Liens
UCC and judgment searches
Searches against the company and, often, its owners reveal secured lenders, equipment financing and unpaid judgments that must be released at closing.
Due Diligence · Buyer's Checklist
The Due Diligence Checklist for Buying a New Jersey Business
This is the request list behind a buyer's review — the documents and answers to ask a seller for, grouped by subject. Use it to prepare for diligence, to test what a broker has given you, or to see what a seller should expect to produce.
How to use this list
Tailor it, then send it early
No buyer needs every item for every deal. A two-location food business and a precision machine shop share little beyond the basics. Start from the full list, strike what cannot apply, and add what the industry demands — health permits, contractor registrations, fleet records, professional licenses.
Send the request soon after the letter of intent is signed, with a deadline, and ask the seller to put responses in a shared folder organized under the same headings. A consistent numbering system makes follow-up questions and the eventual disclosure schedules much easier.
Where a request asks for records over a period, three years is a common starting point for financial and tax items; longer may make sense for litigation or tax years still open to audit. The list is the raw material; turning the responses into findings is the work described under legal due diligence services, and it sits within the firm's wider business purchase and sale practice.
Section 1
Company, ownership and authority
- Certificate of formation or incorporation, amendments and a current good-standing certificate
- Operating agreement or bylaws, and any shareholder, buy-sell or voting agreements
- Ownership ledger or membership schedule, plus any options, warrants or promised equity
- Minutes, written consents and resolutions for the past several years
- Trade name registrations and a list of states where the company is registered to do business
- Any prior acquisitions, mergers or sales of business lines
Section 2
Financial records and taxes
The accountant leads on the numbers; the legal review checks that filings exist and that tax exposure is identified.
- Federal and state income tax returns for at least three years
- NJ sales and use tax, payroll tax and other state filings and any notices received
- Year-end and interim financial statements, with the accountant's reports if any
- Accounts receivable and payable aging reports
- Loan agreements, lines of credit, equipment leases and personal guarantees
- Any tax audits, assessments or payment plans, past or pending
Section 3
Contracts and customers
- The ten to twenty largest customer contracts and a revenue breakdown by customer
- Key supplier, distributor, franchise and license agreements
- Contracts with change-of-control, assignment or exclusivity terms
- Warranty, return and refund policies and any open warranty claims
- Government contracts and any related certifications
- Agreements with owners, family members or affiliates of the seller
Section 4
People, property and claims
- Employee roster with roles, pay, start dates and classification as employee or contractor
- Employment, non-compete, confidentiality and bonus agreements
- Benefit plans, handbooks and any wage, discrimination or unemployment claims
- Real estate leases, deeds, and any environmental reports or notices
- Insurance policies and loss runs showing claims history
- Pending or threatened litigation, demand letters, settlements and government inquiries
- Trademark registrations, domain names, software licenses and website ownership
- Licenses and permits required to operate, with expiry dates
Environmental and employment items often justify specialised follow-up; see environmental due diligence in NJ for when that applies.
Beyond the seller's folder
Independent checks a buyer should run
Seller-provided documents tell only part of the story. Public records fill the gaps.
Courts
Litigation searches
Court records can surface lawsuits the seller did not mention or considered minor.
Tax
Bulk sale notice
In an asset purchase, the Form C-9600 filing with the NJ Division of Taxation prompts the state's own review of the seller's tax position.
Status
Entity and license status
State records confirm the entity is active and that key licenses are current and in the right name.
Questions & answers
Using a due diligence checklist — questions
What documents should I request when buying a business?
At a minimum: formation and ownership documents, several years of tax returns and financial statements, debt and lease documents, the main customer and supplier contracts, employee information and agreements, insurance and claims history, licenses and permits, and anything about pending or threatened disputes. Add industry-specific items based on how the business operates.
How many years of records should a buyer ask for?
Three years is a common baseline for financial statements and tax returns because it shows a trend and covers recent filings. Ask for more where it matters, such as litigation history, tax years still open to audit, or long-term contracts signed earlier. The right period depends on the business and the risks identified.
What if the seller cannot produce a document on the list?
Ask why. Sometimes the document never existed, which is itself useful information; sometimes it exists and is uncomfortable. Either way, record the gap and address it in the agreement — for example, with a representation that covers the missing subject or a special indemnity. Missing records should not simply be ignored.
Should a small business purchase use the full checklist?
Use it as a menu rather than a mandate. A small owner-operated business may need a short, focused list covering taxes, the lease, a few key contracts, liens and licenses. Cutting items reduces cost, but it also means relying more on the seller's representations, so the agreement should be correspondingly protective.
Your attorney
Paul H. Appel, Esq.
Every matter at the firm is handled personally by Paul — the same attorney reads the documents, gives the advice and negotiates on your behalf.
- Education
- Columbia Law School, Juris Doctor (1967)
- Experience
- 58+ years in commercial and business law
- Focus for this matter
- Business acquisitions, sales, due diligence and closing documents
- Office
- Freehold, NJ — serving Monmouth, Middlesex & Ocean Counties
Contact
Discuss Your Business Matter With Paul
Describe what the business is dealing with — a contract on your desk, a deal in progress, a dispute or a company you are about to form. You will hear back from the attorney who handles the work.
- Phone917-748-6124
- Office11 Crestwood Drive, Freehold, NJ 07728
- ConsultationsBy phone, video or in person by appointment
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