10 Legal Considerations When Starting a Hemp Business in Tennessee

Cannabis Industry News Alert

Client Alert

Author(s) ,

Tennessee’s hemp industry is growing fast, and you want in on the action. You have your big idea and a business plan ready. But at some point, 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 unique legal and business issues that impact hemp companies in Tennessee and beyond. Our multidisciplinary team of attorneys helps businesses identify and mitigate risk and recognize opportunities for sustainable growth. In our experience, here are 10 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, and the benefits are substantial for both you and your business. In Tennessee, this process runs through the Tennessee Secretary of State’s Office, and Tennessee law sets forth specific requirements for new business formation and operation.

Attorneys on our Corporate and Securities team are experienced in working with our Cannabis Industry team to form the right corporate entities to meet hemp companies’ needs.

2. Obtain All Necessary Licenses to Conduct Your Business.

Licenses are essential in a highly regulated industry. Hemp companies may need different licenses from different levels of government in certain jurisdictions. In Tennessee, you must obtain a license from the Tennessee Department of Agriculture to grow hemp. Processing hemp generally does not require a hemp-specific license, but if you are making a hemp product for human consumption (like gummies), you must be licensed as a food manufacturing facility. No hemp-specific license is required to sell hemp products at the retail level.

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

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.

Attorneys on our Emerging Growth CompaniesPrivate Equity, and Venture Capital teams have the experience to help your hemp company get the capital it needs for sustainable growth.

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.

Attorneys on our Cannabis Industry team couple their legal experience with industry-specific knowledge to provide you with practical and strategic contract advice.

5. Understand What the Law Allows for Hemp.

Even though hemp is legal at the federal level, the hemp industry is still highly regulated by various levels of federal, state, and local government. For example, the Food and Drug Administration prohibits the introduction of hemp and hemp-derived products (including, for example, CBD) into certain products at the federal level. States and some municipalities have their own hemp-specific rules and regulations. The U.S. Department of Agriculture recently approved Tennessee’s hemp plan for the 2021 growing season. 

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

6. Protect Your Intellectual Property.

Intellectual property is the most valuable asset of many companies. 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.

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 banking services is a recipe for failure.

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

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 that’s exactly what you can expect in a highly regulated industry. Let our tax professionals do their part while you focus on growing your business.

Our Tax attorneys can help guide you through cannabis-related tax issues, as well as other tax matters commonly faced by emerging companies.

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. Like most states, Tennessee law prescribes a variety of requirements that employers must meet related to issues like wages, health inspections, and employee benefits. This is one place where it definitely does not pay to be penny-wise, pound foolish. Get it right on the front end.

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, 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.

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 JournalLaw360, 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.