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Legal FAQS

Question: Does the State of Texas require that business brokers maintain a business license?

Answer: The State of Texas has no formal “Business Brokerage License.” However TABB recommends that a real estate license be secured because the transfer of a business typically includes a transfer of a lease or the outright sale of a piece of real property and these activities require the broker to have a real estate license in order to collect a commission. There is some argument to be made that in certain instances, a real estate license may not be needed, but the Texas Association of Business Brokers recommends every business broker obtain a real estate license. In the event that a business broker does not have a real estate license an attorney should be consulted for proper guidance on any sale of a business that includes the sale or transfer of real estate.

Question: Does a business broker need a securities license to sell businesses in Texas?

Answer: Regarding business sales in Texas that include the sale of securities, there is an M&A Dealer Exemption in the Texas Administrative Code (Rule §139.27, the “Rule”). However, in order to be exempt a business broker must only be involved in a “Qualifying M&A Transaction” and otherwise comply with the Rule. Despite the Texas Administrative Code exemption and a business broker’s compliance with the Rule, if the transaction involves parties from out of state, federal laws apply and some sort of federal license may be necessary unless a federal exemption or other exception applies. Even if the transaction involves only Texas citizens, there is still an argument to be made that federal laws still apply and that a federal license is necessary unless a federal exemption or other exception applies. An attorney should be consulted for proper guidance on any sale of a business that includes the sale of securities (stock, LLC interests, Partnership interests, etc.).

Question: Is there a federal securities license required for business brokers?

Answer: There are a number of federal licenses available for those who actively deal in the business transfer industry relating to the sale of securities. An attorney should be consulted with respect to the matter whenever securities are involved as part of the sale of a business (e.g. the sale of stock, LLC interests, Partnership interests, etc.). Depending on the facts, a federal securities license may be required if the sale of securities forms part of the sale of a business entity. There are presently two federal bills pending in the US Congress that would exempt business brokers from securities licensing under specific fact situations, but that legislation has yet to pass (HR 686 and S 1010). Consult the Association of Merger and Acquisition Advisors (am&aaonline.com) [Vieth to include a link to the am&aaonline.com webpage] website for information with respect to this issue as it is in the forefront of state, local and national trade association and groups.

Question: Does TABB provide legal forms that business brokers typically use to facilitate business brokerage transactions?

Answer: TABB does provide various copyrighted legal forms for use by its members. A standard Business Listing and Services Agreement, Buyer's Confidentiality and Warranty Agreement, or NDA are just two of the many forms available for use by TABB Broker Members. The TABB forms are available in a section of this website designated for “Members Only.”

Question: Does TABB provide a form Offer to Purchase or Contract of Sale for use by its members?

Answer: Although TABB does provide a form Letter of Intent for use by its members, at the present time, TABB does not provide a form Offer to Purchase or Contract of Sale for use by its members. The reason for this is that there is an issue of unauthorized practice of law with brokers assisting parties in filling out such a form given the complexities of a business sale transaction and the unique terms that go into each such sale. An attorney should be consulted with respect to this issue.

Question: Are there are any procedures for filing complaints against a TABB member?

Answer: TABB does not have any authority to handle grievances that may arise. Therefore, TABB does not have any disciplinary, or grievance procedure, or even a formal complaint process. Consult your attorney or other state agencies for the answer to this question.
 
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