While traditionally a taboo product in Western society in the 20th century, cannabinoids such as CBD have been thoroughly studied during the 21st century to determine their health benefits. Currently, the market for CBD products is soaring. So how does one become a legal distributor of CBD?
If the CBD being distributed is hemp CBD and not cannabis CBD, it can be legally stored and sold in accordance with the Controlled Substances Act. Once legally registered, a CBD business has all the usual challenges of starting a company, such as plans regarding marketing, insurance, location, and marketability.
The most important aspect of becoming a CBD distributor is ensuring that you are legally registered to sell CBD products. It is not legal to sell these products in some US states. Therefore, a business plan needs to be outlined and implemented to ensure compliance.
What Are the Legal Requirements for Selling CBD?
The 2018 Farm Bill is federal legislation that legalized industrial hemp and hemp extractions such as CBD oils. This doesn’t mean, however, that there aren’t statutory regulations that need to be complied with should you decide to distribute CBD.
The 2018 Farm Bill, which removed hemp from being defined as marijuana in the Controlled Substances Act, means that hemp shifted from being a narcotic and instead fell under the authority of the Food and Drug Administration.
Consequently, the FDA is in the process of finalizing regulations at the federal level. This means that states have significant control over the use of CBD and its application in products.
However, despite state control, this grey area at the federal level means that most distributors are uncertain how to market their products and whether FDA approval is needed if products are infused with CBD.
It is recommended that distributors err on the side of caution. They need to make sure not to advertise any supposed health benefits of CBD in their marketing campaigns.
It is also essential that distributors get FDA approval before purchasing or selling any CBD products.
With this information in mind, new distributors should opt to acquire distribution licenses at both a state and federal level with the assistance of lawyers.
It is important for CBD businesses to ensure that any products sold are sourced from reliable CBD suppliers.
What Steps Should Be Taken To Become a CBD Distributor?
CBD distribution is a growing industry valued at billions of dollars, and increased consumer interest in CBD products has led to unprecedented growth and competition in the industry.
Despite this accelerated growth, careful business strategies need to be employed if you want to turn a profit.
Here are five simple steps CBD businesses should take to give themselves a competitive edge in the CBD market:
1. Create a Business Plan
Before embarking on a CBD business venture, it is vital to consider your long- and short-term goals, the costs of operating the business, and how the business will be run.
Whether or not your store will operate in retail, online, mobile, or home spaces will determine your initial costs.
The costs include but are not limited to buying stock, advertising costs, employee salaries, purchasing equipment, and rent.
A minimum of $5,000 should be set aside to form a small CBD distributing operation. However, more capital is advisable in case of emergencies.
Consequently, it is vital to consider how long it may take to see a return on investment and whether you have funds available to survive the initial phase of establishing a business.
Know your market and how you wish to reach potential customers. Given the confusion about whether or not CBD products are legal, there is an ongoing stigma around CBD in some communities. An educational website, social media page, or printed pamphlets are recommended for providing updated information about CBD to potential customers.
2. Choose a Name That Stands Out
When choosing a name for your business, it is important to select a name that illustrates your expertise in CBD distribution. It should also speak to your target audience.
You should choose a name that meets the standards of online analytics and search engine optimization. Fortunately, Google AdWords and GoDaddy provide data that can help you find a suitable and catchy name.
3. Get a Business Bank Account
A business bank account allows you to keep your business and personal expenses separate, which is essential for tax purposes.
Having a business bank account is also important because it allows you and any finance experts to easily determine the financial well-being of your company.
4. Ensure You Are Legally Registered
Even though selling CBD products is legal, it is important to comply with both state and federal rules as determined by the FDA.
Standard rules and regulations regarding the establishment of a business need to be met, including but not limited to:
- Registration of the business
- A standard reseller’s license
- A code of conduct
- Employment contracts that comply with all state and federal labor laws
- Any other by-laws that need to be complied with as per your city or town’s regulations
5. Buy Products From Reputable CBD Suppliers
Due to the popularity and variety of CBD products on the market, there are thousands of distributors globally from which you can source products for distribution.
When embarking on a partnership with a CBD supplier, make sure to sign a legally compliant and enforceable contract between your business and the supplier.
This contract should include payment options, products bought, the number of products purchased, and the method of legal negotiation. This information needs to be documented should a dispute arise.
The following standard buyer/seller legal requirements related to the contract and legal and professional considerations must be determined before you enter into a contract with a CBD supplier:
- The legitimacy and reputation of the CBD supplier
- The quality of the products on offer and whether they can be bought for a fair price while complying with federal and state laws
- The company’s logistics networks and the accompanying customer reviews (with special attention to distributor reviews rather than customer reviews)
- The ease with which the supplier can be reached via legitimate social media and communication channels
While it is always daunting to start a business, particularly in a new and uncertain market, if the correct legal and business precautions are taken, becoming a CBD distributor is a fantastic opportunity to turn a profit in a growing industry!