State and Local Business Licenses: A Key Part of Business Sales
Before buying or selling a business, one must think carefully about what licenses are necessary to own and operate the business, as well as what licenses may transfer with the sale of the business. A seller should disclose what government licenses are needed to operate their business and provide such documentation to the buyer. A business buyer should research licenses needed to operate the business and any offer should address the issue and identify which licenses will convey with the sale.
Buyer Must Create Corporate Entity
Before buying a business via the typical asset purchase agreement, a buyer must create their own licensed corporate entity. This may be either a corporation or a limited liability company through which the buyer will take possession of the business. The buyer must legally incorporate their business, and may be done online at sunbiz.org for a couple hundred dollars. A buyer should consult with their attorney or accountant as far as what type of corporate entity (S Corp, C Corp, LLC, or other) they wish to form.
Buyer May Apply for ‘DBA’ or Fictitious Name
- In addition to forming a corporate entity, a business buyer may also create their own ‘Doing Business As’ (DBA) or fictitious name.
- A fictitious name may also be applied for and received online at sunbiz.org.
- A fictitious name – or trade name – is the name which the company does business with the public.
- For example, a buyer of a restaurant may incorporate as Smith Enterprises, Inc.
- Then the buyer may create a fictitious name (owned by Smith Enterprises, Inc.) called Jim’s Barbeque.
- There may be other fictitious names in Florida called Jim’s Barbeque, but no other corporate entities in Florida called Smith Enterprises, Inc.
- If the seller of the restaurant already owns the fictitious name ‘Jim’s Barbeque’ then that may be transferred in the sale to the buyer.
Buyer Must Apply for Employer Identification Number
In order to get a business bank account or otherwise do business as a corporate entity, one must apply for and receive an Employer Identification Number (EIN) with the Internal Revenue Service (IRS). This process may be done online, and the turnaround is as little as a few days. The filing and application process is entirely free and straightforward. It is important to remember that one needs an EIN number in order to fie a business tax return. As long as the buyer knows what kind of corporate entity they wish to create, then obtaining an EIN number is not a difficult task.
Local Business Tax Licenses in Palm Beach County
A local business tax license in Palm Beach County (referred to also as an occupational license) applies to anyone selling merchandise or services in Palm Beach County. The issuance of the license is subject to zoning and health regulations. There is a transfer process whereby the buyer of a business may transfer the existing local business tax license (using the same business address which has already been inspected by local zoning officials) to his or her own corporate entity.
Liquor Licenses in Palm Beach County
- Liquor licenses in Palm Beach County typically range from a 2COP (beer and wine only license within a bar/restaurant) to a 4COP (beer, wine, and spirits within a bar/restaurant).
- These licenses may transfer from a seller to a buyer, so long as the location of the bar or restaurant remains the same, and the buyer can pass the necessary background/fingerprint checks.
- The fees are substantially higher than other licenses, so the buyer should prepare themselves.
- The annual fee for the 4COP liquor license, for example, is $1365.
- The liquor license and the transferability of the liquor license should always be known ahead of the time by the buyer and seller, and should be clearly delineated in the purchase agreement.
- If a buyer is purchasing a restaurant that does not have a 4COP liquor license but wishes to obtain one, then he or she should consult an attorney.
- It is extremely expensive and time consuming to apply for and receive a new 4COP (consumption on or off premises) liquor license as the issuance of new licenses are generally capped by the state.
Contractors Licenses in Palm Beach County
Many different types of specialty contractor licenses in Palm Beach County are necessary to operate construction related businesses. When purchasing a business that requires such a license, the buyer must understand that such licenses typically do not transfer with the business. The licenses are individually owned and assigned, so the buyer must procure the license himself or herself. However, the seller may still choose to serve as a qualifier whereby the buyer operates the business under the seller’s license. Normally the seller will charge a fee for such service, but such fees are always negotiable.
Give Martin at Five Star Business Brokers of Palm Beach County a call today for a FREE evaluation of your business.