You have much to consider when you buy an existing business. If you are deciding whether to purchase an existing business or to start a new business from scratch, due diligence is critical to making an informed decision. Here are just a few examples of how due diligence works in your favor:
- If you are buying the assets of the target business, make the target comply with the applicable bulk sales law so that creditors cannot “follow the assets” to the new owner (you) and make claims against you.
- To avoid being surprised by security interests and liens perfected under the Uniform Commercial Code (UCC), conduct a UCC filing search.
- Inspect local court records to identify undisclosed liens or judgments against the target business or the existence of current or past litigation against the business, its owner(s), or its officers.
- Review the target business entity’s income, payroll, property, sales, use, and excise tax returns for several years to identify exposure to underpaid taxes.