Appendix B: Due Diligence Checklist

This is a sample due diligence checklist:

Assets

• Description of any real estate owned
• Recent equipment inspections
• Equipment leases
• Equipment list 
• List of all assets included in price
• List of all titled assets
• Inventory list

Financial/Tax

• Accounts payable schedule
• Accounts receivable aging schedule
• Annual personal property tax certificate
• Backup data of adjustments to financials
• Bank statements
• Breakdown of sales by customer
• Breakdown of sales by product type
• Copies of existing loan or financing agreements
• Customer or client agreements
• Documentation for add-backs to financial statements
• Federal income tax returns
• Financial budgets and projections
• Full accounting software file
• General Ledger or detailed list of all transactions and expenses
• List of monthly sales since inception
• Merchant account statements
• Payroll tax reports
• Profit and loss statements
• Sales and use tax reports
• Utility bills

Insurance

• Health insurance policies
• Liability insurance policies
• Workers’ compensation policies and history

Legal

• Articles of incorporation/organization
• Business license
• Certificate of Status/Good Standing from the secretary of state
• Copies of all licenses, permits, certificates, and registrations
• Copies of all key contracts
• Corporate/LLC by-laws or operating agreements
• Corporate/LLC minutes
• Description of environmental liabilities
• Fictitious business name statement (DBA)
• Financing agreements
• Information for copyrights
• Information for patents
• Information for trademarks and service marks
• List of liens against the business
• Other third-party agreements or contracts
• Pending lawsuits
• Phase 1 and 2 environmental studies
• Preliminary UCC search results
• Previous purchase agreement and related business documents
• Resale permit
• Seller’s disclosure statement

Operations

• Advertising contracts
• Customer list
• Inventory count
• List of key competitors
• Marketing material
• Operations manual
• Preliminary equipment inspection 
• Premises lease
• Summary of key lease terms
• Supplier and vendor list
• Supplier and vendor contracts

Staff

• Benefit plans
• Compensation arrangements
• Detailed schedule of payroll expenses
• Employment, agency, and independent contractor agreements
• Job descriptions
• List of outside contractors
• Other employment-related agreements
• Overview of personnel turnover
• Schedule of owners, officers, employees, independent contractors, consultants and their titles, length of service, and compensation benefits
• Summary biographies of key management