SMB Due Diligence Checklist: 40 Items

Financial due diligence (items 1–12)

1. Three years of federal income tax returns - reconcile to any broker-prepared financial summaries. 2. Three years of internally prepared profit-and-loss statements - compare to tax returns to identify add-backs. 3. Most recent 12 months of monthly bank statements for all business accounts. 4. Accounts receivable aging report - identify any customer balances over 90 days. 5. Accounts payable aging report - identify any vendor disputes or past-due obligations. 6. Complete list of all business debt: loans, lines of credit, equipment leases, SBA obligations. 7. Proof of ownership for any real estate or equipment owned by the business. 8. All equipment lease agreements, including monthly payments and remaining terms. 9. Prior 12 months of payroll records - verify employee count, compensation, and frequency. 10. Any existing earn-out provisions, seller notes, or contingent payment obligations from prior transactions. 11. Most recent sales tax filings (verify the business is current with all state and local sales tax authorities). 12. Most recent payroll tax filings (verify no outstanding IRS or state payroll tax liability - this can transfer to buyers in some states).

Legal, customer, and operational items (items 13–28)

13. Complete list of all current customer contracts - identify assignment restrictions and change-of-control clauses. 14. Identification of top 10 customers by revenue - calculate customer concentration (any single customer above 15% of revenue is a concentration risk). 15. Pending or threatened litigation disclosures - request from seller and verify with a public records search. 16. All business licenses and permits required to operate - verify each is current and transferable. 17. Any regulatory correspondence: OSHA, EPA, health department, or industry-specific agency. 18. Commercial general liability insurance declarations page - verify coverage amounts and claims history. 19. Workers' compensation policy - verify current, claims-free, and transferable or replaceable. 20. All supplier and vendor agreements - identify sole-source suppliers and change-of-control restrictions. 21. Complete inventory list as of the most recent physical count date. 22. All franchise agreements, FDD, and any franchisee dispute disclosures (if applicable). 23. IT systems inventory: software licenses, SaaS subscriptions, CRM data, and digital asset ownership. 24. Website, domain name, and social media account ownership documentation. 25. Intellectual property: trademarks, trade names, patents, and any licensing agreements. 26. Any government contracts or contracts with change-of-ownership restrictions. 27. Environmental phase I assessment if the business operates at or has operated at industrial sites. 28. Any zoning variances, special use permits, or entitlements tied to the current location.

Employee and lease items (items 29–40)

29. Full employee roster with titles, compensation, and start dates. 30. Any employment contracts, non-compete agreements, or severance agreements with key employees. 31. Employee benefits documentation: health insurance, 401(k), PTO accruals. 32. Any pending EEOC complaints, wage claims, or labor disputes. 33. Commercial lease agreement - full document, including all amendments. 34. Personal guarantee requirements on the lease - who is currently guaranteeing it and on what terms. 35. Landlord consent requirement for lease assignment - confirm landlord is aware the business is being sold and is willing to cooperate. 36. Lease term remaining and renewal option terms - calculate exposure if landlord declines to renew. 37. Rent escalation schedule - calculate total lease cost over the remaining term. 38. Tenant improvement allowance history - any TI obligations that remain with the business. 39. Any pending rent disputes, landlord default notices, or lease modification requests. 40. Operating history at the current location - if the business recently moved, understand why and whether the prior location's customer base transferred.

Once due diligence is complete, use the Business Acquisition Closing Checklist to track the steps from signed LOI through close.

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