Guide
Who can legally sell your business in the US
Updated
An owner selling a business will meet intermediaries occupying four quite different legal positions, and will usually be told about none of them. Only one of the four can be checked in a public database. Here is how to tell them apart, and the one common arrangement that creates a problem out of nothing.
The four positions
A registered broker-dealer, registered with the SEC and in practice a FINRA member, with individually licensed representatives. An M&A advisor relying on the exemption at 15 U.S.C. 78o(b)(13), lawfully unregistered within the thresholds and the conditions. A business broker handling asset sales, where no securities change hands. And a finder, which is not really a position at all so much as an absence of one.
Only the first appears in a public register. FINRA BrokerCheck returns registration status, employment history, exams and disclosure events, free and immediately, for firms and individuals alike.
The finder problem
The most common way an owner creates an accidental securities problem is by agreeing to pay someone a success fee for introducing a buyer. A percentage of a transaction paid for bringing the parties together is transaction-based compensation, and that is the characteristic that turns an introducer into a broker.
It is usually done informally and with the best intentions, often to a friend of the business. The exposure is the same as if it were done formally, and it arrives at closing when the fee falls due and somebody's counsel reads the arrangement.
Three questions, asked in writing
Which position are you in: registered, relying on the M&A broker exemption, or handling asset sales only? Will you at any point receive, hold, transmit or have custody of transaction funds or securities, including escrow? And will you represent the buyer as well, and on what disclosure and consent?
The second one catches good firms out. The exemption disqualifies a broker that takes custody, and escrow arrangements are set up with no ill intent by people who have not read the condition.
What none of this decides
Registration is a floor, not a recommendation. A well run exempt M&A advisor who knows your industry will get you a better outcome than a registered firm that does not, and BrokerCheck cannot tell you which is which.
What the checks do is remove one category of risk cheaply, so the judgement you make afterwards is about competence and fit rather than about permission. The SBA's guidance on preparing a sales agreement assumes an attorney reviews it, and that is the right instinct for the engagement letter too.