420.50): $100 filing fee, $125 (annual) agent for service of process, $20 statement of Information fee, $59.50 Parasec Service Fee/Surcharge, Sec State Filing Counter Fee 1 $15.00, $10.00 Certified Copy cost and Deluxe Entity Kit $91.00. I also include one (1) year of complimentary telephone consultation to help answer the many questions that arise during the formation of your new cannabis business.
What My Office Does for You.
Reorganization of You Corporations Organized Pursuant to Other Laws
If your existing corporation that is organized or existing pursuant to the Corporations Code, either as non-profit or for-profit it may be brought under the provisions of this chapter by amending its articles of incorporation, in the manner that is prescribed by the general corporation laws, to conform to this chapter.
If a corporation amends its articles of incorporation to conform to this chapter, it shall be deemed to be organized and existing pursuant to, and entitled to the benefit of, and subject to this chapter for all purposes and as fully as though it had been originally organized pursuant to this chapter.
Prepare and file Amended Articles of incorporation
Articles of incorporation shall be deemed to conform if it clearly appears from the articles of incorporation that the corporation desires to be subject to, and to be organized, exist, and function pursuant to this chapter.
If the amended articles conform provisions in the articles of incorporation that appeared in the original articles or some previous amended articles, are ineffective if, and to the extent that, they are inapplicable to, or inconsistent with, this chapter.
Can I Tailor the Articles to Fit My Needs?
Yes, the articles of incorporation of an association shall show that the signers of the articles of incorporation are engaged in the cultivation of cannabis products, and that they propose to incorporate an association pursuant to this chapter, and shall state all of the following:
The name of the association.
The purposes for which it is formed.
The city, county, or city and county where the principal office for the transaction of business of the association is to be located.
The number of directors of the association, which shall not be less than three, and the names and addresses of the persons who are to serve as first directors. If it is desired that the first directors shall serve for terms of different lengths, the term for which each person so named to serve shall also be stated.
If organized without shares of stock, whether the voting power and the property rights and interest of each member are equal or unequal. If voting power and property rights and interest of each member are unequal, the general rule or rules that are applicable to all members by which the voting power and the property rights and interests, respectively, of each member may be and are determined and fixed shall also be stated.
If organized with shares of stock, the number of shares that may be issued and if the shares are to have a par value, the par value of each share, and the aggregate par value of all shares. If the shares are to be without par value, it shall be so stated.
If the shares of stock are to be classified, a description of the classes of shares and a statement of the number of shares of each kind or class and the nature and extent of the preferences, rights, privileges, and restrictions that are granted to or imposed upon the holders of the respective classes of stock. Except as to the matters and things so stated, no distinction shall exist between the classes of stock or the holders of them. One class of stock shall always be known as common stock, and voting power may be restricted to holders of common stock.
Can I Tailor the Bylaws to Fit My Needs? Preparation of Bylaws
Yes, each association shall, within 30 days after its incorporation, adopt for its government and maagement, a code of bylaws. The vote or written assent of shareholders or members that hold at least a majority of the voting power is necessary to adopt the bylaws and is effectual to repeal or amend a bylaw, or to adopt an additional bylaw. The power to repeal and amend the bylaws, and adopt new bylaws, may, by a similar vote, or similar written assent, be delegated to the board of directors, which authority may, by a similar vote, or similar written assent, be revoked.
The bylaws may prescribe the time, place, and manner of calling and conducting its meetings. Meetings of members or stockholders shall be held at the place as provided in the bylaws, or, if no provision is made, in the city, county, or city and county where the principal place of business is located at a place designated by the board of directors. Meetings of the board of directors may be held at any place within or without the state that is fixed by a quorum of the board of directors unless otherwise provided in the articles of incorporation or bylaws. The bylaws may prescribe the number of stockholders, directors, or members that constitutes a quorum.
The bylaws may prescribe the following:
The right of members or stockholders to vote by proxy or by mail or both, and the conditions, manner, form, and effects of those votes. The right of members or stockholders to cumulate their votes and the prohibition, if any, of cumulative voting.
The bylaws may prescribe the qualifications, compensation, duties, and term of office of directors and officers and the time of their election.
The number of directors set forth in the articles of incorporation shall be either a fixed number or a variable number. If a fixed number, it shall not be less than three, and if a variable number, the stated minimum shall not be less than three and the stated maximum shall not be greater than two times the stated minimum minus one.
The number of directors may also be set forth in the bylaws either as a fixed number or as a variable number subject to the same limitations. After shares have been issued or members have been admitted, any adoption or amendment of the bylaw provision shall be approved by the outstanding shares as provided in Section 152 of the Corporations Code.
In the event of an inconsistency between an article provision and a bylaw provision, the provision more recently adopted or amended shall prevail.
If a variable number of directors is set forth in the articles of incorporation or the bylaws, the exact number of directors shall be fixed, within the limits specified, by approval of the board of directors or the shareholders as provided in Section 153 of the Corporations Code in the manner designated in the bylaws.
The bylaws may prescribe penalties for violations of the bylaws.
The bylaws may prescribe the amount of entrance, organization, and membership fees, if any, the manner and method of collection of the fees, and the purposes for which they may be used.
The bylaws may prescribe the amount that each member or stockholder shall be required to pay annually, or from time to time, if at all, to carry on the business of the association, the charge, if any, to be paid by each member or stockholder for services that are rendered by the association to him, the time of payment and the manner of collection, and the marketing contract between the association and its members or stockholders that every member or stockholder may be required to sign.
The bylaws may prescribe the amount of dividends, if any, that may be declared on the stock or membership capital. To the extent that dividends are payable out of the excess of association income over association expenses attributable to business transacted with or for members, dividends shall not exceed 8 percent per annum.
An association is not subject in any manner to the terms of the Corporate Securities Law (Division 1 (commencing with Section 25000) of Title 4 of the Corporations Code), and any association may issue its membership certificates or stock or other securities as provided in this chapter without the necessity of any qualification under that law.
If an association issues nonpar value stock, the issuance of the stock shall be governed by the terms of all general laws that cover the issuance of nonpar value stock in domestic corporations.
If an association with preferred shares of stock purchases the stock or any property, or any interest in any property of any person, it may discharge the obligations that are so incurred, wholly or in part, by exchanging for the acquired interest, shares of its preferred stock to an amount that at par value would equal the fair market value of the stock or interest so purchased, as determined by the board of directors.
In that case, the transfer to the association of the stock or interest that is purchased is equivalent to payment in cash for the shares of stock that are issued.
Under the terms and conditions that are prescribed in the bylaws adopted by it, an association may admit as members or issue common stock only to persons engaged in the cultivation of a cannabis product that is to be handled by or through the association.
If a member of a nonstock association is other than a natural person, the member may be represented by any individual, associate, officer, or manager or member of it, who is duly authorized in writing.
Any association may become a member or stockholder of any other association.
If a member of an association that is established without shares of stock has paid his membership fee in full, he or she shall receive a certificate of membership.
An association shall not issue a certificate for stock to a member until it has been fully paid for. The promissory notes of the members may be accepted by the association as full or partial payment. The association shall hold the stock as security for the payment of the note, but the retention as security does not affect the member’s right to vote.
An association, in its bylaws, may limit the amount of common stock that any member may own.
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Please be aware that possessing, using, distributing and selling marijuana are all federal crimes and that this blog is not intended to give you any legal advice, merely legal issues to consider and inquire about when conducting business with a federally illegal substance. Please also note that even though marijuana is illegal under federal law, you will need to pay federal taxes as though you are a legal entity. This is true even if you are a state law not-for-profit entity.
IRS Circular 230 Notice: We do not provide tax advice. However, to insure compliance with certain U.S. Federal Tax Regulations, we are required to inform you of the following: To the extent this message or any attachments concern tax matters, they are not intended or written to be used and cannot be used by any taxpayer for the purpose of avoiding penalties that might be imposed on the tax payer. Further, please be advised that to the extent this message or any attachments concern tax matters, they are not intended or written to be used and cannot be used by any taxpayer for the purpose of promoting, marketing or recommending to any party any matters addressed herein.