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CBD Entity Formation: 7 Words to Avoid when Naming your LLC

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7 Words to Never Use in your Cannabis Company’s Entity (LLC)

If you’re considering starting a cannabis business, there are some words you need to avoid when creating your LLC or entity name. You might be surprised to find out the number of companies that will shut you down if they find out you’re in the cannabis industry because they see these words on your business applications. Don’t learn the hard way like I did in 2016. Things have come a long way, but it’s better to be safe than sorry.  Here are the 7 words you should never use in a CBD Company’s Entity Name, (LLC or Inc.).

Words to Avoid in your LLC or Inc. Entity Name

  1. CBD

  2. Hemp

  3. Canna

  4. Green

  5. Delta

  6. THC

  7. Bud

Woman covering mouth with one hand and pointing to her right as if something is wrong

What is an Entity Name?

An Entity Name is the name of your LLC or Corporation.

Does your Entity Name need to match your Brand Name?

No.  It does not.  However, I would make it something similar and keep the terms general. 

Why choose a different entity (LLC, Inc.) name when you own a CBD or Cannabis Company?

Unfortunately, there are still industries that do not want to work with cannabis and CBD companies.  During your application process to open accounts with these companies, you will have to put your Entity Name.  And if your entity name tells that you’re in the cannabis industry, you may get denied.

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Problems you may encounter if you use Cannabis Words in your LLC

No doubt if you’ve started a CBD company already, you know how challenging this industry can be.  Most likely you’ve already been shut down by a merchant account, bank account, payroll company, or advertising platform just because you sell CBD products.  There are so many pitfalls in the cannabis industry, a lack of knowledge can cause a world of hurt.  One way to minimize these issues, aside from reading all of our Cannabis Business Blogs, is to start your corporate identity off right by naming your LLC something general that excludes any cannabis words.  Doing this can help you avoid several problems starting your CBD business.

 

Trouble Opening a Bank Account

Most banks won’t let you open an account if they know you are a cannabis company.  If you walk into Wells Fargo and try to open a business bank account for Big Budz LLC, they will most likely send you packing.   Instead, name your entity BB LLC, and you won’t have a problem. 

 

Trouble Signing up for Payroll Services.

This has the same problems as banking above.  Most payroll companies, or anything having to do with money have a problem with cannabis companies.  It’s important that you anonymize that part of your business in a general entity name.

 

Negative stigma associated with Cannabis.

It’s sad, but some people still think CBD, hemp, and marijuana are the devil, the gateway to all that is evil.  Your LLC or Corporation, in most states, is public record.  So, think about how that can affect you now, or in the future, with other people who can easily find that information.

 

May limit your company to Cannabis.

Naming your company entity or brand using a cannabis associated word can box you in to one industry.  For example, let’s say your company name is “Blue Water CBD” and you decide you also want to sell protein powder.  It would be better if you initially named your company just “Blue Water”.  Then you can break down different divisions with DBAs.

 

May Red-Flag State Regulators.

If you’re not properly licensed or set up to pay state taxes correctly, you’ve just made it extremely easy for them to find you.

 

Will put your information on marketing lists

You will instantly go onto email marking lists because you’ve told the marketing companies exactly what industry you are in.

 

My Jeopardize future business opportunities

A future business opportunity outside of the cannabis space may be compromised if someone sees you’ve owned a cannabis company.  Maybe it’s a government contract or an opportunity with a Church or non-profit that does not want to be associated with anyone who markets or sells CBD or other cannabis products.

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Conclusion

No matter what type of cannabis company you decide to start, it’s critical that you take proper precautions when choosing an entity name for your business. Keep in mind the seven words listed above as well as any other terms which could potentially raise red flags when applying for accounts with banks and merchant processors down the road. With just a bit of extra effort before setting up shop officially now can save yourself time and money later! Good luck!

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