So, you want to start a hemp company. You have your big idea and a business plan ready. At some point, though, you begin to wonder whether you should be thinking about any legal issues as you get your company off the ground. That’s where we come in.
Bradley’s Cannabis Industry team has a deep understanding of the many unique legal and business issues that impact hemp companies. Our multidisciplinary team of attorneys helps businesses successfully identify and mitigate risk and recognize opportunities for sustainable growth. In our experience, here are the ten things to consider when starting a hemp business.
1. Establish a Corporate Entity to Operate Your Business
Many entrepreneurs choose to establish a corporate entity to operate their budding business. The costs of doing so are relatively small, but the benefits are substantial – for you and for your business.
2. Obtain All Necessary Licenses to Conduct Your Business
In a highly regulated industry, licenses are essential. In certain jurisdictions, hemp companies will need different licenses from different levels of government. No item on this list poses a greater existential risk to your operations than the failure to obtain appropriate licenses.
3. Obtain Funding for Your Business.
Even the best ideas cannot succeed unless they get off the ground. Sometimes the difference between success and failure is having access to capital – more importantly, strategic capital. Raising capital in the hemp industry is a particular craft that calls for a mastery of different skill sets.
4. Prepare Contracts with Suppliers/Processors
Unless your hemp company is fully vertically-integrated, you will have contracts with other players in the hemp space. Whether you are a grower, processor, supplier, or retailer, your company needs thoughtful, well-negotiated contracts to survive in this competitive market.
5. Understand What the Law Allows for Hemp
Even though hemp is now legal at the federal level, the hemp industry is still highly regulated by various levels of government. For example, the Food and Drug Administration prohibits the introduction of hemp and hemp-derived products (including, for example, CBD) into foods and beverages. Certain states and municipalities have their own hemp-specific rules and regulations.
Don’t get tripped up over the rules of the road.
6. Protect Your Intellectual Property
For many companies, their most valuable asset is their intellectual property. Without a trademark, your clever name and tag line are there for the taking. Invented a novel way to process hemp? A patent may be the appropriate strategic choice for your company.
7. Establish a Banking Relationship
Many hemp companies are surprised to learn that many banks will not provide services to cannabis-related businesses, including hemp companies. Operating a business without the ability to utilize and offer banking services is a recipe for failure.
8. Establish an Accounting Relationship and Understand Hemp’s Tax Treatment
Let’s face it, you don’t want to handle complicated tax questions. But in a highly-regulated industry, that’s exactly what you can expect. Let the professionals do their part while you focus on growing your business.
9. Understand Employment Laws
A company is only as good as its employees. It is critical to comply strictly with the employment laws of each jurisdiction where your business operates. This is one place where it definitely does not pay to be penny-wise, pound foolish. Get it right on the front end.
10. Get the Right Insurance
All businesses should have appropriate insurance coverage, but hemp companies quickly realize that not all insurance companies will write hemp insurance policies. And in the event of a claim, the hemp company may learn that many hemp claims are denied for various reasons. Don’t find yourself facing a loss without insurance coverage.