Permits & Upgrades

I was wondering if I was to buy a pre-existing pizzeria. Would I have to apply for new permits, business license, tax numbers? Would I have to have a health/fire inspection to see what needs upgraded since its changing hands? The building is located in a historic district if that matters in any way.

Basically what Im asking is; what is all needed for a business to change hands?

Thanks in advance.

Since you would in 99 out of 100 transactions of this type be buying the assets you would need to for sure:

  1. New Local, State and Federal tax ID for sales tax, wage withholding, unemployment etc.
  2. New workman’s comp and all other forms of insurance.
  3. New bank accounts, credit card processing, utility accounts, phone/internet.

Most locations do not have a “business license” beyond the sales tax licence (see #1) but you would have to get through health and fire inspection in every jurisdiction I have ever heard of. Whether that would trigger any requirements for upgrades is a question that must be asked locally. You should absolutely do this before you enter into a contract or at least before your inspection period is over. In most places being in the historic district has no impact beyond limitations to what you can do or change to the exterior but you should follow up on that too.

The only common way where this hoop jumping is typically not required is when one shareholder buys out another but the original entity still owns the business. Even then you often end up needing to explain it over and over again to various outside entities!

Are you working with a business broker? (NOT a real estate agent!!) If you need to ask these questions, you should be. You should also have an attorney and a CPA advise you.

Thanks Bo

Actually he has it listed threw a real estate agent and Im having to everything myself. Thats why I gotta ask these questions. I was pretty sure I had to get new permits and licenses but just wanted to double check.

Its been established for 20 years so Im assuming upgrades will be needed.

Are you
dealing directly with the sellers agent? If so, this wouldn’t be wise for an inexperienced buyer. The seller’s agent’s fiduciary duty is to the seller, not you. Bodegahwy is correct in that you want your own business broker who represents you and can ask the kind of questions that will steer you from a bad deal.
I don’t think you would want to take over anyone’s tax permit number or licenses as this could subject you to tax litigation for the previous owner’s sins.
Contact your local health and fire folks to see what they will require and get it in writing. Where I live it is typical for one county official to say you need to do xyz to complete the job but when xyz is complete another individual says more needs to be done.
An example of unanticipated expenses, some friends bought a place and with the ownership change the county wanted to have the bathroom resized for ADA. Problem was, the existing bathroom walls were concrete and also shared a wall with another business. $8,000 later the bathroom was complete.

Hi slice:
You have the correct information above.
I suggest you have a building and health department inspection prior to negotiating a price. A 20 year old shop may have a long way to go to pass the current codes.
George Mills

Thanks for the reply George. From what I seen on my first walk through its going to require alot of updates to bring it to code. Which I plan to use this to my advantage on negotiating the price. Then again Im thinkin about just waiting for it close and just buy the oven and mixer. But dont know how long the guy is planning to keep going.