Does my advisor need a license?
Selling a business is a regulated activity. Most parts of it are regulated under two or three different bodies of law, and each advisor at the table holds a specific license — or should. The question is not whether licensing applies. The question is which license, to whom, and for what part of the deal.
Who needs a license to help me sell my business?
The M&A advisors may need a securities license, depending on how the deal is structured.
The attorneys are licensed to practice law in your state.
The CPAs are licensed as a certified public accountant.
The real estate salesperson/brokers when real property negotiation is part of the deal.
Your banker is operating through a regulated financial institution.
The insurance agent provides E&O coverage, business insurance, and key-man policies.
The financial advisor who invests and manages your funds post-transaction.
Everyone at the table is working inside a regulated profession. The goal is to make sure each piece of the deal is handled by someone capable (maybe even talented).
What if no real estate is being sold? What if there is a lease?
This is where a lot of sellers — and some advisors — get tripped up. A common assumption is that if the business does not own the building, real estate falls out of the deal. That is not how the regulators see it.
In North Dakota, negotiating a lease for compensation is itself regulated real estate activity. It requires a real estate license, the same way selling a building does. Since most businesses operate from leased space, a lease is on the table in the majority of transactions — which means a licensed real estate professional usually belongs in the conversation.
A few common scenarios:
The existing lease is simply assigned from seller to buyer with the landlord's consent and no change in terms. Your attorney typically handles that as a contractual matter.
The lease is being renegotiated, extended, or replaced as part of the deal — new rent, new term, new tenant improvements, new guaranty. That is real estate activity. A licensed real estate professional should be at the table representing the parties whose interests are being negotiated.
The seller owns the building and creates a new lease to the buyer — a common outcome when an owner wants to keep the real estate as a retirement asset or plans to sell at a later date. That new lease is a real estate transaction. A licensed professional should structure it.
The seller owns the building and sells it alongside the business. Full real estate transaction. Licensed professional required.
The right question to ask is not "is real estate being sold?" — it is "is anyone negotiating terms for real property in this deal?" If the answer is yes, licensing matters.
Does the type of sale matter?
Yes. There are two common ways to structure the sale of a business, and they have very different licensing profiles.
Asset sale. The buyer purchases the assets — equipment, inventory, contracts, customer lists, goodwill — rather than the entity that owns them. No securities change hands. Securities licensing does not apply. Lower middle market transactions in the Upper Midwest are frequently structured this way.
Stock or equity sale. The buyer purchases the entity itself — shares of a corporation, or membership interests in an LLC. Securities change hands. Federal and state securities laws apply. There is a federal exemption that permits M&A advisors to facilitate certain stock sales without securities licensing, but the conditions have to be met and the deal has to be structured properly, with your attorney confirming the details. Rules vary state-by-state, and not all states have adopted the federal exemption.
If an advisor tells you the choice between asset sale and stock sale does not matter, they are not thinking about it carefully enough.
What do I need my CPA to do?
Your CPA's role is extremely important. Some of the key services they provide include:
Producing clean, reliable financial statements a buyer can rely on — typically a minimum of three years of history.
Preparing the client for questions related to the quality of earnings. Knowledge of what a Q of E is, and how to provide the data to a buyer. More on Q of E in a later post.
Running the tax analysis on how different deal structures — asset versus stock, installment versus lump sum, allocation among asset classes — affect what you put in your pocket after taxes.
Preparing the final tax return and any state-level filings after close.
Clean financials are often the difference between a smooth deal and one that bogs down in due diligence. Start the CPA conversation early, include your M&A advisor when possible so the team can begin to focus on key risks and communication strategy.
What do I need my lawyer to do?
Your attorney is the legal architect of the transaction. They should be:
Drafting and negotiating the definitive purchase agreement.
Conducting pre-sale legal due diligence on the entity, its contracts, leases, permits, and obligations.
Structuring the deal to accomplish what you want while protecting you from what you do not want. Lawyers are key risk management experts, a good attorney will save you money, pain and suffering through responsible risk management and clear communication.
Handling representations, warranties, indemnifications, and escrow terms.
Preparation for closing — the actual moment ownership transfers. They will work with you, the title company responsible for transferring and holding funds, and your M&A advisor to make sure the closing is successful.
On a stock sale in particular, your attorney is the person confirming that the state and federal rules are followed, and their collaboration with your CPA and M&A advisor will be essential to make sure the deal is completed successfully.
How do my advisors work together?
Well-run transactions have a quiet rhythm to them. Each advisor has a defined role. Each one stays in their lane, and understands the duties and responsibilities of each member of the team. The work is sequenced so it compounds rather than backs up.
In a typical engagement:
The M&A advisor orchestrates the process — preparing the company for market, identifying and qualifying buyers, running the negotiation, managing information flow, and keeping the transaction moving through to close.
The attorney drafts and negotiates the legal documents, confirms regulatory compliance, and prepares for the closing.
The CPA supports the financial and tax workstreams throughout.
The real estate professional handles any real property or lease component.
Coordination between these advisors is itself a deliverable. An M&A advisor who shows up at closing having left the CPA and attorney out of the loop has not done the job.
Is the license requirement different state by state?
Yes, and this is where things can get sideways for sellers whose advisor has not thought it through.
Federal securities law sets a floor. Each state adds its own rules on top of that floor. Roughly twenty-two states have adopted a state-level M&A broker exemption that mirrors federal law. Minnesota has not. Neither has North Dakota.
Take Minnesota as an example. An M&A advisor working on the stock sale of a Minnesota company cannot point to a Minnesota exemption that matches the federal one, because no such exemption has been enacted. The deal must be structured to fit within the rules Minnesota actually has on the books today. In Minnesota, their law goes farther than other surrounding states, and requires the sale of any business interest (not just real estate) to be handled by a licensed real estate broker unless specific exemptions or other licenses apply.
Every transaction is unique, and while there is a structured process that must be followed, and essential professionals engaged, the details are important and make a big difference on the seller's final compensation and the success of the firm sold in the future.
What are the risks to a business owner of an unlicensed advisor?
Regulatory risk. State securities regulators and real estate commissions have broad authority to investigate unregistered activity. Investigations can extend to the advisor's clients.
Fee exposure. Fees paid to improperly registered advisors can be subject to clawback. In some circumstances that liability reaches the client.
Deal risk. A buyer's attorney doing due diligence who discovers that the seller's advisor is operating outside the rules can raise it as an issue — potentially delaying, repricing, or killing the deal.
None of this is theoretical. If it can go wrong it will… if the right preparation and risk mitigation is not done and done well.
What questions should I ask before I sign an engagement letter?
A short list that will tell you a lot about who you are hiring:
What structure are you proposing for my deal, and why? (the right answer should be "I don't know yet, it depends" — more on this in a future post)
If there is real estate or a lease in my deal, who handles it, and what license do they hold?
Who are the other professionals you expect to work with on this deal?
What do you do, and what do you not do — and who do you refer the rest to?
Have you or your firm had any regulatory issues?
An advisor who responds clearly has thought about the work. An advisor who gets defensive, vague, or dismissive has not. "Trust me" is not an acceptable answer.
Selling a business is one of the largest financial events of an owner's life. The advisors at the table should be licensed, the plan and the work should be documented, and the regulatory questions should be answered cleanly. You should not have to take any of it on faith.
At Iris Co., we are M&A advisors. We are also licensed real estate professionals. Our focus is ND businesses under $25 million enterprise value. We collaborate with all the right advisors to make sure your deal gets done efficiently, correctly, and confidentially. If you’re considering selling your business or considering entrepreneurship through acquisition, it would be an honor to be considered as a potential member of your deal team.
Thanks,
— Jake
This post is general educational content and is not legal, tax, or regulatory advice. Every transaction is different. If you are thinking about selling a business, start with your CPA and your attorney — and bring in an M&A advisor who is comfortable working with both. Iris Co. is a lower-middle market advisory firm focused on providing transaction services to business owners in ND. Jake is a licensed real estate salesperson in the state of ND. Stillwater Commercial Real Estate is our partner brokerage, with Scott Ritter as our supervising broker.
