Do I Need an LLC for My CBD Business?

So, you’ve decided to get into the CBD game. Congrats! That’s an excellent business decision, especially if you’ve dabbled in CBD use yourself. Many people choose to start a CBD-based business after using some CBD products and seeing how effective they can be. While the United States hasn’t approved THC use on a federal level, the Food and Drug Administration (FDA) has approved certain uses of its non-psychoactive cousin—the cannabinoid called CBD. Ever since the 2018 Farm Bill passed, it’s been a hot topic in many realms. People take CBD capsules for sleep, use CBD oils and creams to alleviate physical symptoms, and even turn to topical CBD salves to treat acne.

You wouldn’t be wrong to view this as a business opportunity waiting to happen. That said, if you’re new to the business world, you might have some questions about how to get started. For example, can you run the finances through your bank account, or should you get a business account? Do you need an LLC (Limited Liability Corporation), or can you get away with a DBA (Doing Business As) certification? If you think you’ve got the whole package when it comes to CBD innovation and just need some business-related info, read on.

If you’re serious about owning your own business, get legal.

The simple truth about running an independent business is that you need to define your business structure to do it right. You can get away with a DBA if you’re only selling a few hemp-based products to friends and family, but if you plan to expand your brand, you need to be able to open a business account at the bank, and you can’t do that without an EIN (Employer Identification Number). An EIN also allows you to file taxes as a business; without an EIN, you’re filing all your business taxes on your social security number. While you can get an EIN with a DBA-backed sole proprietorship, a limited liability company or corporation will offer greater legal protections and decreased personal liability as you pursue your business dreams.

Read Also: What to Consider When Choosing a Registered Agent

Maybe you want to sell a line of CBD pain patch options, the kind that uses menthol and hemp extract to relieve inflammation and discomfort caused by arthritis. In that case, take a leaf out of the book Mary’s Medicinals are using. This top brand successfully sells their CBD patches (which are a great alternative to dangerous opioid medications, by the way) due, at least in part, to their parent company’s designation as an LLC. Whether you’re selling CBD patches, capsules, or tinctures, registering as an LLC will give you and any fellow business owners a leg up in your new endeavor.

If you want to avoid the legal rigmarole, there may be other options.

One way to start your own business without all the filing fees and legal red tape is to become a franchisee. A franchise opportunity means that you’re adopting the business model of an existing business, and it means the business isn’t completely your own business. That said, franchise owners have nearly complete autonomy and can really make their franchises fly if they manage them correctly. It’s also easier to maintain a good work-life balance as a franchisee, which can have a big impact on your quality of life. If you’re in a state like New York, where hemp is legal on all counts and CBD opportunities abound, joining the ranks of franchise owners might be the best way to start a new business without becoming an LLC. Of course, prospective franchisees still have to pay a franchise fee, but it’s still less of a hassle.

Becoming a business owner is a great idea, but you have to be smart about it. Consider the above options and be sure to make the right decision for your specific needs. When in doubt, consult a lawyer or other expert to help decide whether forming an LLC, operating a franchise, or taking an alternative route to being your own boss in the CBD industry is the best path for you.