You guys may have a case for fraud and detrimental reliance. In order to prevail, you are going to need to be able to put forth evidence that the seller either explicitly or tacitly implied that the business was and would continue to be in good standing relative to licenses.
In order to prove fraud, you are going to need to be able to show that your sister was intentionally misled to her detriment. She will also need to prove that she relied on the promises and insinuations of the seller to her detriment relative to the business as well.
One thing to think about to, in an effort to be able to handle the defense, is that the seller will likely argue on two fronts: (1) they did not know about the issues at the time of the sell, or (2) the buyer had a good faith duty to employ due diligence in making sure the business was in good standing and would be in good standing, before they committed to purchase the entity.
Some of this may be explicit in the contract that conveyed the property. Some of it will most assuredly have to be shown through other evidence, including documents, witness testimony, etc.
In short, it sounds like there is a case there to be had. I recommend hiring an attorney that is experience in transaction litigation in your sister's area of the state. You want someone familiar with the court system that this will be filed within.
Let me know if you have any other questions.
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Best wishes going forward!