Organizations undergoing corporate changes or M&A activity often complete Secretary of State filings smoothly, yet struggle with the next step—updating, transferring, or amending their business licenses and tax accounts.
Key takeaways:
- Business licensing due diligence is essential during corporate changes and M&A because missed updates or overlooked requirements can result in significant fines, operational disruptions, license revocations, and reputational harm.
- A structured, proactive approach—building a complete license inventory, conducting pre‑transaction research, and prioritizing post‑close amendments—helps organizations maintain compliance, avoid delays, and ensure smooth operational continuity after the transaction.
While compliance issues may not surface immediately, delays or oversights can result in fines, operational disruptions, legal exposure, and reputational damage. Addressing noncompliance retroactively is often time‑consuming and resource‑intensive.
Best practices for business licensing due diligence
Business licensing due diligence is an essential part of any corporate change transaction. Following the steps below helps ensure compliance and smooth post‑transaction operations.
1. Build a comprehensive license inventory
For each business license or tax account, document:
- License or account type
- License number
- Expiration date
- License status
- Filing authority and jurisdiction
- Legal entity name listed on the license
Conducting this inventory before a transaction allows you to assess required updates and estimate the timing for amendments, transfers, closures, disclosures, or new filings.
2. Conduct pre‑transaction license research
Review existing licenses and tax accounts with the planned corporate changes in mind. This helps determine:
- What must change
- Which jurisdictions require notice
- Applicable deadlines
Example:
If you hold a contractor license in California and undergo a company name change, the State License Board requires licensees to notify the registrar, on a form prescribed by the registrar, in writing within 90 days of any change to information. Failure to notify the registrar of the changes within the 90 days is grounds for disciplinary action.
