Before buying a business, confirm what you are actually acquiring: clean ownership, transferable contracts, accurate financials, and known liabilities. Then match the deal structure and purchase agreement protections to what diligence finds.
Start with the structure, not the price
Buyers tend to negotiate the headline number first and the structure later. In practice the structure often moves more value. An asset purchase lets you choose which liabilities you take on, while a stock purchase keeps contracts and permits in place but brings the company’s history with it.
The five records to request first
- Financial statements and returnsThree years of both, so you can compare what the business reports to lenders with what it reports for tax.
- Customer and supplier contractsLook for change of control clauses, exclusivity, and termination rights that a sale could trigger.
- Employee and contractor recordsConfirm classification, unpaid wages and any promises of bonuses or equity.
- Ownership and governance documentsThe seller must be able to prove it owns what it is selling and has authority to sell it.
- Permits, licenses and leasesSome transfer automatically, some need approval, and some must be reissued in your name.
Where the risk usually hides
Most surprises fall into a few categories: taxes owed but not yet assessed, customer concentration, verbal side deals, and intellectual property that belongs to a former contractor. None of these are unusual, and each can be handled with price, structure or contract language once you know about it.
| Issue found | Typical response |
|---|---|
| Uncertain sales tax exposure | Special escrow or a specific indemnity from the seller |
| One customer above 30% of revenue | Earn-out or a closing condition tied to that contract |
| Software built by a contractor | Signed IP assignment required before closing |
| Lease with a short remaining term | Landlord consent and extension as a condition |
“The right time to find a problem is before the purchase agreement is signed, when it can still change the price.”
Plan the first day, too
Closing is not the finish line. Bank accounts, payroll, insurance, vendor portals and customer notices all need to move the same week. A transition agreement with the seller, even a short one, keeps relationships steady while you settle in.
Common questions
For a small or mid-sized company, thirty to sixty days is common. Delays usually come from missing records, so asking early for the list above shortens the timeline.
It helps. The letter sets the structure, exclusivity and timeline, and those terms are much harder to change once both sides have agreed to them.
Most letters of intent are non-binding on the purchase itself, but check the exclusivity and confidentiality terms, which usually are binding.
This article is general information, not legal advice for your situation.
Elias Brandt
Elias advises owners on formation, transactions and contracts, and personally handles every matter the firm accepts.
elias@brandtlegal.example
