Licenses and permits when you buy a business in Florida

The company you buy has to be legally allowed to do its work the morning after closing. That sounds obvious, but licenses are one of the easiest things to get wrong in a purchase, because they don't all work the same way. Some belong to a person, not the company. Some belong to the company but can't be transferred, so the new owner applies for a new one. Some can be transferred to the buyer.

This post covers how that works in Florida, with examples from industries where it matters most. It isn't a complete list, and rules change, so confirm each license with the agency that issues it and with your attorney.

Three kinds of permission

Licenses held by a person. The company can operate only because a licensed individual is attached to it. Florida contractors work this way, and so do some professional practices. When that person leaves, the company's ability to operate is at risk.

Licenses held by the business that don't transfer. The new owner has to apply for a new one. Florida restaurant licenses, pest control licenses and child care licenses are examples.

Licenses that can transfer. With an agency's approval or the right paperwork, the license moves to the buyer. Florida liquor licenses and local business tax receipts are examples.

For any company you're serious about, make a list of every license, permit and registration it holds, the name each one is in, and its expiration date. You can look up many state licenses on the Florida DBPR's site, myfloridalicense.com. Our post on public records covers what else you can find before you even talk to the owner.

Florida contractors and the qualifier

If you're buying a contracting company, such as an HVAC, plumbing, roofing, pool or general contracting business, this is the license question that matters most.

In Florida, a contracting company doesn't hold its own contractor's license. Instead, a licensed individual, called the qualifying agent or qualifier, qualifies the business under their license. The qualifier has final approval authority over the company's construction work and, unless the state has approved a separate financially responsible officer, over its contracts and payments too. A certified contractor's license is valid statewide. A registered contractor met a local government's requirements and may work only there.

What happens when the qualifier leaves matters a great deal to a buyer. If the company's only qualifier leaves, Florida law gives it 60 days to qualify a new one. For the trades overseen by the Construction Industry Licensing Board, it may not do any contracting until then, unless the board grants a temporary certificate to an officer such as the president, which only lets it finish contracts it already had (Florida Statutes section 489.119). Electrical contractors have their own board: if the only qualifier leaves, the company has 60 days to qualify someone else, and the qualifier must be an officer or a supervising employee (section 489.521).

Two more details shape your options:

• A qualifier who already qualifies another company. The construction board's rules generally require that person to appear before the board, unless they own at least 20% of your company or are its W-2 employee (on its regular payroll). The board revises its rules from time to time, so confirm the current requirement with the DBPR.
• The SBA's rule about the seller. With an SBA loan, the seller can't stay on as an owner or employee, only as a consultant for up to 24 months. That makes them an awkward long-term qualifier, as risks that change the price explains.

So before you sign, settle who will qualify the company: you, if you hold or can earn the right license, or a licensed person you hire as an employee. Getting licensed yourself takes experience and exams, so check the DBPR's requirements for your trade early. Then make the qualifier change part of your closing plan, with your attorney, your lender and the board's forms all lined up.

Professional practices with ownership rules

Some businesses can't be owned by just anyone.

• Dental practices. Florida law bars anyone other than a Florida-licensed dentist, or a professional corporation or limited liability company made up of dentists, from employing dentists or controlling a dental practice, so a non-dentist can't own one.
• Accounting firms. A Florida CPA firm must be at least 51% owned, by financial interest and voting rights, by certified public accountants. A bookkeeping or tax preparation business that doesn't practice public accounting is a different matter; ask an attorney where the line falls.

Other professions, such as law and engineering, have their own rules about who can own or run a firm. If you aren't licensed in the profession, find out what you're allowed to own before you spend time on a company.

Licenses the new owner applies for

These belong to the business, but a change of owner means a new license.

• Restaurants and lodging. Florida law says a public food service or lodging license can't be transferred from one place or person to another. Talk to the DBPR's Division of Hotels and Restaurants about timing, so there's no gap. See restaurants.
• Pest control. The Florida Department of Agriculture and Consumer Services licenses each business location, and a business has to apply for a license when ownership changes. Each licensee also needs a certified operator in charge, who must be a full-time employee. See pest control.
• Child care. Florida law requires a child care facility to reapply for and receive a license before a new owner takes responsibility for it. The licensing agency has 45 days to act on the application, so plan your closing date around it. See child care.
• Health care providers licensed by AHCA, such as home health agencies and assisted living facilities. Both the seller's written notice and the buyer's license application must reach the Agency for Health Care Administration at least 60 days before the change of ownership, and the seller stays responsible for the operation until the buyer is licensed.

Licenses that can transfer

• Liquor licenses. After a genuine sale of the business, a Florida alcoholic beverage license can be transferred to the buyer, but only with the approval of the Division of Alcoholic Beverages and Tobacco, at its discretion, and usually with a transfer fee. A revocation, suspension or other case the state has notified the seller about can block it. With an SBA loan, the lender will take a transferable license like this as collateral along with the other assets. See bars and liquor stores.
• Local business tax receipts. Florida counties and cities can levy a local business tax, and a company may hold a receipt from its county, its city or both. State law lets a receipt be transferred to a new owner after a genuine sale, for a fee of up to 10% of the annual tax (between $3 and $25), when you show the original receipt and proof of the sale. Other local permits, like certificates of use, fire inspections and sign permits, vary by city and county, so ask the local offices.

Buying assets or stock changes the details

If you buy the company's stock, the company itself keeps its licenses, but some agencies still treat a change in who owns it as a change of ownership. AHCA, for example, counts a transfer of 51% or more of a licensee's shares or membership interests. If you buy the assets through your own company, licenses held by the old company don't simply come along. Either way, check each license separately.

Make it a condition of closing

Ask your attorney to write the license plan into the purchase agreement: which licenses must be transferred, reissued or requalified before closing, who is responsible for each step, and what happens if an approval is late. Licensing agencies work on their own schedules, so start early. Our post on choosing an industry covers how licensing should shape which companies you look at in the first place.

What to do this week

• For a company you're considering, list every license and permit, the agency, whose name it's in and when it expires.
• If it's a contracting company, look up the qualifier on myfloridalicense.com and decide who would qualify it after you buy.
• Call or email each agency with one question: what does a new owner need to do, and how long does it take?