Business Sales Different from Real Estate Sales
Many business owners who are contemplating the sale of their business may wonder whether the sale will be publicly disclosed. Often times, they wonder whether the terms of the deal including the purchase price will be made public. In fact, privately owned business sales in South Florida are private affairs and not open to public scrutiny. No public database for South Florida business sales exists. This is an important factor to consider when weighing the potential sale of their business by many business owners.
South Florida Business Sales Not Public
- All real estate property transactions in South Florida are publicly recorded in ‘The Palm Beach County Property Appraiser’ website.
- Any member of the public can (for free) look up any real estate property transaction within Palm Beach County in a matter of seconds.
- Every South Florida real estate property must have a publicly recorded title, which is conveyed to the buyer at closing.
- The conveyance is a matter of public record, including the purchase price which helps determine property values and hence property tax rates.
- Transaction details that are open to the public include the identities of the parties, their mailing address, the purchase price, and date of sale.
- In contrast, South Florida businesses that do not include real estate are not subject the real estate sales reporting requirements.
- South Florida business sales are not reported in ‘The Palm Beach County Property Appraiser’ website and no other such governmental agency discloses South Florida business sales.
Businesses Must Be Registered With Sunbiz in Florida
The Florida Department of State requires every active business to register their corporate entity and maintain their status as active. This is accomplished online through the website sunbiz.org. Sunbiz is the means by which new business owners register their corporate entity and receive a ‘Certificate of Status’ from the state that the corporate entity is active. This enables a business owner to create a business bank account in Florida. Business owners must pay an annual filing fee in order to keep their business maintained as active on Sunbiz.
Information on Sunbiz is Publicly Available
- Any member of the public may go online and (for free) look up active or inactive businesses in the state of Florida on Sunbiz.
- The publicly available information will disclose the names and addresses of the registered agent and officers of the business, as well as the principal and mailing address of the business itself.
- It will also disclose the years in which the corporate identity became active, and potentially became deactivated by virtue of its withdraw or lapsing by non-payment.
- It is thus possible for a member of the public to decipher whether a corporate entity was de-activated on sunbiz and in what year.
- Business sellers de-activate their corporate entity from Sunbiz after most business sales.
- This is because the great majority of business sales are asset purchase transactions whereby the buyer creates their own corporate entity (duly registered with sunbiz prior to the transaction) which actually buys the assets of the seller’s corporate entity.
- The seller’s corporate entity has no further use and will inevitably be dissolved or lapse on Sunbiz.
- If the business sale is a stock purchase transaction, then the corporate entity itself is being sold to the buyer, and a ‘change of status’ will be filed with Sunbiz reflecting the new owner’s name.
- A member of the public may thus discover the the identities of the parties and approximate dates of a business sale, but there is no information whatsoever on Sunbiz pertaining to the terms of the transaction.
Uniform Commercial Code (UCC) Liens Reported in Florida
If a lien is placed against a business in Florida, the lienholder must file a UCC lien with the Florida Secured Transaction Registry. This registry may be viewed for free online by any member of the public. Available information includes the identity of the lienholder, the debtor, the amount of the lien, and the date filed.
UCC Liens Filed After Some Business Sales
In business sales, sometimes the buyer gives the seller a promissory note for part of the purchase price. This is referred to as seller financing, whereby part of the purchase price is financed by the seller. The resulting Note is paid over time. As security for this Note, the seller files a UCC lien against the buyer’s new corporate entity that now owns the assets of the sold business. The resulting UCC lien is recorded in the Florida Secured Transaction Registry, which makes the information about the lien publicly available. Importantly, the information publicly disclosed only pertains to the lien, and not to the terms of the actual business transaction.
Doc Stamp Taxes Applies to Promissory Note
In the event that a business seller finances part of the purchase price, the resulting promissory note is subject to a document stamp (doc stamp) tax in Florida. The doc stamp rate on a promissory note in Florida is 35 cents per 100 dollars, capped at $2450. Note that the doc stamp tax does not apply to a typical business sale, but only to a promissory note associated with the business sale. Whenever a promissory note is involved in a business transaction, both buyers and sellers are advised to seek legal counsel to ensure full compliance.
Unlike real estate transactions, business sales are generally kept far away from the public’s prying eyes. The purchase price need not be publicly disclosed when privately owned business are sold in Florida, much to the relief of many potential business sellers.
Give Martin at Five Star Business Brokers of Palm Beach County a call today for a FREE evaluation of your business.