From a reader:
“When hiring a business intermediary to sell a web-based business, with no real property or store front, does the advisor need to have a broker and/or securities license? It seems like the brokers and advisors that specialize in Internet-based businesses don’t all have broker licenses.”
It actually depends on the state laws. For example, Florida and California law specifically state that a broker’s license or securities license must be used for business opportunities, whether or not they consist of any real property. In those states and many others there isn’t any question. You must be licensed. I can imagine that there are some broker/advisors out that there that try to convince themselves a license isn’t needed, but they can certainly get themselves in trouble in many states.
There are a few states (Georgia is one) that make it clear that you do not have to have a real estate license to sell a small business if there is no real estate. To further confuse the matter, some states state in their laws that you must be licensed but don’t cover the specific situation when there is no real property. However, for larger business where the stock is sold, you generally need to have a FINRA securities license.
You should know that it is not just web based businesses that don’t have real property. I once sold a commercial cleaning company that sub-contracted out its cleaning and thus had no equipment and no employees. It sold for $1 million with less assets than a Web based business since the Web business probably has at least a few computers.
Where a license is required, the industry seems to self-regulate itself. In other words, brokers and advisors that have gone through the effort to get licensed will turn in those that are not. In talking with other advisors and brokers, I’ve been challenged a number of times. I use my middle name, Ney, so other brokers and M&A Advisors have failed to locate me in the databases (anyone can search for a broker on the state department of real estate web site, or for an M&A advisor nationally via the FINRA securities website), when in fact I’m in both if you use my full name.
The bottom line is, if you are asking the question about a particular broker, ask them to show you the statutes that specifically allows them to operate without a license if real property isn’t involved. Otherwise, its safer to use someone that actually does have a license.