How to do an asset sale while using current owners license

searcher profile

August 20, 2024

by a searcher from Miami University of Ohio in Cleveland, OH, USA

I am currently under LOI with an HVAC and Plumbing company in Ohio. The current plan is to use the current owner's license until I can get my own.

SBA banks are saying we need to Roll equity, (in the current LOI) but with rolling equity we can not do an asset deal.

Does anyone have experience using the seller's license and doing an asset deal using an SBA loan?

TIA

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commentor profile
Reply by a lender
from University of Michigan in Indianapolis, IN, USA
How hard is it to pass the licensing requirements? I assume your primary responsibilities will be in running the business not in the field wrenching on furnaces and A/C units. If you aren't learning the trade from a tech's perspective, Im curious to know what the learning curve is to be able to pass the exams for licensing. Any recent HVAC buyers out there that were "business" guys that purchased HVAC and are now licensed themselves?
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Reply by an intermediary
from The University of Chicago in Chicago, IL, USA
Per my research, in Ohio, the owner does not need to be a tradesperson. But at least one person in the business needs to have the license and be responsible for supervising. Verify this on your own. If true, your options are in Asset purchase
1. Make sure there is an employee who has the license and is responsible for supervising the HVAC work. Or
2. Use the owner for 12 months and hire a new employee with license during the 12 months or have current employee take exam if eligible.
Or
Do a stock purchase with rollover equity. 338(h)(10) is not a requirement but will amortize goodwill. 338 is for S Corp. It treats stock purchase as an Asset purchase for tax purposes. There are incremental taxes with Asset purchase. Someone needs to pick up the tax tab. If I remember, there is some tax on sale of fixed asset. I think it is called Sales tax.

^redacted‌ suggestion of NewCo buying Assets and seller buying equity in NewCo will limit the seller to 12 months, I have discussed this with SBA.
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