Change Is Good – But When It Comes to Licensing, It May Not Be Easy
The economy is on the move (hopefully upward) and many businesses are experiencing growth either by acquisitions or expansion into new areas. In the excitement/confusion of such growth, licensing concerns can get pushed down to the bottom of list. However, this may be more detrimental to your new business plan than you realize. Recently, I had a company that was acquiring another company and wanted to know how to transfer the acquired company’s licenses. In this example, the licenses at issue were contractor licenses in numerous different states. Luckily, the acquirer had started this research process early – before the acquisition had closed.
They were somewhat surprised to find that the acquired company’s contractor licenses were not actually “assets” they would purchase as part of the deal. Each of those company contractor licenses were tied to an underlying Qualified Manger or Employee license. Not only did the acquiring company need to obtain new licenses since the licenses could not be transferred, they had to find new Qualifiers or employ the existing Qualifiers in order to even apply for new licenses.
As part of the closing, they needed to determine when the acquired company’s employees should be switched to the acquiring company’s payroll. Many of those employees were license Qualifiers. In the end, the company ended up having to have the Qualifiers file notices of disassociation from the acquired company so that they could be listed as Qualifiers on the new contractor license application.
Meanwhile, since there is a grace period for the disassociated company to obtain a new Qualifier, the acquired company could continue to operate under its licenses until the acquiring company had obtained new licenses. One of the most important questions that need to be asked in any acquisition or sale is whether the licenses are part of the package. It seems like common sense, but many business people do not realize that some licenses run to the individual and not to the company. This situation applies to small businesses as well as large companies.
Even transferring unregulated licenses can be more complex than one would think. For example, a corporation decides to change its business structure to a limited liability company but everything else regarding the business operations and assets are essentially remaining the same. Seems simple right? This company was unhappy to discover that for the most part all their tax registrations and business licenses could not be simply transferred. They were required to file new applications and registrations and close out the old corporation’s licenses. Even if you are not changing your business structure, changes in ownership or officers can trigger licensing issues and require significant license amendments or relicensing.
So while change is good and can lead to greater profits, it may not be easy and there are many pitfalls along the way. Avoid licensing pitfalls by using licensing research as a planning tool and keep licensing tasks near the top portion of the to-do list.
*The information contained herein is intended for informational purposes only and does not constitute legal advice and is not intended to constitute advertising or solicitation for legal services.
About The Author
Lorraine Cody serves as Director of Research at Business Licenses LLC. She is an accomplished attorney with significant experience in commercial litigation, insurance defense, antitrust, real estate and broker malpractice. Her background includes large law firm experience, substantial political and legislative experience and extensive public speaking experience. Prior to her work with Business Licenses, LLC, Lorraine served as a councilperson for the Town of Southeast, New York. She was publicly elected to the Town Board and served a four year term, working closely with legal counsel and land use planners and consultants. She was responsible for creating and overseeing the town website and recodifying the Town’s municipal code. Lorraine also served as an associate for Chadbourne & Park LLC, where she performed a broad range of litigation duties in state, federal and appellate courts.
Lorraine was admitted to the New York State Bar and U.S. District Court for New York. She received her Bachelor of Arts in Political Science from Russell Sage College and graduated Magna Cum Laude from Brooklyn Law School.