In California, a real estate license is required when participating in a majority of business opportunity transactions, such as listing, selling, transferring, or leasing on behalf of others. The transaction of a business opportunity is complex. It often requires an agent that is highly specialized in business opportunity transactions to understand the requirements and disclosures involved in this kind of legal matter.
In some rare cases, however, there are exceptions. Security dealers or brokers can participate in certain mergers and acquisitions without needing a real estate license. Understanding what is included in a business opportunity transaction and the definitions of these elements may make a business opportunity transaction a little less daunting.
How are business opportunities defined?
According to the State of California Department of Real Estate, a business opportunity is the sale or lease of an existing business operation or opportunity. Under the umbrella of a business opportunity, the transfer of several elements of that business opportunity must be satisfied. Components of the business, such as business personal property, real property, stock-in-trade, fixtures, and goodwill, all need to be transferred from one party to another while adhering to the Uniform Commercial Code, California Revenue & Tax Code, California Business & Professions Code and the California Corporations Code.
Business personal property
A business can own property that is included in a business opportunity transaction. Business personal property can include items like computers, machinery, office supplies, and furniture. Business personal property includes any items needed for the operation of the business except for the building that houses this property.
This property includes land and buildings. In a business opportunity transaction, if real property and business personal property are transferred from one party to another, a separate and simultaneous transaction is typically completed.
This property is any inventory or goods on the premises for trade. Before transferring these goods, the State Board of Equalization must be notified to obtain a certificate of tax clearance and a seller’s permit.
These are intangible assets that contribute to the overall valuation of the business. Some examples of goodwill assets are:
- Brand name and recognition of the business
- Good customer relationships generated by the business
- The website and domain name of the business
- Copyrights, trademarks, and patents held by the business
- Licenses and permits held by the business
- The expectation of future economic benefits