Licenses, permits, bonding and insurance

The short version

• Many businesses need licenses, permits, bonds or certifications to operate. Some cannot transfer to you.
• Find out early which ones the business needs, who holds them and how you will get your own.
• Insurance does not usually transfer either. Plan your own coverage before closing.
• Ask for the insurance claims history. It tells you about past problems.
• A missing license on closing day can stop you from operating.

Licenses and permits

List every license, permit and certification the business depends on:

• Business licenses from your state, county or city.
• Trade or professional licenses, such as for contractors or health care.
• Industry permits, such as environmental, health or operating permits.
• Certifications customers require.

For each one, find out:

• Who holds it: the business or a person.
• Whether it can transfer to you, or you must apply.
• How long a new one takes, and whether the business can keep operating meanwhile.

Licenses held by the owner personally are a common problem. You may need a qualified employee, or your own license, before you can operate.

Bonding

Some businesses need surety bonds to bid on work or meet contract requirements. Bonds are issued based on the owner's finances and history. You will likely need your own, and getting bonded can take time.

Insurance

Insurance policies are usually issued to a specific owner and do not transfer. Arrange your own coverage to start the day you close. Your lender will require certain coverage too.

Ask for the claims history on each policy, often called a loss run. It shows past accidents, injuries and claims. Frequent claims may mean safety or quality problems.