Take These Steps Before Buying a Business

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 730 words

Before you buy a business, have your attorney and CPA review three sets of documents: the legal records that show what the company owns and owes, the tax filings that show whether it has complied, and its employee benefit and retirement plans. Problems in any of them can become your problems after closing. Many first-time buyers focus on revenue and skip the paperwork. That is backwards.

The review can feel overwhelming. It is far less painful than discovering, after closing, that you bought a tax bill, a lawsuit or a benefit plan in need of repair. Keep a written list of every document you request and receive; it becomes the backbone of your due diligence file.

Who reviews what

Divide the work so nothing falls between advisors. Your transaction attorney takes the legal documents and drafts the purchase agreement. Your CPA takes the tax returns, financial statements and payroll records, and may bring in a quality of earnings specialist for a larger deal. An advisor who handles employee benefit plans reviews the retirement and health plans. Your lender runs its own checks, and an insurance broker can review the company's coverage and claims history. Agree at the start who owns each item, and keep one shared list of open questions.

Legal documents

Start with the company's formation records and ownership: articles, operating or shareholder agreements, and any record of past ownership changes. Confirm that the people selling actually own what they are selling and have authority to sign. Then work through the documents that govern how the business operates.

• Customer and supplier contracts, and whether they can be assigned to a new owner.
• Leases for every location and for major equipment.
• Trademarks, patents, copyrights, domain names and software licenses, with proof the company owns them.
• Employment, consulting, non-compete and confidentiality agreements.
• Permits and licenses, and whether they transfer to a new owner.
• Any lawsuit, claim, demand letter or regulatory notice.

Tax documents

Review at least three years of federal returns alongside the financial statements, and ask why any figures differ. Look beyond income tax to payroll tax filings, sales tax collection and remittance, and property tax. Texas has a franchise tax and sales tax, and in some cases a buyer can inherit a seller's unpaid taxes; your CPA and attorney will know how to protect you. Check whether workers treated as independent contractors should have been employees, because misclassification is a common and costly problem.

The structure of the purchase matters here. In an asset purchase, many past liabilities stay with the seller; in a purchase of shares or membership interests, they come with the company. Your advisors will explain the trade-offs, and this article on selling assets or ownership interests sets out the seller's side of the same decision.

Retirement and benefit plans

If the business sponsors a 401(k), a pension or a group health plan, review the plan documents, the annual filings and the contribution records. These plans are governed by federal benefits law and overseen by the Department of Labor and the IRS, and a plan run incorrectly can require corrections that the new owner ends up paying for. Ask for proof that employee contributions were deposited on time, and review the balance sheet and investment statements for the plan's assets.

Decide early whether you will keep, merge or end the plan after closing, because the answer can affect how the deal is structured and what the seller must do before closing day.

How the review protects you

What you find goes into the purchase agreement. The seller makes representations and warranties, formal written statements about the business, backed by indemnification if they prove false. Knowing what the documents show lets your attorney write those protections precisely instead of relying on general language. This guide to the representations and warranties a seller should expect shows what is usually covered.

Sometimes the review turns up a problem serious enough that you walk away. That is the review doing its job, not failing.

How it works when MDR & Associates represents the seller

When MDR & Associates represents a seller, core records are organized before the company goes to market, and buyers request documents through the firm after signing an NDA and completing a financial profile. That keeps the review orderly and confidential for both sides. To learn how to access the companies we represent, visit our buyer page.

Where this fitsBuy a business in Texas →

Questions owners ask next

How far back should I review tax returns?

Three years is a common minimum and matches what lenders usually want. Where there is a known dispute, an audit, or a change in how the business reported income, your CPA may ask for more. The goal is a consistent pattern that matches the financial statements.

Can I rely on the seller's accountant?

Use the seller's accountant as a source of information, not as your advisor, because that accountant works for the seller. Your own CPA should test the numbers independently, and your own attorney should review the legal documents, even when the seller's advisors are capable and cooperative.