3 Overlooked Areas to Consider When Buying a Business

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 704 words

The three areas buyers most often skim are the company's legal documents, how its workers are classified, and whether its retirement and benefit plans are in order. None of them appears in the profit and loss statement, and each can hand a new owner a bill, a dispute or a lost customer after closing. They deserve the same attention as the financials.

Most buyers spend due diligence on revenue, margins and customers, which is right. The trouble is what gets left for the final week, when everyone is tired and the closing date is already on the calendar.

1. Every legal document matters, not only the obvious ones

In an acquisition there is no such thing as an unimportant contract. A lease that cannot be assigned without the landlord's consent, a customer agreement that lets the customer leave when ownership changes, a supplier contract with a minimum purchase commitment, or a software license in the owner's personal name can each change what you are really buying.

Ask for a complete list of contracts and read the ones that drive revenue and operations in full. Look hardest at these:

• Real estate leases: remaining term, renewal options, assignment terms and any personal guarantees
• Customer and supplier agreements: change-of-control clauses, exclusivity and pricing commitments
• Intellectual property: whether trademarks, domain names, software and designs belong to the company or to the owner personally
• Loans and equipment leases: what must be paid off at closing
• Pending or threatened claims, and any settlement still being paid

2. How workers are classified can turn into a tax problem

Some smaller companies pay people as independent contractors on a 1099 form when the way they actually work looks like employment, which calls for a W-2. Tax and labor rules draw that line, and when a company gets it wrong, back payroll taxes, penalties and benefit claims can follow. If you buy the company's stock, that exposure comes with it.

Compare the contractor list with the organization chart. If contractors keep regular hours, use company equipment and do the core work of the business, ask your CPA and attorney to review the classification before you sign. It also affects your cost base: moving those people onto payroll after closing raises costs that the seller's earnings never showed.

3. Retirement and benefit plans need their own review

A 401(k) or similar plan carries filing, testing and fiduciary duties. Missed filings, late deposits of employee contributions and plan documents that were never updated are more common in owner-run companies than buyers expect, and correcting them costs money. Health plans and other benefits carry obligations of their own.

Ask for the plan documents, recent annual filings and the provider's reports, and have a benefits specialist review them. If problems turn up, the purchase agreement can require the seller to correct them before closing or to cover the cost.

The deal structure decides how much of this you inherit

In an asset purchase, the buyer generally chooses which assets and contracts it takes and leaves most past liabilities with the seller. In a stock purchase, the company changes hands with its full history. Each has tax and practical trade-offs, and your transaction attorney and CPA decide which fits. Our answer on selling assets or ownership interests explains the choice from the seller's side, which helps you predict what the seller will ask for.

Whatever the structure, the representations and warranties in the purchase agreement (the seller's written statements of fact about the business) and the indemnification behind them protect you against what nobody found. Due diligence is step eight of a professionally run sale, and it is where these three areas belong, not after closing.

Where MDR & Associates fits for a buyer

We represent sellers, and we tell every buyer so at the outset. That is also why the companies we sell go to market with a financial recast and organized records: buyers get clearer answers sooner. You still need your own attorney and CPA for the areas above. Our guide to what makes a sale fall apart in due diligence shows the same risks from the other side of the table. To see the companies we are bringing to market, start at our buyer page.

Where this fitsBuy a business in Texas →

Questions owners ask next

Who should review contracts during due diligence?

A transaction attorney should read every contract that affects revenue, premises or key suppliers and summarize the assignment and change-of-control terms. The buyer should still read the largest customer and supplier agreements personally, because the attorney judges legal risk while the buyer judges whether the commercial terms make the business work.

Can a seller fix a worker classification problem before closing?

Sometimes. The seller can reclassify workers going forward and work with a CPA on the past exposure, and the purchase agreement can hold back part of the price or require indemnification for any claim that surfaces later. The right fix depends on the facts, so both sides' advisors should agree on it before signing.

What if the company has no retirement plan at all?

Then there is nothing to inherit on that front, but find out whether employees expect one. Adding a plan after closing is a cost to build into your budget, and it can matter for keeping key staff who were promised benefits informally by the current owner.