Business Brokers Denied Fees

Illinois law distinguishes between real estate brokers and business brokers and has different requirements for each. A real estate broker must be licensed by the state, while a business broker must register with the Illinois Secretary of State. A typical business, however, may include both business assets and real estate, potentially triggering both statutory requirements.

Two Illinois business brokers who were neither licensed as real estate brokers nor registered as business brokers tried unsuccessfully to collect a finder's fee in connection with the $3.3 million sale of a landfill. The brokers claimed a 6% fee from the seller of the landfill for their efforts in locating a purchaser. The business acquisition was structured as a stock purchase and included the ongoing business, operating permits, and equipment, as well as 180 acres of land.

The court dismissed the brokers' lawsuit because it refused to believe that the real estate was simply incidental to the landfill deal. In the court's words, "without land, there can be no landfill." Because the land was of principal importance to the transaction, the brokers needed an Illinois real estate broker's license in order to collect their finder's fee.

The brokers also failed in their attempt to collect the finder's fee as business brokers, rather than as real estate brokers, because they did not satisfy two of the requirements under the Illinois Business Brokers Act. The brokers were not registered as business brokers with the Illinois Secretary of State and their broker's contract was not in writing.

Before you become involved in the sale of a business as a finder or broker, determine whether real estate is a substantial component of the transaction. Without a real estate license, you may forfeit a finder's fee or commission. Even if the business does not involve real estate, you must be a registered business broker with a written contract in order to collect your fee.

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