Checklist for Opening an Arizona Medical Marijuana Dispensary

Updated on January 13, 2012, from my checklist first published on January 16, 2011.

Here’s my checklist for the legal issues that every prospective Arizona medical marijuana dispensary business must complete, sooner rather than later than the yet to be announced date when the Arizona Department of Health Services will stop accepting applications for dispensary registration certificates.  Check back in the future because I will update the checklist as I find more legal issues to add to the list.

See “Prospective Dispensary’s Single Most Important Task Before April 30, 2012” and “Ten Critical Tasks Every Every Prospective Arizona Medical Marijuana Dispensary Must Accomplish to Be Able to Submit an Application to DHS for a Medical Marijuana Dispensary License.”

1.  Create an Arizona LLC to own and operate the dispensary business and hold the medical marijuana dispensary license.

A. Make sure that all members satisfy all of the requirements for ownership set forth in the DHS rules.

B.  Members adopt Bylaws that comply with the DHS rulesR 9-17-304.D.8 states that the Bylaws must contain “provisions for the disposition of revenues and receipts.”  See “What the Final DHS Rules Require to Be In Dispensary Bylaws,” “Bylaws for Arizona Medical Marijuana Dispensaries,” “Bylaws – We Don’t Need No Stinking Bylaws or Do We?”

C. Members sign a resolution approving the Bylaws.

D.  Members adopt a buy-sell agreement that contains their exit strategy and deals with issues such as having the LLC purchase the interest of a deceased owner to make sure that no person becomes an owner who does not satisfy all of the requirements of the DHS rules. to be an owner.

E.  Members sign a resolution approving the buy-sell agreement.

F.  Members sign a resolution giving the designated officers managers the power and discretion to sign any and all contracts they deem necessary and appropriate to carry out the purposes of the business.

G.  The LLC enters into written Nondisclosure / Confidentiality Agreements with all members.

2.  Obtain a federal employer identification number for the LLC.

3.  Open a bank account in the name of the LLC.  See “Will Some Banks Refuse to Give My Dispensary a Bank Account?” and Banking Issues.

4.  Hire a Certified Public Accountant to determine if the LLC should be taxed as a sole proprietorship (if it has one owner or husband and wife owners who own their interest in the LLC as community property), a partnership (if there are two or more members), a C corporation under subchapter C of the Internal Revenue Code of 1986, or an S corporation under subchapter S of the Internal Revenue Code (if the LLC meets the requirements to be an S corporation for federal income tax purposes. (more…)