A new year brings self-reflection and considerations for self-improvement. Likewise, stepping back and reflecting on the health and status of your hemp or cannabis business can bring to light small, fixable issues that could help your business avoid major headaches and loss of money.
Annual business reviews, or “annual check-ups,” typically include a detailed history of the past year in an effort to determine how to update corporate records, draft annual minutes, analyze whether the business is acting within its operating documents, and renewal of statuses and licenses with state and federal agencies.
Reason 1: Adhering to Regulatory Requirements. Like all highly regulated industries, having your corporate records and designations up to date is vital to being in compliance with state and federal licensing requirements. For example, individual growers, certain upper level managers, and corporate officers must undergo a background check prior to receiving a Minnesota hemp license to ensure such business representatives have not been convicted of a controlled substance-related felony. This obligation continues as long as the business or individual holds the hemp license. When business management or members change, the predominant amount of attention is rightfully placed on moving the day-to-day business forward, but a hemp licensee may be out of compliance if background checks are not conducted on new individuals. An “annual check-up” may catch those issues that fall through the cracks, such as ensuring individuals are correctly and clearly identified to determine whether additional background checks are required, protecting the hemp license from being out of compliance.
Reason 2: Maintaining a Personal Liability Shield. One of the most vital reasons for forming a business entity is to create a barrier or shield against your personal liability. Your business is your business – not you. By maintaining corporate formalities, your business continues to be a separate legal entity from you. Especially in newer, expanding industries like cannabis and hemp, ensuring the separation between you and your business is especially important. If those formalities fall to the wayside, the line between you and your business may begin to blur, putting you at risk for personal liability for your business’s debts and liabilities. As the ebbs and flows of the hemp and cannabis industries continue, ensuring your business is a separate entity from you will provide greater protection from personal liability.
Reason 3: Providing Lenders with Appropriate Business Documentation. At some point, your hemp or cannabis business may need financing to expand your business. Some lenders remain a bit leery about dipping into the hemp or cannabis industries. Having your corporate business documents in order and current may provide your lender with confidence in your business as you seek finance. In addition, your business may experience a delay in receiving financing if the business documents are out of date and need to be made compliant. Keeping everything current can create a smoother lending process.
Undertaking an ounce of prevention to ensure your hemp or cannabis business is up to date and compliant is worth more than a pound of cure. Having your hemp or cannabis business go through an “annual check-up” can be a smooth process and ensures your business continues to thrive and grow.