Due Diligence when Buying a Small Business – Part 4

In a previous post, Due Diligence Part 3, we talked about how to deal with tax returns, in Due Diligence Part 2 we talked about Sales Tax issues. Here in Part 4 we’ll talk about a background check you might considered getting when you are in the due diligence process of buying your small business. Do diligence is not just about investigating the small business accounting, it’s about the entire business..

A business background check might turn up nothing, which is probably good. Or a business background check could turn up everything from tax liens, lawsuits with suppliers or customers or even criminal activity. Basic background checks can be very inexpensive and are available online. One possible source is Background Now.

Due Diligence is supposed to give you comfort, if you check everything and there are no deal killers you can complete the purchase of your small business and sleep a lot better.

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2 Comments

  1. Posted October 16, 2009 at 3:14 pm | Permalink

    Dan – thanks for the post, that whole issue with background checks is a biggie for us – especially since sometimes we have to make the decision on what is really necessary and what is not (as lawyers would like to do as much as possible, and sometimes our clients do not want to spend the time and money to do all these – especially in smaller deals). Can you suggest some of the ones you absolutely want to see performed in a due diligence process? Thanks and greetings from Toronto!

  2. Posted October 26, 2009 at 11:14 pm | Permalink

    Alex- I’m afraid there are no short cuts on this. We encourage sellers to check criminal, litigation, residence history and credit. Our position is this is really cheap insurance.

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