Bylaws – We Don’t Need No Stinking Bylaws or Do We?

Question:  What are Bylaws & Must My Dispensary Adopt Bylaws?

Answer:  Black’s law dictionary defines Bylaws as “a rule or administrative provision adopted by an organization for its internal governance and its external dealings.”  Bylaws have traditionally been a set of rules adopted by the Board of Directors of a corporation to govern the internal affairs of the corporation.   In fact, Arizona Revised Statutes Section 10-3206 requires all Arizona nonprofit corporations to have Bylaws.

Arizona enacted its limited liability company laws in 1992, but nothing in the Arizona LLC Act refers to Bylaws or requires Arizona LLCs to adopt Bylaws.  As a result, Arizona LLCs that have Bylaws are exceptions to the general rule that Arizona LLCs do not have Bylaws.  The Operating Agreement is the Arizona LLC’s governing document that replaces corporate Bylaws.  Because the most commonly formed entity in Arizona today is the LLC, and because many people who seek to obtain a license to own and operate an Arizona medical marijuana dispensary may form an Arizona LLC for that purpose, the question is does an LLC that seeks a license to own and dispensary need to adopt Bylaws?

The answer to that questions is Yes!  Arizona Revised Statutes Section 36-2806.A states: “The Bylaws of a registered nonprofit medical marijuana dispensary shall contain such provisions relative to the disposition of revenues and receipts to establish and maintain its nonprofit character.”  The rules of the Arizona Department of Health Services also require Bylaws and that the Bylaws contain certain provisions. Therefor, the law requires the dispensary to have Bylaws so you must make sure your nonprofit entity adopts ADHS acceptable Bylaws.