Marijuana Surety Bonds: What You Need to Know
If you are planning to open your own retail or medical marijuana dispensary, you may be looking to obtain a marijuana surety bond. Marijuana surety bonds provide a guarantee that a dispensary will operate according to applicable state laws and regulations. While not every state requires dispensaries to carry these bonds, bond requirements have sharply risen as more states have legalized recreational and medical marijuana use. Learn more about marijuana surety bonds, what they insure, how they work, and where you can go to apply for a cannabis insurance policy.
How Marijuana Surety Bonds Work
A marijuana surety bond acts as a contract between three parties: the principal (you), the surety (the warrantor), and the obligee (the entity that is bound by the contract and who requires the bond). When you obtain a marijuana surety bond, there is a financial guarantee made to the obligee that the principal (you) will act in accordance to the established terms of the bond. If you fail to fulfill your obligations, the obligee has the right to make a claim to recover any losses. If the claim is found to be valid, the cannabis insurance company will pay out reparation but the amount cannot exceed the amount of the bond. Any claims paid by the principal will then be reimbursed.
Marijuana surety bonds perform several key functions. First, they help verify that the principal is actually qualified for bonding. After accessing the risk of bonding the principal by looking at credit and other factors, the surety can make a decision whether to provide the bond based on the risks involved. Marijuana surety bonds also benefit the obligee in certain ways. If the principal conducts business in a manner deemed unacceptable by the obligee, the obligee can choose to recoup losses, fees, or fines from the principal.
Marijuana Surety Bonds State-to-State
Many states where recreational and medical marijuana is legal require businesses to post a marijuana surety bond before they can obtain a license. When purchasing a bond, know that you do not have to pay the full amount of the surety bond at once. Instead, you will be responsible for a premium which typically ranges from 1 to 15 percent of the bond amount. Your credit score and similar factors may also modify the premium amount. The costs and requirements relating to marijuana surety bonds can differ from state to state. The cost of a marijuana surety bond in California is usually $250 or less.
In California, there are three main licensing entities that require surety bonds. The Bureau of Cannabis Control (BCC) is a leading agency that works in the development of regulations for medical and adult-use cannabis. The BCC is also responsible for the licensing of distributors, retailers, micro-businesses, and testing labs. There is also a cannabis licensing entity known as the Manufactured Cannabis Safety Branch who is responsible for regulating manufacturers of cannabis-infused edibles. The third licensing entity in California is the Cal Cannabis Cultivation Licensing, who is responsible for licensing cultivators for both recreational and medicinal use.
Who Needs a Marijuana Surety Bond
If you are planning to open a marijuana dispensary or retail shop, acquiring a marijuana surety bond is usually part of the licensing process. In California, dispensary laws require that all businesses working in the marijuana sector obtain a licensing bond of $5,000. This typically includes all manufacturers, retailers, distributors, cultivators, laboratories, and micro-businesses involved. Certain individual cities and counties have their own laws and regulations regarding the licensing of businesses in the marijuana business. Be sure to check the local regulations in your area.
How to Apply for a Marijuana Surety Bond
If you are looking to apply for a marijuana surety bond so that you can get licensed to legally distribute marijuana, you will first need to locate a reputable and licensed surety bond company that provides these types of bonds. After completing a quote, you will be asked to submit a variety of documents and information. This typically includes a completed surety bond application, bond forms from your local state agency or regulation department, and personal and business background information to confirm that you have no criminal record. You will also need to provide financial documents, such as bank account statements, income, letters of credit, and balances.
Learn More About Marijuana Surety Bonds
For medical and recreational marijuana dispensary owners in California, the need for a marijuana surety bond is essential. If you are able to successfully meet the requirements of the underwriters, your surety bond will be approved and a bond will be issued. The cost of your bond will primarily depend on your financial strength, credit score, and other financial circumstances. Costs can also vary from insurance carrier to insurance carrier, meaning it is important to shop around for the best quotes. For more information about obtaining cannabis insurance or to apply for a marijuana surety bond, contact the cannabis insurance professionals at MFE Insurance today.
This article will inform you about marijuana surety bonds, what they insure, how they work, and where you can go to apply for a cannabis insurance policy.
California Cannabis / Marijuana License Bonds
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California Cannabis / Marijauna License Bond Information
Cannabis and various other licensed marijuana related businesses operating in California are subject to surety bond requirements. Surety bonds are part of the initial licensing process for cultivators, retailers, distributors, testing laboratories, microbusinesses, event organizers, and manufacturers. Cannabis license surety bonds are also required for both medical and adult use/ recreational businesses. The bond is typically in a coverage amount of $5,000 and must be furnished by licensees prior to being issued a license to conduct business in the state.
Three California state government agencies are tasked with regulating marijuana businesses in the state. The California Bureau of Cannabis Control is responsible for licensing retailers, distributors, testing laboratories, micro-businesses, and temporary cannabis events. The California Department of Food and Agriculture regulates cannabis cultivators through the CalCannabis Cultivation Licensing Program. Lastly, the California Department of Public Health regulates licensed state manufacturers.
In addition to the state surety bond requirements outlined above, certain cities and counties including the cities of Los Angeles, Coalinga, Palm Springs, Lake Elsinore and Shasta Lake, and the counties of Yolo, San Bernadino and Medocino have passed legislation establishing local marijuana bond requirements.
How Much Does a Cannabis License Bond Cost in California?
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What Does a Cannabis License Bond Protect Against?
Cannabis or Marijuana License Bonds are required by the California Bureau of Cannabis Control, Department of Food and Agriculture, and the Department of Public Health pursuant to California Code of Regulations to ensure compliance with state regulations pertaining to cultivation, retail sale, distribution, testing, and manufacturer of medicinal and adult-use cannabis goods.
The surety bonds ensure compliance with all provisions of the California Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). Bonds may also guarantee adherence to licensure and permit requirements and timely payment of applicable taxes as required by state law. In some cases, the surety bond may guarantee ethical business practices, along with payments related to the cost incurred for the destruction of cannabis goods and materials in the event of a violation of the Act or other pertinent regulations.
Getting Your California Business License or Registration
For retailers, distributors, testing laboratories, micro-businesses, and temporary cannabis events applicants, you should expect to provide the following information to The Bureau of Cannabis Control:
- Business information including owners’ names, DBAs, organizational structure and formation documents, financial information (bank accounts, loans, investments, gifts), and detailed operating procedures,
- Individual owner information including name, title, date, and place of birth; Social Security number or individual taxpayer identification number; mailing address; phone number; email address; current employer, ownership percentage, fingerprints, and criminal history.
- Premises information (including physical address, premises diagram, verification that the premises is not located within a 600-foot radius of a school, and evidence of the legal right to occupy the premises).
- Surety Bond in the amount of $5,000 for the benefit to the state of California (applies to all licensees) as described above.
- Commercial general liability insurance with aggregate of at least $2 million and no less than $1 million for each loss (applies to distributors and micro businesses that engage in distribution).
- The licensing process for getting a recreational dispensary license and the process of obtaining a medical marijuana license differ
Cultivators applying for a CalCannabis Cultivation License as directed the California Department of Food and Agriculture must to submit the following information and documentation as part of the license application:
- Business name, License type (such as Small Outdoor) and whether it is for A (adult use) or M (medicinal) and a list of any other valid state-issued cannabis licenses.
- Determine the Designated Responsible Party and provide required information (name, title, address, phone, email, and a copy of your government-issued ID). Must be an owner with legal authority to bind applicant entity
- List of all owners with aggregate ownership of 20 percent or more, a CEO of a nonprofit or other entity, a member of a nonprofit’s board of directors, an individual participating in the direction, control, or management of the commercial cannabis business, including any of the following: 1. a partner of a commercial cannabis business organized as a partnership; 2. a member of a limited liability company of a commercial cannabis business organized as a limited-liability company; 3. an officer or director of a commercial cannabis business organized as a corporation. Detailed description of criminal convictions, if applicable, and copy of “Live Scan” fingerprints
- List of Financial-Interest Holders: Any individual or business that holds a financial interest, but is not qualified as an owner as indicated in the previous section
- Copies of documents filed with the California Secretary of State. Applicants will need to contact the Secretary of State’s office to find out which required documents are required for their business structure.
- Valid seller’s permit number from the California Department of Tax and Fee Administration (CDTFA) – or evidence that you do not need one. Applicants will need to contact CDTFA to determine what is required for their business type.
- If an applicant is a cannabis cooperative business entity, provide a list of all licensed members
- Legal Right to Occupy: If the applicant is the owner of the property, provide a copy of the title or deed to the property. If the applicant is not the owner of the property, provide the following: 1. a document from the property owner (or property owner’s agent) where the commercial cannabis activity will occur that states the applicant has the right to occupy the property and acknowledges that the applicant may use the property for commercial cannabis cultivation; 2. the property owner’s mailing address and phone number; and 3. a copy of the lease or rental agreement, or other contractual documentation.
- Evidence of a surety bond for no less than $5,000, payable to the California Department of Food and Agriculture (or CDFA). Must be issued by a corporate surety that is licensed to transact business in California (such as Surety Bonds Direct, CA license # 0K22139).
- Evidence of enrollment, or that enrollment is not necessary, with the applicable regional or state water board for water-quality protection. Applicants will need to work with the Water Board to determine what documentation is appropriate for their licensed premises.
- Evidence that the applicant has conducted a hazardous materials record search of the EnviroStor database for the proposed premises. If hazardous sites were encountered, the applicant shall provide documentation of protocols implemented to protect employee health and safety.
- Evidence of exemption from, or compliance with, Division 13 of the Public Resources Code: California Environmental Quality Act (CEQA). The evidence provided shall be one of the following: 1. a copy of the applicant’s license, permit, or other authorization from the local jurisdiction if the local jurisdiction has adopted an ordinance, rule, or regulation that requires discretionary review and approval of the applicant’s license, permits or other authorization. 2. a copy of the Notice of Determination or Notice of Exemption and a copy of the CEQA document, or reference to where it can be located online; or 3. if an applicant does not have the evidence specified in subsections (1.) or (2.) of this section, or if the local jurisdiction did not prepare a CEQA document, the applicant will be responsible for preparing an environmental document that is in compliance with CEQA and can be approved or certified by CDFA.
- For indoor and mixed-light license types, identify all power sources for cultivation activities, including but not limited to: illumination, heating, cooling, and ventilation. A property diagram. A proposed cultivation plan: Detailed premises diagram, Pest-management plan, Cannabis waste-management plan, Lighting diagram (indoor and mixed-light license types)
- Identification of all of the water sources used for cultivation activities and the applicable supplemental information for each source: 1. a retail water supplier 2. a groundwater well 3. a rainwater-catchment system 4. a diversion from a surface water body or an underground stream flowing in a known and definite channel
- A copy of any final lake or streambed alteration agreement issued by the California Department of Fish and Wildlife (CDFW), pursuant to Sections 1602 and 1617 of the Fish and Game Code, or written verification from CDFW that a lake-and streambed-alteration agreement is not required. An attestation that the proposed location is at least a 600-foot radius from sensitive sites. If the applicant has 20 or more employees on the payroll at any time, the applicant must attest that the entity will enter into, (or has already entered into) and will abide by the terms of a labor peace agreement.
- The applicant must attest that the entity is an “agricultural employer,” as defined by the Alatorre-Zenovich-Dunlap-Berman Agricultural Labor Relations Act of 1975; Part 3.5 (commencing with Section 1140) Div. 2 Labor Code. y) If the applicant entity is applying for an indoor license type, the applicant must attest that the local fire department has been notified of the cultivation site. The limited waiver of sovereign immunity: Any applicant who is within the scope of sovereign immunity that may be asserted by a federally recognizable tribe or other sovereign entity shall waive any sovereign immunity defense. The applicant will have to provide documentation that establishes that the applicant has the lawful authority to enter into the waiver described above.
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Other Helpful Information and Links
Cannabis Bond Applicant & Licensee Contact information:
For retailers, distributors, testing laboratories, microbusinesses, and temporary cannabis events
Bureau of Cannabis Control, 2920 Kilgore Road Rancho, Cordova, CA 95670, (833) 768-5880, https://bcc.ca.gov/
California Department of Food and Agriculture, 1220 N Street, Sacramento, CA 95814, (833) 225-4769, http://calcannabis.cdfa.ca.gov/
Department of Public Health, PO Box 997377 MS 0500 , Sacramento, CA 95899-7377, (916) 558-1784, https://www.cdph.ca.gov/
Overview of California Cannabis Licensee Types
A surety bond must be issued to the Bureau in a coverage amount of at least $5,000 and is required pursuant to California Code of Regulations for the following business types.
A storefront cannabis retailer (Type 10) licensee is a business that sells cannabis goods to customers at its premises or through delivery. A storefront retailer must have a licensed physical location where commercial cannabis activities are conducted. A non-storefront retailer (Type 9) licensee sells cannabis goods to customers exclusively through delivery. Non-storefront retailers are required to maintain a licensed premises where cannabis products are stored prior to delivery. The premises of a non-storefront retailer cannot be open to the public.
A cannabis distributor (Type 11) licensee is transports cannabis products between licensees, arranges for testing of cannabis goods, and conducts quality assurance reviews of cannabis goods to ensure compliance with packaging and labeling requirements. A licensed distributor is only permitted to distribute cannabis goods, cannabis accessories, and licensees’ branded merchandise or promotional materials.
A distributor transport only (Type 13) licensee is responsible for the transport of cannabis goods between licensees, but may not transport any cannabis goods, except for immature cannabis plants and/or seeds, to a licensed retailer or to the retailer portion of a licensed microbusiness. A distributor transport only licensee who selected “Self-Distribution” during the application process can only transport cannabis products that the licensee has cultivated or manufactured. A distributor transport only self-distribution licensee is not permitted to transport cannabis goods cultivated or manufactured by other licensees.
A cannabis microbusiness (Type 12) license allows a licensee to engage in the cultivation of cannabis in an area less than 10,000 square feet and to act as a licensed distributor, Level 1 manufacturer (Type 6), and retailer, as specified in an application. In order to qualify for a microbusiness license, a licensee must engage in at least three of the four listed commercial cannabis activities.
Licensees also must comply with all rules and regulations, including applicable regulations adopted by the California Department of Food and Agriculture and the California Department of Public Health.
A Testing Laboratory (Type 8) license allows a cannabis goods laboratory, facility, or other entity in California to perform testing of cannabis goods. Testing laboratories must obtain and maintain ISO/IEC 17025 accreditation. Testing laboratories may be issued a provisional license allowing them to operate while obtaining ISO/IEC 17025 accreditation, provided the laboratory meets all other requirements of licensure.
The California Department of Food and Agriculture governs Cultivators. The MCRSA requires that MCCP establish and mitigate environmental impacts from medical cannabis cultivation sites and seek input from several different state departments and agencies for the development of cultivation requirements as follows:
General Cultivation: The MCCP manages the licensing of indoor, outdoor, and mixed-light commercial cultivation sites. Any relevant mitigation requirements determined by the environmental evaluation must be included in a license for cultivation.
Water: The MCRSA requires all cultivation licenses to include requirements for compliance with applicable principles, guidelines and requirements established by the California State Water Resources Control Board and applicable Regional Water Quality Control Boards.
Pesticides: The MCRSA tasks the Department of Pesticide Regulation with developing guidelines for the use of pesticides in the cultivation of cannabis. DPR is also required to ensure that the application of pesticides with indoor or outdoor cannabis cultivation sites is compliant with existing state pesticide use laws.
Get your Official California Cannabis Licensee Bond today. For cultivators, retailers, distributors, testing laboratories, micro-businesses, event organizers, and manufacturers. Available with instant approval and no credit check! Plus, our bond experts are standing by to answer your questions.