Documents for due diligence when buying a business

Corporate and ownership documents

These documents establish who the seller is, who owns it and who can approve the sale.

• Certificate of incorporation or equivalent formation documents, and any amendments.
• Bylaws, operating agreement or shareholder agreement.
• Capitalization table and records of share or unit issuances, transfers and options.
• Minutes and written consents of the board and owners for the last several years.
• Organization chart showing entities, ownership percentages and jurisdictions.
• Good standing certificates and registrations in the places where the business operates.
• Powers of attorney and a list of authorized signatories.

Read these against the proposed deal structure. A shareholder agreement may give a minority owner a right of first refusal or a veto over a sale. Formation documents may restrict how assets can be transferred. If the target has subsidiaries, ask for the same set for each.

Financial documents

Financial documents are usually the largest group and the one that moves price most directly.

• Annual financial statements for the periods in scope, with the accountant's report if one exists.
• Monthly income statements, balance sheets and cash flow statements, including the current year to date.
• General ledger or trial balance detail for the same periods.
• Bank statements for all accounts, and reconciliations to the ledger.
• Revenue detail by customer, product and month, reconciled to reported revenue.
• Accounts receivable aging and accounts payable aging.
• Payment processor reports, payout statements and records of refunds and chargebacks, where the business takes card payments.
• A schedule of debt, leases, guarantees and other commitments, with the agreements.
• Budget and forecast, clearly separated from historical results, with the assumptions behind them.
• Any schedule of proposed adjustments to earnings, with supporting invoices, contracts or payroll records.

These records support the work described in financial due diligence and the review behind a quality of earnings report. The quality of earnings report example shows how an accountant links each adjustment to evidence. Ask the seller to explain the accounting basis, such as cash or accrual, and any changes in policy during the periods. A comparison across periods can mislead when the basis changed.

Tax documents

Tax records show what the business has filed and paid, and where exposure may sit.

• Income tax returns for the periods in scope, with work papers where available.
• Sales tax, value added tax and payroll tax filings and payment confirmations.
• Correspondence with tax authorities, notices, audits and settlements.
• Records of tax elections and any agreements with authorities.
• Documentation of transfer pricing for related party transactions, where relevant.
• For businesses that sell across borders, an analysis of where the company has tax obligations.

Tax advisors interpret these records and the effect of the deal structure. Your role as buyer is to make sure the advisor has what is needed and to ask the seller about every open notice.

Legal and contract documents

Contracts decide whether the earnings and customers you are buying can be kept.

• Customer agreements, master agreements, order forms and statements of work, with all amendments.
• Supplier, vendor and distributor agreements.
• Leases for premises and equipment.
• Loan agreements, security agreements and guarantees.
• Partnership, joint venture, reseller and referral agreements.
• Non-disclosure, non-compete and exclusivity agreements.
• Licenses, including software licenses the business depends on.
• Settlement agreements and records of any claims, litigation, arbitration or regulatory proceedings, including threatened matters.
• Insurance policies and the claims history.
• Permits, licenses and regulatory registrations.

For each important agreement, counsel looks for change of control and assignment provisions, termination rights, renewal mechanics, exclusivity, minimum commitments, price protection, liability caps and indemnities. AI contract review highlights where those provisions appear so counsel can focus the reading. Counsel interprets the language and advises on how it affects the transaction.

Commercial documents

Commercial documents test whether the revenue story holds up outside the accounts.

• Customer list with revenue by customer for each period, tied to the ledger.
• Contract start and end dates, renewal dates and notice periods.
• Pricing lists, discount approvals and history of price changes.
• Records of customer cancellations, downgrades and complaints.
• Sales pipeline and backlog, with the basis of any probability weighting.
• Marketing records, channel results and customer acquisition spend, where relevant.
• Market studies, competitor information and any customer surveys the business holds.
• Product roadmap and records of planned launches.

Compare the customer list with the signed agreements and the revenue in the accounts. Differences point to questions: a customer in the list but not in the ledger, revenue that depends on a verbal arrangement or a discount that is not in the contract.

People and employment documents

People records show who runs the business and what obligations come with them.

• Organization chart with roles, locations and reporting lines.
• List of employees and contractors with start dates, compensation, bonus arrangements and notice periods.
• Employment agreements and contractor agreements, including confidentiality and invention assignment terms.
• Non-compete and non-solicitation agreements.
• Benefit plans, pension arrangements and equity or incentive plans.
• Handbooks, policies and records of training required by law.
• Records of disputes, grievances, investigations and claims.
• Immigration and work authorization records where relevant.
• Key person dependencies and the plan for retaining them.

Pay attention to contractors who build the product or hold key relationships without a written agreement. If intellectual property was created by people who did not assign it to the company, the company may not own what you intend to buy. Counsel and HR advisors assess how local law treats these arrangements.

Technology, product and data documents

For software and technology businesses this group can carry as much weight as the financial records.

• Architecture overview, hosting and infrastructure inventory, and a list of accounts with the person who holds each one.
• Source code repositories with access lists, and a record of who contributed to the code.
• Open source inventory and the licenses that apply.
• Third party software, application programming interface and data provider agreements, including usage limits and prices.
• Security policies, access controls, incident history and any penetration testing reports.
• Backup and recovery procedures, and evidence that they work.
• Privacy policy, records of how personal data is collected and processed, and data processing agreements.
• Records of regulatory obligations related to data, such as breach notices.
• For products that use machine learning models, the list of model providers, the terms that apply, the ownership of prompts, evaluation data and any fine-tuned assets, and the rights under which training data was obtained.

Ask who owns each account and domain. A product that depends on infrastructure held in a former employee's name, or on a provider account that cannot transfer, creates work at closing. List these items early so the transfer plan can cover them.

Intellectual property documents

• Registrations for trademarks, patents and copyrights, and a list of pending applications.
• Domain name registrations and the registrar accounts that control them.
• Assignment agreements from founders, employees and contractors.
• License agreements, in and out.
• Records of claims or disputes about infringement.

Match the registrations to the entity being sold. A mark registered to a founder personally is not automatically part of the company.

Organize the room around the request list

A virtual data room turns the request list into a working structure. Create one folder per workstream, with subfolders for the categories above, and number the requests so the seller uploads against them. Set permissions per folder: the financial folder for the accountant and deal team, the legal folder for counsel, the HR folder for a smaller group because it contains personal information.

Keep a few conventions.

• Separate signed agreements from drafts, and historical results from forecasts.
• Use clear file names with entity, document type and period.
• Note in the room when a document is missing, and why, rather than deleting the request.
• Use expiring links for outside parties who need short access.
• Review the view audit log on Team and Fund to see who opened sensitive folders.

Invite the seller, the seller's lawyer and accountant for view and upload only. In Acquisitions these external parties do not need a paid seat. Disclosure usually happens in stages, so keep the most sensitive folders closed until the deal reaches the matching step. The NDA for business sale guide explains how confidentiality terms and staged disclosure fit together.

Review the documents once they arrive

Receiving a document is not the same as reviewing it. Run a first pass to see what is there, what is missing and what looks unusual. Upload the financial statements and contracts to Acquisitions and read the red flag report. It highlights potential concerns such as unusual revenue patterns, expense lines that stand out, change of control language, termination rights, exclusivity and automatic renewal, and it points to the passage that caused each flag. Read the passage before deciding what it means. The review can miss an issue or misread context, and the document set may be incomplete.

Sort what you find into questions for the seller, issues for an advisor and matters that may affect the price or the decision. Keep the list where the whole team can see it. The M&A due diligence process guide describes how the workstreams, Q&A and reporting fit together, and the M&A due diligence page summarizes the workflow.

Adjust the list for a small business

A small company will not have every document on this list, and asking for all of it can slow the process without helping. Prioritize the records that support the largest assumptions: bank statements and payment processor reports that show the receipts, the signed agreements with the biggest customers, evidence of who owns the code, domains and accounts, and the written terms with the people who run the business. Where a document does not exist, ask the seller to explain how the arrangement works in practice and then decide whether to ask for a written confirmation at closing.

A missing record is information. It may mean the business is informal, or it may mean something is not as described. Record the gap, and consider its effect on the offer.

Match the plan to the review

Deal covers one active deal room with three seats, 2 GB of storage, 300 document analyses per month and red flag report export. Team covers five rooms, ten seats, 20 GB, 1,500 analyses per month and adds custom checklists, Q&A, watermarking and the view audit log. Fund covers 25 rooms, unlimited seats, 100 GB, 6,000 analyses per month, SSO, a portfolio view and priority support. Annual billing is half the monthly price. Analyses count per billing period, and deleting documents does not restore used analyses. Pricing lists the details.

Start with one document

Analyze a document and see how the red flag report reads a contract or a set of financial statements. Then create your account to build the request list, invite the other parties and keep every answer next to its source.