24 Business Opportunities
The statutory merger of the real estate and business opportunity licenses occurred in 1966. Since then, a real
estate license is required to engage as an agent in the sale or lease of business opportunities.
Definition
The Real Estate Law defines “business opportunity” as the sale or lease of the business and goodwill of an
existing business enterprise or opportunity.
The sale of a business opportunity may involve the sale of only personal property. Typical transactions involve
retail stores, automotive service businesses, restaurants, cocktail lounges, bakeries, manufacturing facilities,
distribution and services businesses, etc. The sale almost always includes the inventory, fixtures, non-
competition agreement, lease assignment, and goodwill. If real property is involved in the sale, the agent usually
treats the sale of the business and sale of the land/building as two separate and concurrent transactions with two
concurrent and contingent escrows.
Agency
In most business opportunity transactions, the real estate licensee will be acting as a dual agent, with the
informed consent of the principals. Thus, the licensee is in a fiduciary relationship with both the buyer and
seller.
The real estate broker must obtain the written authorization of the owner of the business property before he or
she may obtain the signature of a prospective buyer on a procuring cause agreement. Failure to do so is grounds
for revocation or suspension of the agent’s license under Business and Professions Code Section 10176(j).
Small Businesses and the Small Business Administration
The Small Business Administration (SBA), a federal agency, assists small businesses through various financial
and counseling programs. In establishing loan qualifying criteria, the SBA has developed size standards
governing eligibility. Depending on the type of business (manufacturing, wholesaling, retailing, service,
construction, or agriculture), the standard of eligibility is based either on the number of employees or on the
annual gross sales of the business. Interested persons should contact the SBA for current criteria, loan amounts,
etc.
Form of Business Organization
Legal and tax considerations generally enter into a buyer’s decision regarding the legal form of business
organization. Sole proprietorship, corporation, partnership, limited liability company, syndicate, and franchise
are examples.
It is estimated that about 75% of American businesses operate as sole proprietorships. About 16% are
corporations. However, corporate enterprises earn over 70% of the total income.
The sole proprietorship is the simplest form of business opportunity. Corporations are governed by officers,
directors, and shareholders (owners), and the business is conducted under authority of its articles of
incorporation, bylaws, resolutions and policies. Organizers must comply with the legal requirements of the state
in which the corporation is established.
Form of Sale
The usual form of transfer for small businesses is a sale of assets for individual owners and a sale of assets or
stock when a corporate owner is involved. (Transfer of partnership interests, corporate mergers, etc., are other
examples of forms of sale.) Tax factors often influence the form of sale.
The transfer of ownership of a corporate small business by sale of all corporation stock may require that the
agent negotiating the sale have a broker-dealer securities license issued by either the California Department of
Corporations or the Securities and Exchange Commission. However, a real estate broker who has a listing for
the sale of the assets of a corporation is entitled to a commission if the parties decide on the sale of the stock in
the corporation, provided it is a sale of all of the outstanding stock. Regarding the sale of stock of a corporation,
see Section 260.204.1 of the California Code of Regulations.