Essential Legal Checklist for Natural Product & Functional Food Companies

 

Are you wondering how to legally protect your natural product or food and beverage company?  The legal system can seem overwhelming when creating a new product or launching a brand.  Legal obligations and fees vary depending on business structure and location.  Consult a business attorney and a regulatory compliance expert prior to forming your operations structure to determine which requirements apply.  Use our natural product legal decision checklist to make informed choices and find resources.

1. Choose a business structure

This decision needs to be made first.  Your business structure impacts your business registration, tax obligations and personal asset liability.  So choose carefully.  Future structure changes may be limited by your location and cause tax penalties and other negative consequences.

Also choose a structure that offers the benefits and legal protections that are right for your business.  There are nine business structure choices with various considerations .  The most popular for new businesses are:  sole proprietorship, partnership and Limited Liability Corporation (LLC).

• Sole Proprietorship

Set up the most simple business structure if you’re a company of one (for now).  One person assumes liability for company profits and debts.

• Partnership

Choose this for businesses owned by two or more people.  This structure allows partners to share profits, losses and decisions.

• LLC

Consider this for small businesses seeking legal protection but simple formality.  The LLC structure shields owners from personal liability.

2. Register your company name

You put a lot of time and effort into choosing the perfect name for your business.  Protect it by registering it with the right agencies.  Each name registration is legally independent.

• Entity name

This is how a state recognizes your business.  It also protects your name at the state level.  Name requirements vary, but may include distinguishability (name must be different from other similar names).  For example, if the business name “Healthy Vitamins” is registered you may not choose “The Healthy Vitamins”.   Another common name protection is purpose-related.  For instance if your business is registered as “Henry’s Healthy Hub” then “Henry’s Healthy Properties” would likely be denied registration.  Consult your state’s government website for business name requirements.

• Trademark

Trademarks protect your business name at a federal level.  Visit the U.S. Patent and Trademark Office’s website for trademark searches and registration.  Trademark applications must meet legal requirements prior to registration.  To make this easy, consult an experienced trademark attorney.  Or apply yourself.  For help visit the U.S. Patent and Trademark Office’s step-by-step trademark filing tutorial.

• Domain name

This protects your business website address.  A domain name is the name used for your website, like “www.vitawater.com” or “www.gingergells.com”.  Domain registrars, like GoDaddy or Domain.com, register domains through the Internet Corporation for Assigned Names and Numbers (ICANN).

• Doing Business As (DBA)

Use this when the operating name of your company differs from the legal name.  For instance, if you’re “Joan Doe” conducting business as “Natural Vegan Products” you may need a DBA.  Some states require filing of this name to protect consumers.  So consult your state’s government website for DBA requirements.

3. Obtain an Employer Identification Number (EIN)

Businesses located in the USA or a U.S. territory need to apply for an EIN.  The IRS uses this free service to identify your business for tax purposes.  Don’t fall for scammers charging for this service.

You can easily apply online.  This requires a valid Taxpayer ID (SSN, ITIN, EIN) and the ability complete the application in one session.  You can’t save the application and return to it later so keep this in mind.  Also inactive sessions expire after 15 minutes.  Apply online now.  The system validates the information upon submission and an EIN is issued immediately.

You can also apply by fax, telephone and mail.

4.  Obtain business permits and licenses

Avoid one of the most common mistakes made by new business owners:  failing to obtain necessary permits and licenses. Make sure your business stays open by obtaining the required legal items.

• Business license

Contact your city to obtain a business license.  This grants you the right to do business in your city.  Other permits business permits vary.  Check if you need fire department, air and water pollution control, sign usage, and county permits.  Visit your local government website for more information.

• Sales tax license  

Companies selling taxable goods and services must obtain a sales tax license.  Requirements vary by state so check with yours.

• State licenses, certifications, and occupational permits 

Most states require people working in select professions to meet legal requirements.  So contact your state government office for a list of these professions.

• Federal business license

Some companies, like those selling meat products and fruits and vegetables, require this license.  Consult the SBA’s licenses and permits site for more information.

• Health department permit and FDA registration

Companies holding, distributing, manufacturing and warehousing food to customers or wholesalers need both of these  The Health Department will inspect your facility prior to issuing the permit.  The FDA requires that you register so that in the event of a serious adverse reaction to your product(s), a product recall, etc. your contact information in the system allows for a swift response to protect public health and safety.

5.  Draft legal documents for hiring contract workers

Do you plan to hire contract workers:  individuals providing goods or services to a company who aren’t a company employee?  For consultants, artists, web designers or other contract workers, make sure to obtain legal documents before work begins.  Contractors may be difficult to track down later.

• Nondisclosure / Confidentiality Agreement (NDA)

Protect sensitive company information by requiring contract workers to sign an NDA.  Click here for a sample Natural Product NDA / Confidentiality Agreement you can modify.  Have an attorney review your NDA to ensure validity.

• Proof of qualifications

Keep a copy of the contract worker’s application, resume, and other proof that they quality for your job.  Also make sure contractors realize they are filling out a contract worker application and not an employee application.

Verify their Tax ID and contact references to make sure the worker’s qualifications are valid.  Also, conduct a background check if the contractor is working with sensitive information or providing in-person services to customers.

• W-9 Form  

Independent contractors paid $600 or more per year need this form.  You will need the contractor’s taxpayer identification number, name and address.  The W-9 excuses your company from having to withhold payroll taxes for contract workers.  It also provides the information needed to create a 1099-MISC Form for contractors for the tax year.  The 1099 is the contractor equivalent of the W-2 form that you use for company employees.

• Written contract

Prepare a contract for each contract worker.  This protects your business if a dispute arises.  Make sure a contract includes the scope of the work, who owns the work, payment information, and an independent contractor statement.  Have both parties sign the contract.

Even though it might seem tedious, take the time to meet your legal requirements.  Remember business laws and regulations vary by industry and state.  Understand which requirements apply to your business, and consult an attorney for necessary guidance when needed.  If your company doesn’t have a legal team, don’t skip legal steps.  Type “free legal help” into your browser to find free or inexpensive help.  My browser returned over 2 billion hits on this search term.  Sleep easy at night knowing you and your company are legally protected.

 

Kendeyl Johansen, a tech geek and award-winning journalist, creates multimedia health and wellbeing content.

Susan Ulery utilizes her legal background plus 20 years of manufacturing expertise in the dietary supplement industry to help clients overcome regulatory challenges.

 

Essential GMP Knowledge For Nutritional & Sports Supplement Brands – 6 Questions

 

Hundreds (if not thousands) of laws and regulations, and best federal and local practices govern the natural products industry. Within that growing and changing body of regulations, current Good Manufacturing Practices (cGMP for supplements and GMP for foods) serve as a the key regulatory backbone for the industry.

GMP or cGMP are codified in 21 CFR 111 as a set of best practices for the manufacture, holding, distribution and warehousing of dietary supplements in the United States.  So, cGMPs require that products are consistently produced and controlled to meet  detailed quality standards.

Additionally, cGMPs embody the concept of quality assurance. Every stage of dietary supplement manufacturing, holding, distributing and warehousing must meet a host of quality standards appropriate to the intended product use.  These safeguards aim to reduce the risks inherent to all food and nutritional products by controlling production and distribution through evaluative audits.

1. How do cGMP audits work?

In cGMP audits, a representative visits the company and provides a quality system and GMP standards overview.  The auditor reviews all aspects of the operation and conducts a gap analysis to identify any shortcomings.

2. What is the evaluation process?

21 CFR 111 regulations (cGMPs and GMPs) are created, maintained and updated by the United States Food and Drug Administration (FDA).   These regulations establish the basic requirements for dietary supplement companies engaged in any aspect of production or distribution.   The regulations are extensive, covering everything from formulation, qualifying suppliers and ingredients, label claims and design, packaging, all manufacturing steps, cleaning and maintenance, training employees, personnel hygiene practices, product specifications, quality control reviews, distribution records and so on – all of which must be performed pursuant to Standard Operating Procedures.  Performance must be adequately documented.

The FDA does not certify manufacturers, but several third party certifiers offer this service.  Manufacturers seeking certification must voluntarily disclose manufacturing facility information, records, and practices to a comprehensive audit conducted by an external organization.  If the manufacturer passes the annual audit, they will earn cGMP certification.

During an audit, team auditors will physically inspect and audit all procedures, documents and qualifications of employees related to dietary supplement manufacturing. As a result, this process may take several days.

Some reputable third party certifiers:

  1. NSF (National Science Foundation)
  2. NPA Certification by the Natural Products Association
  3. USP Certification by the United States Pharmacopoeia
  4. Pharmaceutical Consulting Services

3. Why obtain NSF International’s Certified for Sport Seal?

Companies committed to providing athletes with a clean, safe product; while promoting fair play in sports, may want to obtain this seal.

Products with this seal undergo additional scrutiny and are subject to two annual quality control audits that include:

  • Testing for substances prohibited by the WADA (World Anti-Doping Agency) in the final product or ingredients.
  • Verifying the presence of content claims made on the label and protecting against adulteration and fraud.
  • Ensuring that they do not contain unsafe contaminants.
  • A cGMP certified facility manufacturers the product.

4. Which manufacturer should I choose?

Choose a cGMP certified manufacturing partner with proof of audits by an external organization such as NSF.

That’s 95% of what you need to know about cGMP certifications. However, ask the manufacturer as many questions as necessary to obtain the relevant information to make an informed decision.

These may include: years of experience, references, certifications, specifications and how many rounds of tests are performed.  Also check if they supply high quality ingredients, the efficiency of their quality control, their minimum order quantity, their shipping times, and if discounts exist for large orders and repeat orders.

Ask your manufacturer specifically about the regulatory environment of the dietary supplement industry.  Do they show expertise or do they struggle to answer questions?  So, if it’s the latter, think twice before working with them.

In addition to this, check the details of the manufacturer’s leadership team on their website and / or social networks. In these days of operational transparency, most organizations provide this information.  So, if a manufacturer lacks transparency, ask why.

5. What’s the other 5% of cGMP Certification knowledge?

  • If your manufacturer can’t, or won’t, answer your cGMP questions, choose another company.
  • Maintain records of all documentation you receive from your manufacturer.
  • Verify that your manufacturer produced product that meets your written Product Specifications.

The right manufacturer can make the difference between your product leading the market or stagnating, between an easy or a painful process, between success and failure.

6. Finally … What are the advantages of cGMP Certification?

First, you can count on exceptional quality and manufacturing standards when you choose a certified manufacturer. This provides peace of mind that your partner will produce a product that meets your requirements.  Also, if you expect your supplement to work as designed, choose a high-quality manufacturer. The cGMP certification dictates that all security measures and record keeping are in place and ensures safe and clean manufacturing.

Secondly, a supplement made in a cGMP certified facility provides greater confidence to consumers, which can build brand loyalty. Consequently, this matters as consumers become more educated and aware of the quality differences between the supplements. Many consumers seek to validate that the supplements they take have high quality standards.

A third benefit could be increased brand loyalty. Although supplements certified to meet cGMP may require a higher retail price point due to the complex cGMP standards and the cost of third party certification, displaying “Manufactured in a cGMP-certified facility” on your label can boost supplement sales.

Fourth, cGMP certified supplements can open doors. This is because most retailers and sales platforms require or will soon require that the supplements be manufactured in accordance with this standard. Consequently, don’t ignore this and let your distribution channels dry up.

Amazon has announced supplements sold on its platform must soon be cGMP certified.  Also, most retailers are doing the same. This is because cGMP certification reduces liability and improves consistency and quality.

Conclusion

With stricter guidelines for supplement brands from retailers, like Amazon and other vendor platforms, making sure that your supplement line is manufactured in a GMP-certified facility has never been so important. Consequently, consider reducing your risk while increasing brand loyalty and customer satisfaction with cGMP certification. 

 

Kendeyl Johansen, a tech geek and award-winning journalist, creates multimedia health and wellbeing content.

Susan Ulery utilizes her legal background plus 20 years of manufacturing expertise in the dietary supplement industry to help clients overcome regulatory challenges.

Clean Label Essentials for Natural Product Companies: $180 Bil by 2020

 

Want to understand your supplement ingredients without needing a biomedical engineering degree to decipher the label?  You’re not alone. More consumers are seeking “clean label” products that offer transparent and simple labels. The market research firm Euromonitor estimates clean label global food and supplement sales will rise from $165 billion in 2015 to $180 billion by 2020.  Boost sales by creating clean labels to attract buyers seeking transparency.

What exactly does clean label mean? It’s confusing because no formal agreed-upon definition exists. This stems from consumers desiring a variety of product characteristics: transparency, USDA organic, no artificial ingredients, non-GMO, hormone and antibiotic free, and locally grown.

People increasingly want specific product characteristics for their food and beverages, and they want to ensure products meet their needs or they won’t buy.  Labels information can make or break sales. Make sure your labels are updated to meet the needs of targeted customers so they’ll choose your product.

Target Specific Customer Label Needs

Since there is no government-agency definition of clean label, consumers are just as confused as everyone else as to what this means. Buyers are clear on what they want, though. Discerning consumers seeking clean labels look for organic certification, fresh foods, familiar ingredients and easy to read and understand labels.

Discover your customer’s ideal needs so you can adjust labels to match. The easiest way to discover what people want is to ask.

A Cargill marketing study of 302 U.S. grocery shoppers found almost half would pay more for clean label products for their children.  So if you’re selling supplements for kids, customer feedback may signal a popular desire for an organic-certified version.  Add the organic certificate to your label to attract customers and drive sales.

Besides food consumed by children, Cargill found clean labels most appeal to consumers of functional foods. Marketers of these products can use clean labels to boost sales.

Provide Transparency and Simplicity

We’ve all stood in the grocery store puzzling over a product label bursting with multi-syllable mystery ingredients. People seeking clean foods will put that product down and reach for another item.   These consumers want labels that are easy to read and understand.

This means the label ingredients are familiar and not difficult to pronounce.   Once example of simplifying an ingredient list is to use vitamin B12 in lieu of the vitamin’s scientific name cyanocobalamin. There are 56 names for sugar.  Keep it simple whenever possible.

Natural product companies can reformulate products to meet clean label demand.  Maybe your product can be made with a shorter ingredient list or a more wholesome ingredient.

New formulations can be used as opportunities to create products with simple ingredient lists that appeal to targeted markets. Google natural product trends to find innovative bestsellers. Smart companies can discover new popular ingredient trends and capitalize on buyer needs.

Label Legalities

Make sure claims made on labels have research back up. You don’t want to end up with a supplement labeling class action lawsuit, like Universal Protein Supplements Corporation (which does business as Universal Nutrition, Universal USA and/or Animal Pak) which allegedly violated California law by labeling supplements “Made in USA”.

“Food companies must understand their product, its ingredients and its processing so labeling statements narrowly tailor claims to properly reflect the product,” says David L. TerMolen, partner and member of the food industry team at the Chicago law firm Freeborn & Peters L.L.P.   The Institute for Legal Reform’s The Food Court Paper states food marketing class actions increased from about 20 in 2008 to over 425 active cases in federal courts in 2015 and 2016.  Avoid court by using caution before making label claims.

Customers are paying more attention to product labels as they seek products that meet their individual needs. Although clean labels mean different things to different people, smart companies can use guidelines to target discerning customers.  Why not grab your slice of the projected $180 billion clean label pie?

 

Kendeyl Johansen, a tech geek and award-winning journalist, creates multimedia health and wellbeing content.

8 Essential Questions To Ask Supplement Ingredient Suppliers

 

How can you find a high-quality dietary supplement ingredient supplier?   With hundreds to choose from this can seem daunting, but not if you know the savvy questions to ask.

Smart inquiry matters because the FDA implemented cGMP (Current Good Manufacturing Practice) regulations for supplement manufacturers, but regulations aren’t enforced for suppliers, especially for suppliers not located in the U.S.  It’s essential to know what’s in your products because the FDA requires manufacturers, packagers, labelers and distributors to assess the entire operation for safety and quality.

So interview your potential ingredient suppliers to make sure they’re cGMP compliant and that they meet your individualized needs.  Taking time to do research now will save headaches later.  Use our list of essential questions below to get the answers you need.

1) Do you grow your own ingredients?

If yes, ask about food safety standards.  Also what are your supplier’s pest control, shelf-life and storage procedures?  You don’t want dangerous pesticides or expired ingredients to potentially harm your consumers.

2)  What is the origin of outsourced ingredients?

It’s important to find out if ingredients come from growers or wholesalers.   How does your supplier ensure outsourced ingredients are pure and meet safely standards?  Does the company have on-site inspectors?

Large established companies will have tested procedures that test ingredients and ensure safety because they don’t want to risk shut-downs, which may impact their profits.  Smaller suppliers may not have the same level of safety sophistication.  Ask for total supply chain transparency.

3) Are outsourced ingredients tested internally?

How does you supplier ensure ingredients are pure and safe?  What testing methodologies and equipment are used?  Does a company have written procedures to standardize testing?  How are testing records kept?

4) Which documents and/or certifications can your supplier provide?

Does your supplier have Global Food Safety Initiative (GFSI) certification?  GSFI was created to ensure confidence in safer foods.  This certification includes compliance with SQF, BRC, IFS, FSSC, GLOBALG.A.P., BAP, and CanadaGAP.  Companies that have dedicated time and effort to earn GFSI certification are a good choice for your company.  Also ask about additional certifications and/or documents that may provide additional layers of trust.

5) Are ingredients artificial or natural ?

With increasing focus on transparency, manufacturers and consumers want to know specifics about ingredients.  There can be a grey area in regard to exact definitions of artificial vs. natural.  Natural ingredients are those produced by nature without human intervention.  Artificial ingredients are made by humans using methods different than nature uses.  Make sure you know how your supplier defines these terms.

6) Which fillers or extract solutions are used and what is their composition?

Food fillers are less-expensive additives used to bulk up the weight of a food, enrich foods or add nutritional value.  Also fillers can preserve appearance and effectiveness.  Fillers may help keep the cost down but you may wish to avoid some additives, such as artificial dyes. Make sure you know which fillers are used and their exact composition.

Extract solutions are used to separate desired substances when mixed with others.  For instance, extract solutions are used for de-caffeinated tea.  Ask which extract solutions are used, and which ingredients are used for extraction.

7) Which special ingredients are offered?

With consumers willing to pay more for special ingredients, more companies are seeking suppliers with these offerings.   Can your supplier provide organic, natural, non-GMO, kosher and/or vegetarian ingredients?

Make sure your supplier’s definition of special ingredients meets your expectations. For instance, organic and natural are not the same.  Organics do not allow GMO’s and antibiotics but these items are allowed for natural products.  Ask how your supplier ensures special ingredients meet specifications.

8) What are the total costs?

A supplier may provide  a quote but make sure to ask about other fees.  You might have to pay a delivery fee, or other fees and you want to know about this up front.  Also ask if payments are negotiable.  Instead of 30-day payment terms you may be able to negotiate 60 or 90 days.  Finally, consider negotiating discounts for up-front payments and high-volume orders.

There are many considerations to think about when choosing your ingredient supplier.  Asking smart questions will help you find a great supplier that delivers safe ingredients hassle-free.

 

Kendeyl Johansen, a tech geek and award-winning journalist, creates multimedia health and wellbeing content.

 

 

 

5 Natural Product and Food Label Essentials – Avoid Costly Mistakes

 

Boost natural product and food sales by creating outstanding product labels.  Your company wants accurate labels that will wow customers. Use our tips to avoid the nightmare of FDA non-compliant labels causing product recalls, or needing to reprint 10,000 labels due to blurred text.  Taking time to create attractive, error-free labels can interest potential customers and win sales.

Determine Label Requirements

Exactly what are you selling? What are your ingredients? What about nutrition? Any warnings? Your label should quickly answer these questions and more. The best labels provide an excellent marketing pitch to drive sales. If your label is inferior to your competition, or confuses buyers, you’ll lose customers.

So what are the label essentials for your natural product or food? Label requirements vary widely, for instance food labels need nutritional information.  Consult the National Institute of Standards and Technology (NIST) website https://www.nist.gov/about-nist to determine your label requirements.

Mandatory information will appear on the back of the label. Use the front of the label to describe your product and sell it.

Select Product-Appropriate Colors

Many marketers claim that color determines purchase decisions but little science backs this up. Color influence sparks debate because it depends on many factors, such as upbringing, cultural differences, personal preference, etc. For instance, bright primary colors sell supplements for children, but organic supplement buyers may prefer natural tones, such as greens and browns.

Research such as The Interactive Effects of Colors and Products on Perceptions of Brand Logo Appropriateness  determined that color choice isn’t as important as the appropriateness of the color for your product.  For instance hot pink labels won’t attract traditional men’s supplement buyers, but they’re a good choice for a girly energy drink. Choose label colors that match your product vision to compel your targeted audience to buy.  Then use the same color family for future products so customers can quickly recognize your brand.

Choose a Pro Label Designer

Professional label designers might cost more, but they can avoid costly labeling mistakes that inexperienced designers may make. Before hiring a designer, make a list of your label must-haves and any suggestions for shape, color, etc.  For ideas, visit 20 Examples of Beautiful Custom Label Designs .

When you’re ready to hire a designer, communicate your needs clearly. For example, refrigerated functional drinks need labels and finishes that withstand cold temperatures. You don’t want your label losing stickiness and falling off.  Also, a product for children may require a label that can stand up to rough handling without scratching.

A common label mistake is blurry or too-small barcodes. Obviously you want to create labels that scan. Another mistake is creating clear labels that don’t show up well on colored bottles. Seasoned designers will avoid these problems.

Professional label designers can take your ideas and specifications and create artistic magic. Use their attractive, functional designs to boost sales.

Control Label Versions

Labels can go through multiple versions, especially if a large number of stakeholders are part of your review process. Labels may need feedback from an art team, marketing team, management, etc. Save future headaches with version control (aka revision control).

You want to prevent confusion such as this:

• label name

• label name old

• label name v1

• label name final

A version control system keeps track of each label version. If something goes wrong, making changes is easy and version control prevents general chaos, like above.

You don’t want waste time and money printing the wrong label version. Also you need an easy-to-find record of each version in case of a review.

Select a Reliable Printer

Make sure the label printer you choose has excellent customer reviews. Also does the company have experience with your type of label?  How fast is the turn-around time?

After submitting your design, ask for a proof and study it carefully. Are the colors as requested and do they pop? The printed colors should match the colors of your artwork, and any finish that was applied should not distort the color.

Also are the proof text and images sharp? Make sure to submit high-resolution images to avoid blur. Also test that the bar code scans. Finally, make sure the label unwind direction is correct (the labels come off the roll the right way). After okaying the proof and print run, take the time to inspect your labels.

You want perfect labels that match your vision. Once your products are in the marketplace labels are your only sales pitch. Use our tips to create issue-free labels that compel customers to choose your product over others.

 

 

Kendeyl Johansen, a tech geek and award-winning journalist, creates multimedia health and wellbeing content.