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10 Legal Considerations When Starting a Hemp Business in Alabama 

Published: October, 2020

Submission: October, 2020

 



So, you want to start a hemp company in Alabama. You have your big idea and a business plan ready, but 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 in Alabama and beyond. Our multidisciplinary team of attorneys helps businesses successfully identify and mitigate risk and recognize opportunities for sustainable growth. In our experience, here are the 10 things to consider when starting a hemp business.


1. Submit Your Application Before November 30.


The Alabama Department of Agriculture & Industries has announced that applications for the 2021 growing season will be accepted from October 13 through November 30, 2020, at 5:00 p.m. CST. Anyone wishing to grow or process hemp in Alabama in 2021 must submit an application, regardless of whether you have previously grown or processed hemp in Alabama. Don’t miss out!


Our Cannabis Industry team can assist in preparing and submitting your application.


2. 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. In Alabama, this process runs primarily through the Alabama Secretary of State’s Office, and Alabama law sets forth very specific requirements for new business formation and operation.


Attorneys in our Corporate and Securities team are experienced in working with our Cannabis Industry team to form the right corporate entity to meet your needs.


3. 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. And each county or municipality is likely to require one or more types of business licenses. No item on this list poses a greater existential risk to your operations than the failure to obtain appropriate licenses.


Our Cannabis Industry team stands ready to advise you on all of your licensing needs.


4. 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.


Attorneys in our Emerging Growth Companies, Private Equity, and Venture Capital teams have the experience to help your hemp company secure the capital needed for strategic and sustainable growth.


5. 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.


Our Cannabis Industry team stands ready to advise you on all of your contracting needs.


6. 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 currently prohibits the introduction of hemp and hemp-derived products (including, for example, CBD) into foods and beverages.


Don’t get tripped up over the rules of the road. Our Cannabis Industry team is ready to advise you on what you legally can and cannot do with your hemp operations.


7. 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.


Our Intellectual Property attorneys are prepared to protect your company’s IP assets at the federal and state level.


8. 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.


Our Banking and Financial Services attorneys have the experience and connections to help you establish the banking relationships needed so your company can conduct business smoothly.


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. Like most states, Alabama law prescribes a variety of requirements that employers must meet related to issues such as wages, health inspections, and employee benefits.


Our Labor and Employment lawyers are an invaluable resource for navigating local, state, and federal employment laws.


10. Get the Right Insurance.

All businesses should have appropriate insurance coverage and surety bonds, but hemp companies will quickly realize that not all insurance or surety companies will write hemp insurance policies or issue bonds. 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.


Attorneys on our Insurance team can advise you on a range of coverage options.


* * *


Bradley lawyers have the breadth of experience to provide full-service representation to our hemp clients, including litigation, if necessary. As strategic advisors, we give each client the practical counsel they need to make the best decisions for their businesses.


And our team is a leading voice in the hemp sector. We have presented on hemp issues at conferences around the country. Our work has been featured in the National Law Journal, Law360, and the Westlaw Journal. And we have been quoted in an array of legal and mainstream publications, from Law360 and Super Lawyers to the Atlanta Journal-Constitution, the Associated Press, and ABC News.


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