Due Diligence Checklist

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Once you agree to purchase a business and have a contract your Accountant will need  certain documentation to determine if the business you are buying is earning what the seller represents.

  1. Tax Returns For Three Years
  2. Profit & Loss statements through Prior Year End, Current Year to date P&L  & Prior Year to Date P & L for the same period.
  3. Bank Statements Prior Three years plus Current Year To Date
  4. Sales Tax Returns Three years
  5. General Ledger Three Years
  6. Copy of Lease.
  7. 940's & 941's payroll tax for Three Years
  8. Employee list/job function/Rate of pay.
  9. Copy of insurance policies if any
  10. Equipment list
  11. Tangible Tax Returns Three Years

If the business is a cash business you will need purchase invoices, sales invoices and register tapes. Tax return numbers are generally considered to be more accurate. In some cases the business may actually be earning more than the tax return shows.

For a Cash Business the Due Diligence list would include:

  1. Register tapes for Three Years plus Current Year to date
  2. COGS Invoices for Three Years plus Current Year to date
  3. Two week observation (cashing out the daily sales by buyer)
  4. Cash expenses like payroll & COGS for Three Years

Generally two to four week’s will be needed for Due Diligence.