Are Business Brokers licensed
There is probably no other question
that causes as much controversy as this one!
There is no one fast answer of 'yes'
or 'no'. The answer depends upon which state or country the business
or Business Broker is in. Some laws apply only if the Business
Broker actually sets foot in the state to sell the franchise
or business. Some laws fall under Federal Consumer Protection
laws; Fair Housing Laws; anti-discrimination laws; handicapped
laws; American Disabilities Act and Agency laws both local and
Federal to name a few.
Let me explain my opinions below and
you may draw your own conclusions.
Most people ask "Is a Business
Broker required to have a real estate license?" It depends
on what the Business Broker is selling and which state you are
asking about. There are at least 20 states (and DC) that require
a 'real estate' license to sell a business, business opportunity
or franchise. Of the other states, if you are selling only assets
of the business including personal property, fixtures and goodwill,
you may not need a real estate license. You may not discuss,
handle, transfer or assist in any lease arrangements of the business.
You may not be involved in the exchange of the business.
To quote one state that does not require
a license to sell businesses, "A real estate license
would be required if the sale, exchange or leasing of real estate
is part of the transaction. A real estate license would not be
required to sell personal property both intangible and tangible
of the business."
There is only one state that does not
require a real estate license to sell businesses and permits
the involvement of the business broker with the lease arrangements.
For all other states, if the lease is part of the value of the
business or incidental to the sale, they consider the Business
Broker to fall under their State Real Estate Division. Another
opinion is that if the term "month-to-month tenancy"
is used in the listing or sale of a business, there is no lease
and the Business Broker is not operating under the real estate
One state that does not require a real
estate license for a Business Broker did say "If the
lease for the property will be transferred from the seller to
the buyer, then the business broker must have a real estate license.
If the buyer will be signing a new lease and the business broker
will be compensated for procuring a new tenant, then the business
broker must have a real estate license."
Another state does not say you have
to be licensed to sell businesses. Only that the brokerage fee
may be in jeopardy and it does not rule out criminal or civil
penalties on the broker should they find there is any attributable
fee to real estate! (lease) If mention of the lease is made on
the listing agreement, marketing brochure or offer to purchase,
it may be considered 'real estate.' Who is going to buy a business
without knowing the terms of the lease? Most of my buyers make
the purchase subject to the transfer of the lease!
To further confuse the issue, one state's
Department of Real Estate will tell you that you do not need
a real estate license to sell a business. However, the courts
have ruled that in order to collect a commission on the sale
of a business, you had better have a license. There are several
states with legislation on the books concerning the licensing
of business brokerage as will as disclosure.
Only one state recognizes "finders"
whereby the finder merely introduces the parties. They do not
negotiate nor do they go beyond a mere introduction.
If that isn't enough to worry about
then there is Willful Misrepresentation; Negligent Misrepresentation;
Willful Omission; Negligent Omission; Professional Liability
and Personal Liability. A real estate licensee is required to
know about hazardous waste, zoning, new tax rulings and state
regulations. Do you think any of those items might affect the
value of the business you are selling or thinking of buying?
If the state you are seeking to do
business in, is one of those that does not have a written ruling,
contact the Real Estate Division/Commission of that state/commonwealth
and ask for an answer in writing. Then ask for an answer in writing
from the Attorney General's office. This way you are covered
should a question arise later.
One more caveat... January 1, 2000
the new "American Disabilities Act" requirements are
alleged to go into affect. This will affect all businesses open
to the public. It is expected to open many a can of worms in
the next few years when a business owner sells a business he/she
purchased recently and was not told of this. As 'state real estate
licensed business brokers' we have been disclosing this and advising
buyers/sellers of the consequences. Most new construction had
been building to this code for the last 3-5 years. "When
a person holds them self out to the public to be a professional,
he has a personal liability to know all the present, pending
and future changes to the code and related laws..." At least
that's the way the Judge explained it.
Decide for yourself should you be using
a licensed professional regulated by a state agency or one that
just decided one day to advise people on investing in businesses...
If legal, accounting or tax advice
is desired, consult the appropriate professional.