The path to selling your company starts with choosing the right business broker. To choose the right business broker, you must first understand the certifications and licenses required to operate as a business broker within your state. This helps you ensure you choose a broker who is qualified and will follow all applicable regulations and laws throughout the sales process. In this review, we discuss the certifications and licenses business brokers need to operate.
What are The Education Requirements for Business Brokers?
The educational requirements for business brokers varies by state. Your level of education may not directly affect whether or not you become a business broker. However, some states require a certain level of education to acquire the proper licensing (i.e. real estate license) and certifications. For many states, a Bachelor’s degree or higher is required to operate as a business broker. This is especially the case for states where a real estate license is required (see below).
What are The Licensing Requirements for Business Brokers?
There is no national “business broker license.” Most states also do not offer a business broker license. However, some states require a real estate license to operate as a business broker; other states do not require a real estate license. Specifically, the states that require a real estate license to become a business broker (as of April, 2023) include the following:
- South Dakota
Why Do Some States Require Business Brokers to Obtain a Real Estate License?
Many (if not most) business sales include real estate. For example, a manufacturing company may include their warehouse space in the sale. If real estate property is included in the business sale, then the business broker most likely requires a real estate license. This is irrespective of whether or not the state requires business brokers to obtain a rel estate license If the broker is not licensed, then they may need to partner with a real estate agent or broker to complete the sale.
A real estate license is a useful asset in states that do not require business brokers to obtain one. Without a real estate license, a business broker may have to work directly with a real estate broker, particularly if real estate property is included in the sale. However, this is not always the case, particularly if the business owner rents (rather than owns) real estate they use for business purposes. For states that do not require a real estate license, the lease is usually considered incidental to the sale of the business.
What Certifications are Available for Business Brokers?
There are certifications available for business brokers. A certification provides more credibility for business brokers as they have demonstrated an advanced knowledge and the skills required to operate effectively as a business broker. Certain states have their own organizations that handle certifications for business brokers. For instance, the Texas Association of Business Brokers (TABB) provides certifications for Texas-based brokers (see below).
International Business Broker Association (IBBA)
The International Business Broker Association (IBBA) provides professional designations and educational courses for business brokers. Specifically, the Certified Business Intermediary (CBI) certification. CBI certification designates a business broker as someone who has “proven professional excellence through verified education as well as exemplary commitment to [the business brokerage] industry.”
This is a prestigious designation. To receive this designation, the broker must prove they are proficient in all areas and tasks associated with practicing as a business broker. Sellers who choose a CBI-certified broker can trust they are receiving excellent guidance throughout the sales process.
American Business Brokers Association (ABBA)
The IBBA is arguably the most prestigious certification. However, there are other certifications a business broker may obtain. For instance, the American Business Brokers Association (ABBA) offers accreditation. Specifically, they designate brokers who meet their criteria as an Accredited Business Intermediary (ABI).
M&A Source Certification
M&A source provides certifications, such as the designation of a Mergers & Acquisition Master Intermediary® (M&AMI). You can learn more about the certification (and certification) requirements to become an M&AMI here.
Texas Association of Business Brokers (TABB)
The Texas Association of Business Brokers (TABB) is the oldest business broker trade association in the country. Business brokers in Texas who obtain TABB certification subscribe to the code of ethics and professional conduct of the Texas Association of Business Brokers and have demonstrated an ability to operate as a trustworthy and professional broker as they represent sellers and buyers in the state of Texas.
Other Regional Associations
As mentioned, every state has its own set of certifications and accreditations that business brokers may obtain. You can learn more about the regional associations that provide business broker certifications here.
What Laws are Most Applicable to Business Brokers?
This answer also depends on the state in which the business broker operates. All states have their own set of regulations and laws that a business broker must follow. However, there are some more general laws that a broker must keep in mind as they operate. Specifically, these laws are:
- Federal security laws (i.e. The Securities Exchange Act)
- Real estate laws, such as the Fair Housing Act and the Americans With Disabilities Act
- State laws, which vary by state
For sellers or buyers who are choosing a business broker, it is essential to ask them about the certifications and licenses they possess and any laws that may apply to their sale. This helps ensure you choose a business broker who is qualified and ready to deal with the many complexities that are involved with the sales process.
Do You Need a Qualified and Experienced Business Broker?
Regardless of whether or not you include real estate in the sale, Sigma Mergers and Acquisitions can help you sell your company in a proper manner. We are fully qualified to work as business brokers. More importantly, we have years of experience, helping numerous companies sell for excellent value. Contact us today to learn more and to receive a free, no-obligation business valuation.