Essential Legal Checklist for Buying a Business
Due diligence is the comprehensive investigation of a business before completing an acquisition. It is your opportunity to verify everything the seller has told you, uncover hidden risks, and make an informed decision about whether to proceed with the transaction and at what price. Skipping or rushing due diligence is one of the costliest mistakes a buyer can make.
Review 3 to 5 years of financial statements (income statements, balance sheets, cash flow statements), tax returns and any IRS correspondence, accounts receivable and accounts payable aging reports, revenue breakdown by customer, product, and geography, cash flow analysis and working capital requirements, outstanding debt obligations and loan agreements, and capital expenditure history and future requirements. Attorney Zara's accounting background provides a unique advantage in financial due diligence analysis.
Examine all material contracts and agreements, pending or threatened litigation, intellectual property portfolio and registrations, regulatory compliance history, corporate governance documents, real property leases and titles, and insurance policies and claims history.
Evaluate organizational structure and key personnel, employee agreements and benefit plans, customer and vendor relationships, technology systems and infrastructure, standard operating procedures, and inventory and supply chain analysis.
Review employee handbooks and policies, employment and independent contractor agreements, benefit plans and pension obligations, workers' compensation history, OSHA compliance, and any pending or threatened employment claims.
Assess environmental assessments (Phase I and Phase II if indicated), permits and licenses, industry-specific regulatory compliance, and zoning and land use compliance for real property.
This checklist provides a starting point, but every acquisition is unique. Contact Zara Business Law to discuss your specific acquisition due diligence needs.
Schedule a confidential consultation with attorney Michael A. Zara to discuss your business legal needs.