What Documents to Ask for When Buying a Business

I. Introduction

Buying a business is one of the biggest financial decisions you'll ever make—and the paperwork matters just as much as the price tag. Whether you're eyeing a business for sale in Orlando or preparing to buy a business in Lake Nona, having the right documentation ensures you make a secure, well-informed decision.

This guide from First Choice Business Brokers Lake Nona will help you understand exactly what documents to ask for when buying a business, from financial records to legal filings.

II. Understanding the Due Diligence Process

What is Due Diligence?
Due diligence is the investigative process that occurs after a seller has accepted your offer to purchase the business, but before the final transaction is completed. It is your opportunity to verify the information presented and uncover any potential issues that could affect your decision.

When Does It Happen?
This phase takes place after a letter of intent (LOI) or purchase agreement has been signed. It typically lasts 2 to 6 weeks, depending on the complexity of the business.

How to Prepare for Due Diligence
Create a detailed checklist of the documents you need, focusing on legal, financial, operational, and industry-specific categories. Request access to these documents from the seller, and ensure that everything is up to date and verifiable.

Who Should Help You?
Work closely with professionals during this phase:

• Accountants to verify financial data, assess profitability, and identify irregularities
• Attorneys to review legal documents, contracts, and compliance issues
• Business Brokers like First Choice Lake Nona facilitate communication and keep the process on track

Why It Matters
Due diligence helps you make an informed decision and avoid buyer's remorse. It ensures that the business is represented accurately, identifies red flags before closing, and strengthens your negotiation power if issues arise. In Lake Nona's competitive market, this phase is especially crucial for securing the right opportunity with confidence.

III. Legal Documents You Should Request

1. Business Licenses and Permits
   These documents prove that the business operates legally within its jurisdiction. Verifying licenses and permits ensures the business is compliant with local, state, and federal regulations. An attorney can help assess whether these documents are current and sufficient. Missing or expired permits may signal operational risks or pending regulatory issues and could delay or derail the closing process entirely.
2. Articles of Incorporation or Organization
   These records define the legal structure and ownership of the business. They outline whether the business is an LLC, corporation, or partnership, and include key details about shareholders or members. Legal counsel should review these documents to ensure clarity and legal soundness. Inconsistencies here might complicate ownership transfer or expose hidden stakeholders—both of which may lead to renegotiation or a decision to walk away.
3. Contracts and Agreements
   This category includes leases, supplier/vendor agreements, customer contracts, franchise agreements, and service arrangements. These contracts are critical for evaluating the business's obligations and income sources. A lawyer can interpret the legal implications while a broker ensures key terms (e.g., transferability, renewal clauses) are favorable. Unfavorable contract terms or non-transferable agreements could significantly reduce the business’s value or feasibility of continuation.
4. Intellectual Property Documentation
   This includes trademarks, copyrights, domain ownership, and any patents. Reviewing IP documentation ensures you’re acquiring rights to branding, proprietary content, or products. Attorneys experienced in IP law can confirm ownership and help file proper transfers. Overlooking this step can lead to costly legal battles or the inability to use core assets after the purchase.
5. Employment Agreements & NDAs
   Reviewing employee contracts, benefits packages, and non-disclosure or non-compete agreements helps you understand HR obligations and risk exposure. A labor attorney can verify compliance with employment laws and flag liabilities such as pending disputes or excessive severance clauses. Discovering binding agreements or unresolved staff issues might prompt renegotiation—or even cancellation—of the deal.

📝 Tip: In the Lake Nona area, zoning laws and licensing may vary. Always verify that local compliance documents are up to date for businesses in retail, food service, or healthcare.

IV. Financial Documents to Review Carefully

1. Tax Returns (Past 3–5 Years)
   Tax returns are one of the most reliable documents to verify reported income and expenses. Comparing them with internal financial statements helps detect inconsistencies or red flags. A certified public accountant (CPA) can analyze these returns for accuracy and uncover hidden liabilities. Discrepancies between tax filings and P&Ls could indicate underreported income, tax avoidance, or financial mismanagement—any of which might cause you to renegotiate terms or reconsider the deal entirely.
2. Profit & Loss Statements (P&L)
   These statements reveal how profitable the business has been over time. They provide detailed breakdowns of revenue, cost of goods sold, and operational expenses. A financial advisor or CPA can help interpret trends and identify areas of concern such as declining margins or disproportionate overhead. An unstable or inconsistent profit history could affect your valuation of the business and raise concerns about long-term sustainability.
3. Balance Sheets
   Balance sheets provide a snapshot of the business’s financial position by listing its assets, liabilities, and owner equity. This document is crucial for evaluating the business’s solvency and net worth. An accountant will review whether the assets are accurately valued and if liabilities are fully disclosed. A poor balance sheet—with excessive debt or overvalued assets—can signal deeper financial instability and prompt a reevaluation of your offer.
4. Cash Flow Statements
   Cash flow documents show how money moves in and out of the business. Positive cash flow indicates the business can meet its obligations, reinvest, and grow. A CPA will help you assess whether cash flows align with reported earnings. Poor or erratic cash flow may reveal liquidity issues that aren’t obvious in other reports, which could affect financing options or day-to-day operations post-sale.
5. Bank Statements & Credit Reports
   Bank statements verify the cash balances and transactional history of the business, while credit reports reveal its financial reputation and debt standing. Accountants can reconcile bank statements with internal ledgers, and credit analysts can assess the company’s borrowing behavior. Negative banking patterns or poor credit scores may limit your access to financing and suggest mismanagement, making it a strong reason to reconsider proceeding.

✅ Local Insight: Lake Nona is a competitive marketplace. Clean, well-documented financials make your offer stronger when considering a business for sale in Orlando through trusted brokers like First Choice Lake Nona.

V. Operational Transition Plan

Once you’ve verified the core documents, evaluating the business's operational setup can ensure a smoother post-sale transition. This includes examining how daily operations are structured and whether there is documentation to guide continuity.

Look for:

• Standard Operating Procedures (SOPs) for tasks like inventory, customer service, or staffing
• Training manuals and employee onboarding guides
• Technology infrastructure, including POS systems, booking software, or CRMs
• Current vendors and service provider contacts

A business broker or operations consultant can help assess the readiness of the business for a seamless handover. A lack of clear operational documentation might result in downtime or customer dissatisfaction, influencing whether you're prepared to proceed with the purchase.

VI. Inventory and Asset Documentation

Evaluating tangible and intangible assets is crucial when buying a business—especially for retail, manufacturing, or service-based businesses.

Ask for:

• Complete inventory lists with quantities, SKUs, and conditions
• Appraisals or depreciation schedules for vehicles, machinery, or equipment
• Proof of ownership or lease agreements for business property and high-value assets
• Documentation of software licenses or technology subscriptions

Your accountant or business valuation expert can help interpret the value and accuracy of the inventory and assets. If the assets are overstated or not transferable, it may require renegotiation or reduce the purchase value.

VII. Seller Representations and Warranties

Before finalizing a business purchase, request a formal list of representations and warranties from the seller. These are legally binding statements attesting to the state of the business.

These may include:

• That all tax filings are current and accurate
• That there are no pending lawsuits or regulatory issues
• That all disclosed assets and contracts are valid and binding

An attorney should review this section closely, as it provides legal protection post-sale. Misrepresentation could result in significant legal consequences and would provide grounds to back out of the deal or pursue damages later.

VIII. Post-Sale Support Agreements

Many buyers benefit from transitional support from the seller. This can include:

• A defined training period for the new owner or key employees
• A short-term consulting agreement
• Customer introductions or vendor hand-offs

Ensure these agreements are documented in writing, with clear expectations and timelines. A business broker can help negotiate these terms. A lack of support may increase the risk of turnover or disrupt customer relationships, so consider this when finalizing your offer.

Frequently Asked Questions