Are you interested in starting a cannabis processing business in Kentucky? With the state’s new medical cannabis program, there are numerous opportunities for entrepreneurs. This guide will walk you through everything you need to know about obtaining a Kentucky processor license and starting a medical cannabis processing business.
Kentucky Processor License: How to Start a Processing Business in KY
Approved Activities for Kentucky Processor Licensees
Processor license holders in Kentucky are authorized to:
- Extract, process, and manufacture cannabis products from raw cannabis material.
- Package and label cannabis products for distribution to licensed dispensaries or other cannabis businesses.
- Conduct research and development to improve processing techniques and product formulations.
However, cannabis processors in Kentucky are prohibited from:
- Selling cannabis products directly to consumers.
- Operating in unauthorized locations or without adhering to state regulations.
Number of Processor Licenses Available
On July 1, 2024, Kentucky will begin accepting applications for the initial medical cannabis processor licenses. The state will initially issue up to ten (10) Kentucky processor licenses.
The Cabinet for Health and Family Services will review the need for issuing new licenses on a quarterly basis starting January 1, 2025. The number of licenses issued will depend on factors such as market demand, population, and geographic distribution.
Regulations Relevant to Kentucky Processors
Processors must comply with several regulations to operate legally. Below are the cannabis processor-related regulations:
- 915 KAR 1:001 Definitions
- 915 KAR 1:010E Initial and renewal applications for cannabis business licenses
- 915 KAR 1.020E Cannabis business licenses
- 915 KAR 1:040 Processor
- 915 KAR 1:080 Transportation and delivery of medicinal cannabis
- 915 KAR 1:090 Advertising
- 915 KAR 1:100 Packaging and labeling of medicinal cannabis
- 915 KAR 1:110 Medicinal cannabis testing
In short, Kentucky processor license applicants must comply with:
- Criminal background checks for prospective employees.
- Employees must be at least 21 years old and free of disqualifying felony convictions.
- Processors cannot hold management roles or financial interests in safety compliance facilities.
- Applicants must meet qualifications detailed in the relevant administrative regulations.
Application Requirements for Kentucky Processor License
To apply for a processor license in Kentucky, applicants must meet several detailed requirements as outlined by the Cabinet for Health and Family Services. Here is a summary of the key application requirements:
Legal and Business Information:
- Provide the legal name, business type, trade name (if applicable), mailing address, federal tax ID number, website, email, and phone number.
- Confirm the entity is registered with the Kentucky Secretary of State and in good standing.
Ownership and Management Details:
- List the names, addresses, dates of birth, and resumes of principal officers and board members.
- Disclose any individual or entity with at least 10% ownership interest in the business.
- Include details of any parent companies and their ownership percentages.
Location and Site Plans:
- Submit the proposed location’s physical address and GPS coordinates.
- Provide a contingent agreement for property sale or lease, or an existing deed or lease.
- Include a detailed site plan for the proposed business.
Financial Information:
- Show proof of capital requirements for Kentucky processor license ($150,000).
- Submit a financial plan, including budget, cash flow planning, and debt management.
Compliance and Background Checks:
- Conduct criminal background checks on prospective employees.
- Ensure no employment of individuals under 21 or those with disqualifying felony convictions.
- Disclose any felony convictions of principal officers or board members and any past business non-compliance issues.
Operational Plans:
- Provide detailed plans of operation addressing:
- Security
- Employee training
- Transportation
- Storage
- Labeling
- Inventory management
- Prevention of unlawful diversion of cannabis
Additional Documentation:
- Include business entity formation documents, such as articles of incorporation or bylaws.
- Provide a timeline for starting business activities and any management service agreements.
- Ensure all required attestations and acknowledgments are included and notarized.
For a complete list of requirements and further details, refer to the full administrative regulation documents, or schedule a call with our Kentucky cannabis consultants to have your questions answered.
Fees & Costs for Processors in Kentucky
The costs associated with obtaining and maintaining a Kentucky medical cannabis processor license include:
- Application Fee: $5,000
- Initial Licensing Fee: $25,000
- Annual Licensing Fee: $15,000
- Capital Requirements: $150,000
One key thing to note is that you must show proof of the capital requirement to qualify for a processor license. This includes documentation of sufficient capital available to the applicant, either on deposit or through an extension of credit from one (1) or more financial institutions.
How to Apply for a Kentucky Processor License
Step 1. Familiarize Yourself with Laws, Regulations, and Requirements
Start by understanding the legal framework governing cannabis processing in Kentucky. Review the relevant regulations to ensure compliance and preparedness for the application process.
Step 2. Form a Business Entity
Establish a legal business entity such as a corporation or LLC. Register your business with the Kentucky Secretary of State and ensure it is in good standing.
Step 3. Engage a Consultant
Hiring a cannabis consultant can provide invaluable guidance throughout the application process. At Quantum 9, our experts have extensive experience in the Kentucky cannabis market and can help you navigate the regulatory landscape, prepare your application, and increase your chances of securing a license.
We’ve worked in the Kentucky medical cannabis space since 2013, and Senator Perry Clark of Kentucky has written a letter of support to Quantum 9, highlighting our expertise and dedication (found here).
With our deep understanding of Kentucky’s regulations and personalized approach, we can significantly enhance your chances of winning a processor license. Let Quantum 9 be your trusted partner in this journey.
Step 4. Secure a Location
Identify and secure a suitable location for your processing facility. Ensure that the property complies with local zoning laws and state regulations. Provide a contingent agreement for property sale or lease, or an existing deed or lease, along with a detailed site plan.
Step 5. Raise Capital (if needed)
Assess your financial needs and raise the necessary capital to meet Kentucky’s capital requirements for processor licenses. Documentation of your financial stability is a critical part of your application.
Step 6. Prepare Your Application
Gather all necessary documents, including:
- Operating plans
- Financial statements
- Business formation documents
- Proof of capital
- Ownership and management details
- Compliance and background checks
- Detailed site plans
- Additional required attestations and acknowledgments
Ensure all information is accurate, complete, and complies with the requirements outlined in the relevant regulations.
Step 7. Submit Your Application for Kentucky Processor License
Apply through the online portal, which opens on July 1, 2024. Pay the nonrefundable application fee and ensure all information is thorough and accurate to avoid any delays in processing.
Step 8. Await Review
The application review process is expedited but thorough. The Cabinet for Health and Family Services will review your application for completeness and compliance with all regulatory requirements. Be prepared to respond to any requests for additional information or corrections.
Step 9. Participate in the Lottery
If the number of eligible applications exceeds the available licenses, your application will enter a lottery system. This ensures a fair and transparent allocation of licenses. The Cabinet will publicly announce the date, time, and manner of the lottery.
Closing on How to Start a Kentucky Processing Business
Starting a cannabis processing business in Kentucky involves navigating a complex regulatory landscape. However, with careful preparation and adherence to state guidelines, you can successfully obtain a processor license and contribute to the growing medical cannabis industry in Kentucky.
For expert assistance and guidance, contact our Kentucky cannabis consultants today and take the first step towards your processing business.
