How does a business broker company operate?

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  • 1 decade ago
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    A business broker is a person or firm that acts as an intermediary between sellers and buyers of businesses.

    Business brokers, also called business transfer agents, or intermediaries, assist buyers and sellers of privately held business in the transfer of ownership. They typically estimate the value of the business, advertise it for sale without disclosing its identity, handle the initial interviews, discussions, and negotiations with prospective buyers, facilitate the progress of the "due diligence" investigation and generally assist with the business with the sale. Sellers typically pay brokers either a fixed fee or a percentage of the sale price which typically ranges from 8% to 12%. Business brokers attract prospective buyers in a variety of ways, including listing limited details of available businesses on their websites and advertising in business newspapers and magazines. Brokers also directly approach prospective buyers and sellers to gauge interest.

    The business broker often handles the confidentiality contracts on behalf of the seller, screens prospective buyers and otherwise advises the seller in the disposal of the business or the business assets. Buyers sometimes retain a broker to find a business that matches a pre-agreed brief.

    In the US, licensing of business brokers varies by state, with some states requiring licenses, some not; and some requiring licenses if the broker is commissioned but not requiring a license if the broker works on an hourly fee basis. State rules also vary about recognising licensees across state lines, especially for interstate types of businesses like national franchises. Some states, like California, require either a broker license or law license to even advise a business owner on issues of sale, terms of sale, or introduction of a buyer to a seller for a fee. At last check the following require a license to practice as a business broker: Arizona, Arkansas, California, Florida, Idaho, Illinois, Michigan, Minnesota, Nebraska, Nevada, Oregon, South Dakota, Utah, Wisconsin, and Wyoming.

    In all states the broker must be a licensed real estate agent if real estate interest is involved in the transaction or the transfer of real estate interest is a requirement for the sale. In this context, "real estate interest" ranges from assignment or negoiation of a lease, to the sale of real property. Most sales of existing businesses include some form of real estate interest in the transaction. Examples in which real estate interest is not included are home-based businesses and new franchise opportunities.

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