Licenses And Contracts That Do Not Transfer

Transferring a business transfers ownership of an entity or its assets. It does not automatically transfer the permissions and agreements the business needs to keep operating.

Licenses often attach to a person

Many occupational and professional licenses are held by individuals rather than businesses, and they generally cannot be sold or inherited with the company.

Where a business can only operate under such a license, the successor must qualify independently or the business must employ someone who does.

Requirements differ by state and by profession and are revised over time, so the position has to be confirmed with the relevant licensing body rather than assumed.

Entity licenses may still need approval

Permits held by a company frequently contain conditions triggered by a change of control, requiring notice to or approval from the issuing authority.

Alcohol, health care, childcare, transportation and construction are among the areas where this is common, and processing times can be substantial.

A transfer that closes before those approvals are obtained can leave the business operating without valid authorization.

Contracts carry consent provisions

Customer and supplier agreements often include clauses restricting assignment, and some are triggered by a change in ownership even where the entity itself continues.

Leases, equipment financing and lines of credit commonly contain similar provisions, and lenders in particular tend to enforce them.

The practical effect is that counterparties acquire a say in the transaction, and that leverage sometimes appears late in the process.

Death is a harder case than a sale

A planned sale allows consents to be sought in advance. A death does not, and the business may operate for months while authority is established.

Where the deceased owner personally held the operating license, the business may be unable to trade lawfully at all in the interim.

Some states provide procedures for temporary continuation, and whether one applies is specific to the license and the jurisdiction.

The review that prevents the surprise

Listing every license, permit, franchise and material contract, and noting what each says about transfer and change of control, is a straightforward exercise done in advance.

That list is what a business attorney needs in order to say what a transfer will actually require and how long it may take.

Where a license is personal to the owner, planning for who else will hold it is a succession question rather than a transactional one.