3 Considerations for Businesses Looking to Grow/Sell/Distribute Hemp and Hemp Products in New Jersey

This is an exciting time for cannabis law, and multitudes of individuals and businesses are finding themselves interested in or working with cannabis-related business issues.  From the purchase and sale of CBD, to the expansion of medical marijuana programs across the country, to the constant discussions and rumors swirling around pending or anticipated legislation, this truly is an interesting time to be involved in the cannabis industry.

Unfortunately, here in New Jersey, at least for now, there are voids in legislation and regulations that leave individuals, attorneys, and businesses wondering precisely what can and cannot be done with cannabis (both industrial hemp and marijuana).  The good news (hopefully) is that guidance appears to be forthcoming on both the state and federal levels relating to industrial hemp and hemp-derived products such as CBD.

As of this writing, the New Jersey Department of Agriculture is currently regulations to establish New Jersey’s Industrial Hemp Pilot Program.  Although the contours of this program are hazy right now, it would allow certain individuals and businesses to research, develop, grow, process, and distribute industrial hemp and hemp-derived products in New Jersey.  This is great news if you’re thinking of working with hemp in the Garden State.  But what can you do now to make sure you’re ready to hit the ground running once the New Jersey Industrial Hemp Pilot Program is in full swing?

Here are a couple of helpful tips to consider if you’re thinking of getting involved in the hemp business, regardless of what you intend to do:

1. Develop a Business Plan and Form a Business Entity

   The first step in any successful business venture is, well… a business. First, you need a business plan.  What do you want to do with your business?  Do you want to grow hemp? Sell hemp and hemp-derived products? Conduct research and testing on hemp and hemp-derived products?  Who is your target market?  What sets you apart from everyone else?  Depending on what you want to do, there are myriad business and legal implications on both a state and federal a level that need to be taken into consideration to get you from planning to profiting.  (Depending on what you plan to do, there may be local zoning and regulatory concerns to consider as well.)

   Next, you need to decide what type of business entity is right for you and how you’re going to operate that business.  Choosing the right type of business entity depends on a multitude of factors, including corporate structure; tax treatment; limitations on liability; allocation of income, loss, deductions, and credits among the owners; and many more. Once you’ve decided on the type of entity, you need to determine how that entity will operate.  Typically, businesses have some form of agreement among its shareholders/members that spells out all the details of how the business will be managed and operated by its owners, how profits and losses will be allocated and distributed, and whether the members/managers have the right to make capital calls to the shareholders/members.  These high-level crucial steps set the foundation for any successful venture and ensure that you are protected and making the most of your investments for years to come.  Consulting with an attorney and business planning professionals will help identify the best type of business entity for your goals.

2. Consider Patent/Trademark/Domain Name Issues

   Do you have a catchy name or slogan for your future business? Working on a neat logo? Any business looking to build a brand should consider intellectual property assets and enforcement.  Cannabis brand owners are no exception. Surely, you’ll be working hard on making your business a success through building brand recognition and goodwill and you should make sure that no one else capitalizes on your hard work. However, the ability to obtain a patent or trademark registration can become more complicated for cannabis businesses.  You’ll want to work closely with an intellectual property attorney who is well-versed in the United States Patent and Trademark Office’s position on cannabis registrations.

3. Considerations for Hemp Growers/Distributors - Licenses 

Once the Pilot Program regulations are promulgated, there will likely be an accreditation or certification program that will allow individuals and businesses to grow hemp. This will likely require a lengthy application process and, if successful, strict compliance with extensive municipal, state, and federal rules and regulations. Of course, record-keeping and a robust compliance program will be essential. Setting the proper foundation through careful business planning and building a team of professionals to assist will help the application process go more smoothly.

The list doesn’t end there. There are a multitude of other factors must be taken into consideration, too many to fit into a single blog post.  For the best chance at success, any person or business looking to enter the market place should consider consulting with an attorney familiar with applicable laws and regulations.