As a heavily regulated industry that can impact people’s lives in Rhode Island, occupational licensing will be a major feature of the cannabis industry here in the coming years.
The cannabis industry is still in its early stages, with the state formally decriminalizing and legalizing adult-use cannabis in May 2022.
To become a part of this exciting industry, you will need to meet strict regulations and navigate a high bar of entry. While the precise laws are still being finalized and will evolve from here, we can expect an occupational licensing model similar to that employed in other states to take shape soon here in Rhode Island.
At Cannabis Law Solutions, our knowledgeable cannabis lawyers have been following the emergence of the industry in Rhode Island for a long time. We are well placed to advise you on the likely legal hurdles you will face and how to meet the upcoming occupational license requirements.
What is an occupational license?
Entrepreneurs looking to enter the cannabis industry in Rhode Island must understand the licensing laws before making a move. That’s easier said than done when the laws are still being formulated.
What we do know is that the cannabis industry will be tightly regulated. As such, the state is likely to adopt an “occupational licensing” model similar to other states. Occupational licensing is a type of licensing required by government regulation where business owners want to pursue a particular profession for a profit.
Other professions with an occupational licensing model include doctors/physicians, lawyers and accountants. These professions are highly regulated by the government because of their potential to have a profound impact on the lives of the public. In some states, tradespeople like electricians and plumbers also fall under occupational licensing regulations.
Occupational licensing is generally adopted when the health, safety, finances, freedom or wellbeing of people is at risk from a profession. It protects the public against unscrupulous or incompetent operators.
Because cannabis businesses will require occupational licensing, there will be an inherent commitment by business owners in the industry to act responsibly, maintain quality, and not pose a risk to the safety or wellbeing of their customers.
Typically, cannabis business license fees are much higher than average occupational licenses in the U.S. Many in the industry see this as unfair but, as already recognized, the bar of entry into the cannabis industry is set high.
Common restrictions with occupational licensing
Because of the responsibility to protect the safety and wellbeing of the public, aspiring cannabis business owners face legal hurdles to enter the industry in Rhode Island, as in other states that have legalized adult-use cannabis.
Occupational licensing requirements are more stringent than standard business licenses. The extra costs are likely to be passed on to customers. We see in other regulated professions like law and accounting that the rates charged can be higher than with other professions. We can expect similar for the cannabis industry when compared with other retail products.
Some states have been accused of using occupational licensing to restrict competition. Restrictions include requiring only registered medical cannabis dispensaries to apply — or only businesses with an existing wholesale dealer license for liquor.
In Rhode Island, the occupational licensing provisions will be made by the Cannabis Control Commission, according to the Rhode Island Cannabis Act. The Commission is in the process of finalizing laws to cover topics like:
Qualifications for a license
Procedures for obtaining a license
Limits to consumer purchases and possession
Advertising and marketing regulations
It remains to be seen how stringent the restrictions will be but we can expect an exhaustive and expensive licensing process with higher fees than for other occupational licenses.
We can also expect restrictions placed on who can apply, with the automatic exclusion of anyone with a criminal conviction.
When will cannabis occupational licenses become available in Rhode Island?
According to the present laws, 24 new retail licenses can be issued in six geographic areas of Rhode Island, with sales expected to commence by December 2022.
There is no date yet set for the occupational license model in Rhode Island to be finalized but we are expecting this in the near future. It is likely to be closely aligned with the system employed in other states that have legalized cannabis in recent years.
Rhode Island cannabis licenses
There are currently only two cannabis business license types available for Rhode Island entrepreneurs:
The Compassion Center license
Rhode Island Cannabis Cultivator license
These licenses date back to when only medical cannabis usage was permitted in the state.
Whether you are looking to form a limited liability company (LLC) or a corporation, our experienced business lawyers can discuss the pros and cons of both and help you incorporate your business with the optimal structure to achieve your goals.
Cannabis business licenses
If you want to run a cannabis business, you will need a valid business license issued by your state authority as well as local permits. Eligibility criteria are likely to be stringent and we can help you navigate the often-complex license application process.
Cannabis corporate documentation
Whether you need to prepare for a license application, transfer of business ownership, change of corporate structure, transfer business location, or another business process, we can help you identify and draft the documentation you need to operate legally in your state.
Cannabis administrative law
State authorities watch licensed and unlicensed cannabis businesses closely. If you violate regulations, you could face an administrative penalty. Our attorneys can provide representation or help you prepare for an administrative hearing, settlement conference or appeal.
Cannabis disputes and litigation
Whether you have a dispute with another business, a legal issue with one of your partners or a licensing or administrative issue, you may need legal assistance to help resolve it. We are adept at alternative dispute resolution methods as well as civil litigation.
As the cannabis industry emerges in states around the U.S., it is more heavily regulated than most other industries. We can help your business navigate the red tape and plan to stay on the right side of the regulatory authorities in whichever state you are based.
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Opening a successful and legal marijuana dispensary begins with hiring a knowledgeable cannabis attorney and learning all that you can about this industry and the applicable laws. The next step is to set up a corporate business structure and create a retail business plan, which an attorney can also help you with. You will also need to research potential locations for your business to find out where licensing is legal.
Next, obtain the necessary licensing to operate your cannabis business and ensure that your operational infrastructure follows all laws and regulations. If you are not growing or producing your products yourself, you will need to contract with cultivators and product manufacturers to supply your business.
Before you begin the process of applying for a cannabis license, you need to establish a business from which to apply. The state will not consider an application from an individual; instead, the applicant must be a business entity in good standing with the state.
Your business will begin when you choose a legal entity and file the appropriate paperwork with the Secretary of State. After that, you will file with the IRS and obtain a taxpayer identification number.
You would start with articles of incorporation and include other key corporate provisions in the bylaws that state how your company will be governed. If your business is a partnership or limited liability company, you will need an operating agreement. Depending on your line of business, you may also need other licenses to operate.
In addition, you will also need other corporate documents that the Department of Health will want to see when they are considering your cannabis application. Of importance here, your application would ask you to provide:
Your articles of incorporation
Certificate of good standing
An attorney can help you both choose the appropriate business entity and draft and file any necessary documentation. When you are seeking to enter the cannabis field, it is important to get your business formation process right to make the best possible impression on the Department of Health. Doing so will allow you to devote as much time as possible to your cannabis-related business arrangements.
As a precursor to even being able to apply for state approval of your cannabis business, you must have a properly formed business entity. As a result, the first documentation you must file is the documentation establishing your business.
Next, you will need to obtain a tax identification number by registering with the IRS. In addition, the licensing application also asks you to provide your current state business license registration.
Beyond your general business licenses, you would also need specific permission to operate a cannabis business. This involves a very strict registration process where the state will closely scrutinize your application. You can expect the state to review each of the licenses that they request since it wants to be sure that your business complies with laws before they are granted the right to operate in the cannabis industry.
Compliance means making sure that you follow the myriad of laws that apply to your state’s cannabis businesses. Further, the regulatory landscape is fast-changing as the state gains more experience overseeing the businesses.
What this means for you is that knowledge is one of the most important things that you can have. Not only do you need an expert in the current laws, but you also need to be able to anticipate future changes in the law. This means that each business needs an expert who understands the laws and can advise them as to the best means of following them.
Also, compliance also means that you have sound policies and procedures in place that govern your business. The Department of Health is already looking at your policies when they evaluate your initial application. However, they reserve the right to audit and inspect your business to verify that you are complying with the law. You should always be ready for an inspection by documenting how you are following the regulations.
The best way to show compliance is by keeping your paperwork organized and conducting your own internal audits. The Department is interested primarily in your safety procedures, so you should be ready to show how you are following your own procedures. Further, you should always reevaluate your own policies to see if there are any weaknesses or changes that can be made to strengthen them.
The major thing that the Department of Health is interested in is the safety of both the product and the operation. As a baseline, the state wants to know who all of the owners are and the people who will be working in the operation.
While there are common documents among all the application classes that the Department is seeking, there are also special requirements for each of the categories.
For example, when the Department is evaluating a manufacturing application, it will pay close attention to measures that your business takes to ensure proper hygiene and testing methods. The Department also will pay attention to the manufacturer’s procurement practice and the security of its inventory.
With regard to laboratory submissions, the focus is partially on the testing processes and equipment that the business will use. The Department wants technical, scientific details of the exact tests and the quality control that the laboratory will use for testing. The emphasis is on ensuring product safety.
For courier businesses, the Department will scrutinize the safety and security of the delivery process, including the vehicles and the delivery routes that are used. The emphasis is on the safety of qualified patients, primary caregivers, and courier staff in light of the product being delivered. In addition, since there is interaction with patients, the Department wants to see how the applicant plans on protecting patient privacy.
Cannabis legalization often works in a series of steps. Broadly speaking, cannabis policy reform occurs in the following stages:
Prohibition: Criminal penalties apply for the possession or use of cannabis.
Decriminalization: Low-level criminal penalties are removed for cannabis usage (e.g., personal possession) and criminal penalties may be replaced with civil fines.
Medical legalization: Full medical legalization with commercial licensing and testing may come straight away or in a series of stages.
Legalization: State laws are changed to make any cannabis activity a crime no longer. Cannabis must be removed from the Controlled Substances Act and new rules added for the legal commercial cultivation, distribution, testing, and sales of cannabis.