How to start a Cannabis LLC in California 2022

Cannabis use has been at the center of conversation in the U.S. especially after most states legalized the cultivation, sale, and use of weed for recreational purposes. An analysis of the current U.S. Cannabis Industry, legislation, and the Impact on Marginalized Populations points to a slow but steady increase in the number of new cannabis growers. This has made the commercialization of cannabis farming a lucrative commercial venture.

In California alone, both older and amateur growers are looking for the best ways to set up their cannabis businesses and tap into the huge demand of cannabis flower extracts and CBD products alike. This is especially widespread in Springfield —the city has recently launched a second phase in the efforts to bring in more marijuana businesses.

The new act passed in the state on November 8, 2016, ushers in a new dawn for entrepreneurs interested in investing in the cannabis business.. But before conducting cannabis-related activities for recreational adult use, all corporations must have the required licenses as provided for by the authorities. Entrepreneurs who decide to venture into the California cannabis industry must also comply with all the local ordinances regulating commercial cannabis activity.

Though not fully regulated by the Federal government, most states have passed laws that allow medicinal and recreational use of weed. Medical studies link cannabis CBD extracts with therapeutic properties on the body. CBD (Cannabinoids), which are mainly extracted from the cannabis flower, can be used in any form to help ailments such as chronic pain and stress. Other extracts from the cannabis flower are also helpful in reducing seizures and weight loss.

One of the most notable days among American weed users is Green Wednesday—the biggest sales day of the year for the cannabis industry. The day comes before Thursday’s “Thanksgiving, and most retailers line up a variety of weed products on the menu in anticipation of a potentially record-breaking haul. Green Wednesday is one of the types of evidence highlighting Americans’ big appetite for cannabis.

Seniors over the age of 50 are the fastest-growing group of recreational weed consumers in the U.S. Most of them love having weed on their daily menu because of its numerous health benefits and wellness applications. Companies like Flower Co. in California have also partnered with the Veterans Cannabis Group to help advocate for the use of medicinal marijuana to treat PTSD symptoms among U.S. Military veterans.

How to start a Cannabis LLC in California

If you own retail cannabis business in California, you’ve probably considered forming a cannabis LLC. Forming a limited liability company is a great substitute for your unlicensed unprotected weed store. It lets your entire store benefit from maximum asset protection, and diversity in operations, among other benefits.

This guide seeks to help you understand the tasks and responsibilities California marijuana startups encounter and how to set up your cannabis store as a limited liability company.

What is an LLC?

LLCs are formal structures that enjoy the limited liability protection and the simple taxation of a sole proprietorship. When you operate as a limited liability company, your assets are treated separately from your business. This means none of your cars, houses, or personal savings will be auctioned or taken away in event of debts or lawsuits

The best option to form an LLC for your medical marijuana dispensary is to hire a formation service for a small fee. This way, you’ll benefit from registered agent services, unlimited support, filing of articles of organization, advertising services, and many more. Other formation services will include website creation for your marijuana store.  

No matter your approach, forming an LLC is an inexpensive way to protect your assets and save more money on taxes from your cannabis venture. But before considering a cannabis LLC, learn more about the unique challenges the legalized cannabis industry faces regarding current tax law policies in the U.S.

How to start a Cannabis LLC in California

Why Starting an LLC for a Cannabis Vendor Is Important?

If running a simple marijuana store or registering as incorporation doesn’t make much more sense to you, registering as a limited liability company may be a good option. Besides, it comes with more ease than registering corporations. Here are a few reasons you should convert your entire store to a limited liability company.

Enhances credibility of the Entire Store

A limited liability company structure enhances the credibility of your marijuana store. Informal entities don’t have exclusive assumed business names. They operate under personal names, which can be pretty challenging to maintain owner privacy. The best you can do is register a DBA to allow your business to use an assumed name. However, DBAs lack exclusivity, meaning another cannabis shop selling THC or CBD products can register another company with that name.

LLCs are the only solution if you want an exclusive name that gives your business more credibility. The company structure grants exclusive rights to your business name with the “limited liability company” tag. These registered trademarks will provide your company with more respectability among its competitors. Also, most customers, whether patients seeking marijuana for pain relief or recreational users will be more comfortable writing checks to registered trademarks rather than informal setups.

Better Taxation

Like any other company in America, your weed venture is subject to taxation according to state and federal laws. However, there is still tax uncertainty for most businesses selling medical or recreational marijuana to patients. This is because the federal government still classifies it under illegal substances. This clash between state and federal legislation affects the taxation of marijuana, something all retailers should be wary of.

However, this doesn’t mean you can’t enjoy tax benefits from your marijuana venture. By registering as an LLC, your business will be taxed as a pass-through entity, just like sole proprietorships or partnerships. This means your weed venture’s net income will pass through your tax return.

The taxation will be based on your tax bracket and self-employment taxes. This saves you a lot of money compared to simply operating as an informal entity. Keep in mind that the state of California has its taxation model. Besides, you must first navigate a tax code that considers a medical marijuana dispensary illegal. The following taxes apply in California;

  • Income Tax (Federal, State, and Local)
  • Franchise Tax
  • Alternative Minimum Tax
  • California State Sales Tax
  • Use Tax
  • Property Tax

Personal Asset Protection

Whether retailing medical or recreational marijuana, you need the personal asset protection that only an LLC can provide. Your houses, cars, or bank accounts won’t be at any risk if a customer sues your company.

You’ll have the liberty to sell your marijuana and its products, knowing your assets at home are fully protected from the misfortunes of your dispensary. The scope of your customer’s lawsuits is only limited to your business assets. 

Increased Options for Loans

By registering your marijuana venture as an LLC, you give it the credibility to build a credit history of its own. Your store can build a line of credit under its name, making it eligible for corporate loans. This way, you can uplift your business by increasing more products on the menu, moving to a better location and invest in more marijuana markets like other bigger corporations in California.

5 Basic Steps to Start a Cannabis LLC in California 2022

Starting an LLC varies depending on your location. If you decide to create a cannabis LLC in California, the process will still follow the universal steps applied in other states. Here is a comprehensive guide detailing every step you should follow to have your cannabis venture fully registered as an LLC in California.

Choose a Name for Your Delivery Service, LLC

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The first formation step involves choosing a name for your delivery service. With many marijuana dispensaries in Springfield, California, you’ll need to conduct a thorough name search to ensure another vendor isn’t already using your desired business name. If other California corporations already claim the name you choose, the authorities will likely not approve it.

To maintain a strong identity, you’ll need to choose a name that represents your company and describes what you do. For example, if you sell medical marijuana, it’s better to highlight it in the business name. This will make it easier for patients seeking it for pain relief and other ailments to locate you efficiently.

Remember, the business name is automatically registered with California authorities after they file and approve the formation paperwork. This will safeguard it from using any other registered trademarks within the state. You can also reserve an available business name 60 days in advance if you want to claim it but aren’t ready to register your business officially.

Choose Your Registered Agent

A registered agent is responsible for receiving essential documents from the authorities on behalf of your business. Such documents include annual report reminders, service of process, a notice of lawsuits, and court summons, among others, and ensuring they reach your desk. You can either choose to work with an individual or a professional service as long as they make a reliable point of contact for your company during the normal business hours.

For the case of California-based corporations, it’s a must to have a registered agent with a physical location within the state. The state also allows you to serve as your own registered agent for your business. However, you must meet the following conditions;

Be at least 18 years of age

This is vital for anybody seeking employment.

Be a California resident.

This ensures they’ll be available throughout when needed.

Available throughout the business hours

A registered agent must be available during all business hours from Monday to Friday. This ensures they receive all documents sent by the authorities.

File Articles of Organization and other Forms

This is a crucial step in the formation process that requires you to file a document with all the formation paperwork. Filing this document is an essential requirement for any company formation, no matter the location. Registering your Marijuana venture with the California Secretary of State will also require you to sign this document before approval.

By signing the articles of organization, you agree to share some basic information about your business and the owners. It’s the least the state will require from you in exchange for an operational permit.

Create an Operating Agreement for a Delivery Service

Operating agreements are not a must-have thing when applying for registration. However, you need to have one regardless. The document outlines how the company will be run among other key ownership terms. It’s the most crucial document, among other forms, when ownership disputes arise. Each party must sign it before proceeding into any partnership agreement. 

Obtaining an EIN

Businesses operating in the US need an EIN (Employer Identification Number). It’s a nine-digit number that establishes the separation between you and your business. You need the EIN to file taxes and conduct other transactions. It’s also a requirement to hire employees, set up a company bank account, and apply for credit cards. The IRS issues EINs free, and you may apply for them online through the IRS website.

The Top 2 LLC Services

If you’re looking to incorporate your cannabis business in California, you may have realized that doing so isn’t the most straightforward work. You need to find the right partner who’ll walk you through the formation process with ease and at an affordable cost. Thankfully, there are online formation services, like ZenBusiness and Northwest Registered agent, that take off a lot of burden from your shoulders. Here are some of the services you’ll get from these two LLC service providers.

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Name Zenbusiness Northwest Registered Agent
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Starting a limited liability company has variations, depending on the location of your business. As such, it can be challenging to make sure you’ve taken care of every task, especially on business licenses, formation requirements, and forms. If you’re not careful, you may leave out important details and also waste too much of your time.

ZenBusiness is most suited if you’re only starting. It provides a lot on the menu for small business owners seeking to work with a limited budget. With this formation service, you can prepare and file your business formation documents, avoiding the need to bring on board expensive professionals to do the work for you.

As one of the reputable business formation services in the US, ZenBusiness makes it easier to monitor the formation progress and stay compliant with all requirements. ZenBusiness offers different tiers to its formation services. Some of its most noteworthy features include on its service menu are;

  • Name availability search.
  • Registered agent services.
  • Business website
  • DBA (doing business as) registration
  •  Expedited filing
  • Operating agreements.
  • Employer ID number.
  • Annual business reports.
  • Certificates of good standing.
  • Banking resolutions.

You’ll also enjoy add-on features and free accounting assessments to help set up bookkeeping, accounting, and tax considerations within your first year of operation. ZenBusiness formation packages range between $39 and $249.


Northwest Registered Agent primarily serves as a registered agent service. However, it also doubles up a business formation service, providing top-notch customer support. The company stands out among the rest by providing only one paid plan. The plan includes a registered agent service and an LLC filing, with other services being treated as Add-ons.

The company charges $39 to file an LLC, plus all the relevant filing fees. You can opt for the “Pay in Full” option on their site and pay up to $225 for filing services with registered agent services for one year.

The VIP service is also displayed on their site, which allows you to pay monthly for a year. The VIP service is renewable and entails business formation, registered agent service, and an EIN. Other Add-ons included on Northwest registered agent service are;

  • Compliance filing: $100
  •  S Corp filing: $50
  • Mail forwarding: $40/month
  • Certificate of Good Standing: $50
  •  Certified copy of Articles of Organization: $55
  • Virtual phone service: $9

Final Thoughts

Marijuana is becoming increasingly accepted within our society. Multiple states in the U.S. have legalized it for medical or recreational use, making it a lucrative business for weed growers. Forming LLCs remains one the best options for companies that want to tap into the broader benefits of lower taxes, personal liability protection, and increased credibility.

Frequently Asked Questions (FAQs)

What’s the Difference between an LLC and inc?

LLC” stands for “limited liability company.” The abbreviation inc indicates that a business is a corporation. LLCs and corporations are both formed under state guidelines.

Is Marijuana Legal across the U.S.

No. Only a few states have legislation allowing the sale and cultivation of weed

What’s the recommended age to use weed in the U.S.?

Most states allow adults above 21 years to use weed

Is weed business lucrative in California?

California is the largest grower of weed in the U.S. Weed business has been booming in the state since its legalization in 2016.

Can anyone start a weed business in California?

You must first meet the minimum requirement stated by the authorities. Besides, only medicinal or recreational weed is allowed for sale.



Billy Graham is a Highly skilled copywriter/editor with over 8+ years of experience working for content mills, direct clients, and SEO marketing agencies alike. Possesses extensive expertise in crafting unique copy, exceeding editorial goals, and delivering first-rate client-focused service in results-driven content production. Specialties include gaming, branded content, short-form to long-form copywriting, call-to-action, buying guides, how-to – articles, product reviews, and comparisons, copy editing, proofreading, complete QA, and in-depth research.


Jazmin Castello holds a Master's degree in Business Management, owns two companies, and has also published a self-help book. When she is not working or writing, she likes to spend time with her family and to travel.

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