Conducting research when buying a business

Legal and financial checks when buying a business

When considering buying a business, ask the vendors for any information you wish to see. They should be happy to provide this, although you may have to sign a confidentiality agreement. The seller will want to protect certain aspects of the business, so some information may be off limits until close to completion - despite your signing of a confidentiality agreement.

The legal and financial items to check and where to get help with these include:

Information about the business

  • Check the vendor has the legal right to sell the business as there may be more than one decision-maker involved. If the business is a company registered at Companies House you will be able to get the necessary information from Companies House. Find company information using Companies House WebCheck.

The original business plan

  • Ask the vendor to see the original business plan. This will outline issues such as start-up finance which may notify you of any outstanding loans, for example.

Financial commitments

  • Examine the business' accounts, including the detailed management profit and loss account and balance sheet. These and other documents may be available from Companies House if the business is legally formed as a company. Find company information using Companies House WebCHeck.
  • Ask for documentation regarding outstanding loans and debts. Get your accountant to look at any financial details.

Ownership of assets

  • Check the business has legal ownership of its key assets and determine what the terms and conditions are for these assets. Ask your solicitor to check the property deeds for premises owned by the business, for example, or ask for the rental agreement and speak to the landlord if you want to continue to operate the business from its current premises.
  • You should also ask for information and documentation regarding the business' current employees, IT infrastructure and other technology as well as any issues relating to the environment.

Legal actions

Seek professional advice

It is sensible to take advice from professionals with experience of valuing businesses and their assets, such as accountants, lawyers, chartered surveyors, business transfer agents, business brokers and corporate financiers. See seeking professional advice when buying a business.