Glossary
Change of ownership
On this page3 sections
What it is
Change of ownership is the SBA's term for a transaction in which ownership of a business changes hands — what a buyer would simply call buying a business. The vocabulary matters because the rules are indexed to it: the change-of-ownership provisions are where the requirements that shape your deal actually live.
What it triggers
Under SOP 50 10 8.1 [1] , a change of ownership brings with it:
- An equity injection of 10% of total project cost. On an Initial Acquisition the SOP states it cannot be reduced or eliminated; on a Business Expansion or Owner Buyout a lender may reduce or eliminate it on a liquidity and working-capital test. See equity injection.
- A cap on standby seller debt counting toward that injection — no more than half of it. See standby agreement.
- A prohibition on seller earnouts. Only a buyer rebate is permitted, with proceeds applied to loan principal. See earnouts.
- A bar on the seller remaining as an officer, director, stockholder or employee, with a consultancy capped at 24 months in aggregate including extensions.
That last item is worth internalising early, because it constrains transition planning. See the first 90 days.
The New York layer
A change of ownership also triggers state obligations that have nothing to do with your lender. The bulk-sale notification is due at least 10 days before you take possession, and without it the purchaser can be liable for the seller's unpaid sales tax [2] . Many New York licences and registrations do not transfer at all. See bulk sale and successor liability.
The full guide: SBA equity injection on a change of ownership.
Frequently asked questions
Is a change of ownership the same as buying a business?
In substance yes, but the phrase is SBA vocabulary and it matters because the rules are indexed to it. If your transaction is a change of ownership under SOP 50 10 8.1, a specific rule set attaches: the equity injection, limits on standby seller debt, the prohibition on seller earnouts, and the bar on the seller staying as an officer, director, stockholder or employee.
Does it matter which of the four transaction types I am doing?
Enormously, and it is the first thing to establish. An Initial Acquisition cannot have its 10% equity injection reduced or eliminated. A Business Expansion or an Owner Buyout can, where the lender determines the borrower has sufficient liquidity and working capital. Same programme, very different cash requirement.
Does a change of ownership trigger anything in New York?
Several things that have nothing to do with your lender. The bulk-sale notification is due at least 10 days before you take possession, and without it you can inherit the seller's unpaid sales tax. Many New York licences and registrations do not transfer at all, including the sales tax Certificate of Authority.
Sources cited on this page
Every mutable number on this page — program caps, tax rules, thresholds, filing deadlines — traces to one of these primary sources. Rules change; check the source before you act on the number.
- 1 U.S. Small Business Administration. SOP 50 10 8.1 — Appendix 15: 7(a) Changes of Ownership. https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs
- 2 NYS Department of Taxation and Finance. Tax Bulletin ST-360: Purchasers' Obligations to Pay Sales Taxes (Bulk Sales). https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/purchasers_obligations_to_pay_sales_taxes.htm
Educational only — not legal, tax, lending, or investment advice. Confirm specific rules, rates, and forms with the relevant New York State agency, attorney, CPA, lender, or insurer before acting. See the editorial policy and methodology for how sourcing and review work.