Transferring business licenses: hurdles and hiccups we're seeing in SMB transactions
By William Fry
Dec 17, 2023
In Buying a Business
We're working with a few entrepreneurs under contract right now who are running into snags with licenses.
Many of the trades businesses will require licensing from local and/or state authorities in order to be in good standing. Common industries include HVAC, electrical, towing, general contracting, and medical. While some of these licenses may be transferrable, the process of actually transferring the license is often opaque.
Here are some tips when navigating a license transfer:
Get Started Early: Many local and state offices have 2-6 week lead times to processing applications for license transfers. Do not wait until your transaction is close to closing before getting the ball rolling.
Leverage Previous Searchers & Brokers: We find that the actual agencies will take days or weeks to respond to inquiries. To bootstrap the process, we recommend to reach out to previous business brokers and/or searchers who have sold and bought businesses in your industry. They'll often be able to show the best path forward and flag any grace periods that the state may have in place.
Work the Seller's Network: Aside from previous searchers and brokers, sellers are typically pretty plugged into their vertical. They may know other owners who've sold or even people involved in the relevant regulatory agency. In terms of someone who's aligned with your interests, there's not much better than the seller himself.
Prepare to Get in Line: Sometimes there will be no easy answer, and you will be faced with the reality of having to get in line at the local office. Do not delay this! You may find out that you need to jump through additional hoops before the deal can proceed to the closing table.
Information posted on this page is not intended to be, and should not be construed as tax, legal, investment or accounting advice. You should consult your own tax, legal, investment and accounting advisors before engaging in any transaction.
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