The federal government considers marijuana a Schedule I drug under the Controlled Substances Act, making it illegal for interstate commerce, even as dozens of states legalize it for adult use. Industrial hemp, on the other hand, was recently removed from the Controlled Substances Act altogether, opening the way for its cultivation and harvest in the U.S. for the first time since 1937.
The potential of the CBD industry has prompted many people to explore how they can launch a CBD business. The industry is not without its challenges, though, especially surrounding the evolving legal landscape, but the opportunity is significant.
Hemp CBD vs. cannabis CBD
[If you’re looking for more details on how to start a business and all the steps you need to take, see our step-by-step guide to get started.]
CBD is one of more than 100 cannabinoids, which are compounds found throughout the cannabis and hemp plants. The most famous cannabinoid is undoubtedly tetrahydrocannabinol (THC), which is responsible for the intoxication associated with the consumption of cannabis. CBD, however, does not produce an intoxicating effect; instead, it offers potential therapeutic and health benefits, though research into its potential medical applications is ongoing.
Did you know? The key difference between hemp CBD oil and CBD products derived from cannabis is THC.
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In order to register for taxes you will need to apply for an EIN. It’s really easy and free!
Is this Business Right For You?
If you grow your own hemp and turn it into CBD oil, then your costs to start will be low. You can begin selling your product online with little more than a website made for a few hundred bucks with Squarespace and commercial liability insurance in case a customer sues you after using your product. You can also consider partnering with an established farmer to grow their business and your own.
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.
Although CBD oil does not produce psychoactive effects like the THC found in marijuana, the two products are associated closely enought that the production and sales of CBD are currently in a legal grey area. Before starting your CBD oil business, it is important that you make sure to read up on both state and federal laws regarding CBD products. This will help ensure your business functions smoothly and avoids legal trouble.