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Forming a Collective

A consumer collective cooperative corporation is a special type of corporation that can be formed to serve it’s members interests.  

While although in 2017, California passed legal recreational marijuana, the collective model may still continue to be used in the state, as there are said to still be growing limitations per person.  States which have not yet gone legal, may use this model effectively in introducing medical marijuana to their state.

The Model of a Collective

Unlike a for-profit corporation, the purpose of a consumer collective  cooperative corporation is to serve it’s members interests, rather than make a profit.  In a collective, each patient is allowed a certain number of plants.  As a group, the collective is able to grow that number of plants and share the medicine amongst it’s members.  Members return to the collective and offer a donation in exchange for the effort in the collective manufacturing and providing medication.

Such a corporation is democratically controlled and the members can limit each member of the corporation to one vote regardless of how many shares of the corporation a member owns.

Forming a Consumer Collective Cooperative Corporation

As with all corporations in California, to create a consumer collective cooperative corporation, you must file articles of incorporation with the Secretary of State’s office.  This can be as easy as doing it yourself, or going through a service like legalzoom, which offers review services and other useful services as well.

A medical marijuana collective in CA can really be any type of entity, but the only entity recognized for this purpose in CA is a non-profit C-Corporation, which provides all of the benefits and protection necessary to the owners of the collective.

A C-corporation is typically filed with the CA Secretary of State as is non-profit status with the state and you can have non-profit status in CA. There is no need to apply for federal 501c3 status, because of the federal law issues with marijuana, only state non-profit.   You would still have to file and pay regular corporate federal taxes.

The statutory requirements for the articles are set forth in California Corporations Code section 12310, which states that the articles must include the corporation’s name and address, as well as a special statement that the corporation is formed under the Consumer Corporation Law and whether member voting will be equal or based on ownership interest. The corporation’s name must include the word “cooperative” and an indication of its corporate status by use of a designation such as “Inc.” or “Corp.”

Collective Membership

In a collective, each patient is allowed a certain number of plants.  As a group, the collective is able to grow that number of plants and share the medicine amongst it’s members.  Members return to the collective and offer a donation in exchange for the effort in the collective manufacturing and providing medication.

Consumer collective cooperative corporations can have an unlimited number of members or no members at all. If neither the corporation’s articles or bylaws state whether it will have members, the corporation shall have no members. A consumer cooperative cooperation without members vests all voting rights in its board of directors.

The directors are authorized to issue memberships for no payment or to set the amount of payment required per membership, unless otherwise prohibited by the corporations articles or bylaws. If the director’s set the membership payment at $300 or less, the memberships are exempt from registration with the Department of Corporations.

Uses

A consumer cooperative corporation is the preferred form of corporation to ensure compliance with other laws. For example, in 2008 the California Attorney General recommended the use of such a corporation by qualified persons to comply with the Compassionate Use Act of 1996 regarding medical marijuana. Because the act prohibits diversion of marijuana for non-medical purposes, qualified persons can work cooperatively regarding the handling of the marijuana for the members’ benefit and safeguard it from improper diversion.

Worker Cooperative Corporation

In February 2011, the California Assembly introduced a bill to amend the Consumer Cooperative Corporation Law. The primary purpose of the amendment is to permit the formation of a worker cooperative corporation. As of October 2011, the bill has yet to be made into law; however, if it passes, the amendment would permit a corporation to be owned and democratically controlled by its workers.

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