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What You Need to Start Your Edibles Business

If you’re thinking of starting a cannabis edibles business, there are a few hurdles you’ll need to get over before you’re licensed and ready to go. The experts at CLE can break down exactly what you’ll need to start your edibles business.

The first thing to be aware of is the requirement for a separate building to manufacture edible cannabis products. If you already have a business that manufactures regular, non-cannabis food products (including beverages), then processing cannabis at the same site can only be done if production, packaging, labelling, and storage of cannabis products and production, packaging, and labelling of food products are conducted in separate buildings.

This requirement applies to all classes of cannabis (not just to edible cannabis). This precaution is put in place to help minimize the risks of cross-contamination of Canadian food products with cannabis, as processes will be completely separated and isolated. This includes separate personnel, equipment, production rooms, HVAC and air filtration.

The requirement for separate buildings ensures there are no mix-ups, mislabelling, or confusion among employees. While this requirement is a key strategy to mitigate against the food safety and public health concerns associated with multiproduct manufacturing facilities, it may be burdensome and could pose a barrier for your business if multiple buildings are required at your site. If you are not manufacturing regular, non-cannabis food products, and will solely have an edible cannabis business, then one building at your site will suffice.

The next step is to consider the type of licence you’ll need to secure. A Processing licence is required to manufacture and package cannabis-based products such as edibles. Currently, Health Canada offers two variations of the Processing licence; Standard Processing and Micro-Processing.

The Micro-Processing Licence is generally reserved for smaller manufacturers, as it only permits up to 600 kg of dried flower (or the equivalent) to be handled each year. This option is ideal for businesses that do not intend on expanding their market reach in the near future.

The Standard Processing licence functions much like the Micro-Processing Licence, but there is no limit on the amount of cannabis product your business can handle each year. You can manufacture, sell, and distribute an unlimited amount of cannabis with this licence. Both Processing licences allow for the sale and distribution of cannabis products to other licence holders, or to provincial and territorial retailers.

Furthermore, if you would like to sell your packaged cannabis products directly to medical patients, you will need a Sale for Medical Purposes licence.

An important part of securing a Processing licence is retaining the services of one individual to serve as a Quality Assurance Person (QAP) in your organization.

Such a person would need to have the training, experience and technical knowledge related to the requirements of Parts 5 and 6 of the Cannabis Regulations. Your QAP must have previous work experience in a quality control or quality assurance position at a site where regulated products are manufactured.

When screening resumes/CVs, you should look for an individual that has 5-10+ years of experience in these types of positions (head of quality assurance, quality control manager, director of quality, etc.). They should also have familiarity with regulated industries such as food, pharmaceuticals, natural health products or medical devices.

Another important point to consider is that your QAP should have applicable experience which relates to the product classes and activities under your cannabis licence. For example, if you are making edibles, you will need an individual who has experience with Food Safety and Preventive Control Plans.

Speaking of Preventive Control Plans (PCPs), you’ll want to ensure you have a solid and well drafted plan in place for your edibles business. Under the Cannabis Regulations, anyone who holds a licence for processing (standard or micro) and conducts activities in relation to edible cannabis must prepare, retain, maintain and implement a written Preventive Control Plan for any activity they conduct with the cannabis, or anything that will be used as an ingredient in the production of the edible cannabis.

A Preventive Control Plan is a written document that demonstrates how hazards to your cannabis product are identified, prevented, eliminated or reduced to an acceptable level. The content of your PCP depends on the activities you conduct at your site, and may include elements relating to packaging, labelling, grading, standards of identity, and food safety.

A PCP will allow you to identify and describe the biological, chemical and physical hazards associated with the cannabis product (edible), document how you intend to control those hazards, provide the information you used to develop your plan, and demonstrate through records that you have implemented your plan. PCPs require expertise in quality assurance. Therefore, your PCP must be reviewed and acknowledged by your Quality Assurance Person (QAP), who oversees the production processes and can monitor the safety of your product(s).

So there you have it! The items mentioned above are key to running a successful and compliant cannabis edibles business. Contact us today to discover how we can license and legalize your cannabis business to meet federal or provincial regulations.

How we can help you

At Cannabis License Experts, we provide you with the guidance to plan your cannabis business, acquire funding, navigate the legal requirements, and acquire the appropriate licence for your operations. As the Canadian cannabis industry develops, more and more licensed producers will be needed to meet the demands of consumers.

Cannabis License Experts offers support from day one of starting your cannabis business, including strategic planning, floor plan preparation, site audits, SOPs, Preventive Control Plans (PCPs) and more.

Our Edibles Compliance division can provide you with a solid plan for your edibles business to help get your products on store shelves.

If you're thinking of starting a cannabis edibles business, there are a few hurdles you'll need to get over before you're licensed and ready to go. The experts at CLE can break down exactly what you'll need to start your edibles business.

What Are the Business License Requirements for a Cannabis Business

By Nikki Nelson , Customer Service Manager, BizFilings

Most businesses are subject to various licensing, permit, and registration requirements. These are put in place for public safety, tax, or other reasons.

Because the cannabis industry is heavily regulated, licensing for cannabis businesses is particularly complicated. Compliance requirements not only vary from state to state, they can change depending on your business category (cultivation vs. retail, for example) and which city or county you’re planning to operate in.

In order to operate legally, it is essential that you meet all necessary business license , permit, registration, and other requirements. Here are some licensing basics you should know about before you plan to start up a cannabis business.

Basic Legal Requirements

No matter what type of business you’re interested in, there are basic legal requirements you will need to follow. Although these may vary depending on your location and industry, here are some common requirements.

  • Business formation: Incorporating your business or forming an LLC with the state is important because it protects your personal assets from any potential debts and liabilities that arise from your business.
  • Tax ID number: This is your federal tax identification number, also called an employer identification number (EIN). The IRS uses this number to identify your business for anything related to taxes.
  • General Business License: This license, renewed annually, allows you to legally operate in your city or county. (Note: This license does not give you the authorization to operate a cannabis business.)
  • DBA Filing: Your DBA (Doing Business As) allows you to conduct business using a name that’s different than the name included in your incorporation papers.
  • Sales Tax Permit: This is for retailers of physical or digital products or services, both online and offline. If you have to collect state and local sales taxes, you need this permit.
  • Permits: Different businesses need varying permits. For example, you’ll need one with the health department if your business requires food preparation. Businesses may also need permits for signage, zoning and land use.

Note: A home-based or online business often requires the same level of compliance as a traditional bricks-and-mortar commercial establishment.

Business License Requirements for Cannabis

As with general licensing requirements, business license requirements for cannabis vary greatly from state to state and between municipalities. For example, while some states hold an open application period and give out many licenses, others states are more restrictive and can limit the number of licenses issued to single digits.

There are also restrictions related to residency and background (those with previous convictions may not be eligible), which can apply to owners, contractors and employees.

Which department is responsible for licensing?

In some states you may need to file your organizational paperwork with the Secretary of State’s office, but in many cases you will need to work with local licensing agencies.

In Nevada, the Department of Taxation is responsible for licensing and regulating retail marijuana businesses and the state’s medical marijuana program.

In California, potential business owners can apply to one of three agencies:

Bureau of Cannabis Control: This is one of the main agencies for regulating commercial cannabis licenses for medical and adult-use cannabis in California. They’re licensing is specific to certain businesses, including retailers, distributors, testing labs, micro-businesses, and temporary cannabis events.

CalCannabis Cultivation Licensing: CalCannabis operates as a division of the California Department of Food and Agriculture (CDFA), and is responsible for licensing businesses that are cultivating medicinal and adult-use (recreational) cannabis. They also manage the track-and-trace system used by the state to record the movement of cannabis product through the distribution chain.

Manufactured Cannabis Safety Branch: This division of the California Department of Public Health (CDPH) regulates those in the cannabis manufacturing business. This includes anyone making and selling cannabis-infused edibles for both medical and nonmedical use.

How licensing differs based on business category

As a cannabis business, you’ll be regulated based on a variety of factors. One of them is category of business—whether you’re cultivating, selling, manufacturing or investing. Here are a few examples of how licensing differs based on business category.

  • Cultivation: Growing cannabis is usually heavily regulated. An operation like this will require a significant initial investment and a vigorous site plan review, and practical and proven horticultural knowledge.
  • Retail: As a retailer, some states may require that you’re able to provide adequate product and building security in place. They may also limit the amount of product that can be sold to one individual and restrictions on your pricing. For example, Nevada requires cannabis business owners to have at least $250,000 in liquid assets that are “unencumbered and can be converted within 30 days after a request to liquidate such assets.” When applying for more than one retail license, those available funds need to be available for each establishment.
  • Edibles: When manufacturing edibles, some states require that you cook and maintain your product in a commercial kitchen. You may need to produce the cannabis butters and oils that are used in your product on site as well.
  • Investors: Those who want to invest in cannabis businesses may need to follow specific regulatory and statutory provisions as well. In Colorado, there are detailed requirements for anyone interested in legally investing in a marijuana business within the state.

Licensing for employees

There are also licensing requirements for employees working for a cannabis business. Some states require that any employee be licensed to work for a cannabis-related business, in addition to meeting standard state requirements concerning employees for any type of business.

Nevada requires all employees or volunteers of a cannabis business to apply for and receive a registered agent card. According to Nevada.gov, this agent card requires a background check and is issued by the state.

Colorado has two types of licenses that stem from the MED Occupational License. This allows holders to work for MED licensed Medical and Retail Marijuana facilities or for vendors that provide services to MED Medical and Retail Marijuana business licensees. The two categories of this license, as explained by Colorado.gov, include –

Key Employee: This is necessary for any employee who’s making operational or management decisions that directly impact the business. This might be the master grower, the person who’s determining what or how much of a particular strain to produce.

Support Employee: This is required for any employee that works within the business but isn’t involved in making operational decisions. For example, a “budtender.” As such, the majority of occupational license holders are in this category.

Pay close attention to local regulations

While running a cannabis business may be legal at the state level, you may encounter roadblocks at the local level.

For example, California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) gives local jurisdictions the right to control what activities are permitted in their jurisdiction. Some cities require a local license for approval, while others may prohibit your business activities altogether.

This is the case in the city of Mill Valley. Votes were 74 percent in favor of Proposition 64 (the 2016 voter initiative to legalize cannabis in California), yet the city is adhering to local regulations that strictly prohibit any commercial cannabis activities, including cultivation and selling.

Know Your Cannabis Licensing Regulations

It can be challenging to start a business in this highly regulated industry. It requires a lot of planning, knowledge and preparation to understand and follow all the legal requirements expected of you. Do your due diligence before taking your first step toward owning a cannabis business. Get acquainted with the rules, regulations, and requirements at the state, city, and even possibly, the county level.

After your business is established, you can expect ongoing legal obligations, such as licensing renewals and changes to existing rules and regulations.

Discover the business license requirements for a cannabis business, including basic legal requirements, which state department to work with, how licensing differs based on product category, & more. ]]>