Cannabis Business Blog

Despite some early grumbling from Congress threatening to block DC’s ballot initiative from becoming law (because of DC’s special status, DC ballot initiatives do not become law until they pass through a 30-day Congressional review period), with only a few hours to go, it appears that the review period has come and gone.

DC Mayor Muriel Bowser held a conference yesterday outlining the new DC law and how it would be enforced.  Under DC’s new law, anyone 21 years of age or older will be able to lawfully:

• • Possess two ounces or less of marijuana;

• • Use marijuana on private property;

• • Transfer one ounce or less of marijuana to another person, as long as (a) no money, goods or services are exchanged and (b) the recipient is 21 years of age or older; and

• • Cultivate within his or her primary residence up to six marijuana plants, no more than three of which are mature.

It will remain illegal in DC for anyone to:

• • Possess more than two ounces of marijuana;

• • Smoke or otherwise consume marijuana on public space or anywhere to which the public is invited; including restaurants, bars, coffee shops, and public housing;

• • Sell any amount of marijuana to another person; or

• • Operate a vehicle or boat under the influence of marijuana.

Some Members of Congress are upset about the new law and Representative Jason Chaffetz, Chairman of the House Committee on Oversight and Government Reform, has written to Mayor Bowser, warning her that implementation of the DC law is illegal because it would violate the federal spending bill passed at the end of last year barring federal funds from being used “to enact any law, rule, or regulation to legalize or reduce penalties associated with the possession, use or distribution” of marijuana.   Chairman Chaffetz has also launched an investigation, demanding that Mayor Bower provide his Committee with information about efforts related to DC’s enactment of the ballot initiative.

This article was original published in Marijuana Venture magazine in June, 2014

Last month, in the first half of this two-part series on strategic planning, we reviewed the important fact that the growth, processing, distribution, retail sale and use of marijuana, while legal under state law, remains illegal as a controlled substance under federal law. The Aug. 29, 2013 Cole memo is guidance from the federal government which provides that the federal government will not enforce the marijuana laws in Washington so long as the state does an adequate job of preventing the marijuana industry from being abused in the state of Washington.

The Cole memo is guidance which could be amended or withdrawn at any time either in whole or part. The impact would lead to criminal prosecution and severe economic hardship.

So what do we recommend for the I-502 business participant?

As mentioned at the end of the last month’s article, we recommend that the I-502 business person utilize a strategic asset ownership plan of limited liability companies (LLCs) and trusts to isolate the risk inherent with the I-502 business from the other assets of the business participant.

Structuring with LLCs: The I-502 business should be owned by an LLC (Washington state law appears to require that the business be owned by an LLC formed under Washington law. See WAC 314.55.020(7)). If the I-502 business person has several I-502 related businesses each business should be operated within its own LLC. The reason for this is to isolate the liabilities associated with each I-502 business within its own separate LLC. We further recommend that the I-502 business person have a second LLC hold the ownership in the I-502 business entity (the operating entity).

The ownership LLC provides a second layer of protection by having both the ownership and operation of the I-502 business in LLCs.

Under Washington law, assuming the investors of the LLC properly operate the LLC and treat it as a separate, independent legal entity, the liabilities associated with the operation of the I-502 business should remain within the LLC and not “bleed” over into the other assets of the I-502 business person. (In the event the federal government reversed the prosecuting of violators of the Controlled Substance Act as it relates to Washington residents, there is no assurance this structure would protect the I-502 business person from criminal liability if found personally liable for violating the federal Controlled Substance Act.)

To read more, visit Marijuana Venture magazine online