Preparing to Sell Your Business? You’ll Need These Business Sales Documents

Business Sales Documents – Selling a business is very document intensive. Potential buyers and the accountants, bankers, brokers and lawyers working on their behalf will want to conduct a due diligence process.  In due diligence, the buyer and their advisors inspect the contracts and financials behind a company prior to making an offer.  When an offer is made, the buyer is just as likely to value your business based on its contracts and financial records as it is on it’s daily performance in terms of revenue.  A high-performing business that has its documentation in order ahead of the time, typically pays lower fees to lawyers, CPAs and other advisors.

It is important that a business has documentation to cover the bases in each of these areas and that the documents have been reviewed and revised wherever possible to reflect the best interests of the business.

Documents needed in the due diligence process fall into three major categories: legal, financial and human resources.  Additional documentation, often industry specific, may be needed to round out the due diligence library.

Legal Documents

During the due diligence process, potential buyers and their advisors seek complete awareness of all the target company’s obligations and responsibilities.  These include pending and potential lawsuits, warranties and factors that can be found in the language of the legal documents that bind the company in its external and internal legal relationships. 

These documents may include:

  • Commercial Property Leases
  • Company Formation Documents
  • Equipment Leases and Related Maintenance Agreements
  • Subcontractor Agreements
  • Supplier and Distributor Contracts

In addition, potential buyers themselves will be a party to at least two legal documents as they peruse the due diligence library.  These documents include a Non-Disclosure Confidentiality Agreement to protect the target company and it’s proprietary information and perhaps eventually an Offer-to-Purchase Agreement.

Prior to the placement of these documents in the due diligence library, it is recommended that the selling company review each with its advisors and, wherever possible, seek to renegotiate terms and conditions to ensure that the document is in the best interests of the company being sold.  This is especially important if the original document was not drafted and reviewed by an experienced business attorney.   

“A high-performing business that has its documentation in order ahead of the time typically pays lower fees to lawyers, CPAs and other advisors.”

Financial Documents

Accounting and tax-related documentation form an essential part of the due diligence library because they indicate the financial health of the company.  Ultimately, potential buyers are most likely to view the target company as a financial investment in that they hope to make a positive return on investment.  Financial documents are the most likely to indicate the earning potential of the target company.

These documents include: 

  • Aging Reports for Accounts Payable and Accounts Receivable
  • Asset Depreciation Schedule
  • Cash Flow Statement Showing Seller’s Discretionary Earnings 
  • Corporate or Schedule C Tax returns for past 3 years
  • Description of Liens
  • Financial Ratios and Trends
  • Financial Statements (from current to up to 3 years)
  • Insurance Policies
  • Note for Seller Financing
  • Outstanding Loan Agreements
  • SWOT Analysis with Areas of Improvement and Financial Projections

Many of these documents would already exist if the seller has a CFO and/or CPA that has maintained the company’s accounting books and reports over the years.  If not, there are a number of accounting firms and financial experts who specialize in preparing companies for mergers and acquisitions.  These advisors can work with a companies’ existing accounting and tax documentation and create the documents needed above.  Additionally, in small business sales it is typical that the sell-side produces a personal financial statement form for the potential buyers to complete.

HR and Employment Documents

When a business is purchased, it is sold along with its employment contacts, employment policies and company culture. Payroll is one of the most significant cost bases in a company once it reaches a certain size. Potential buyers are potential employers and thus would like to have a view of what the employment environment of the target company looks like. 

  • Agreements with Payroll Companies and Professional Employment Organizations (PEOs)
  • Employee Benefits Plan(s) in Place
  • Employment Agreements
  • Employment Policy Manual
  • Organization Chart
  • Staffing List with Hire Dates and Current Salaries

There could be scope to find significant cost savings in the way human resources are managed.  Often, with the right company financial planner, significant savings can be found in the areas of payroll fees, training, benefits and insurance without having to make cuts to a company’s employee count.


In addition to the documents listed above, businesses for sale may also include the following documents and material in their due diligence library.  Ensuring that each is produced by a professional service or by employees/advisors with relevant experience is a good way to ensure that content created will improve the valuation of the company. 

  • Business Association Memberships
  • Business Licenses, Certifications and Registrations
  • Business Plan
  • Client List
  • Intellectual Property Documentation
  • Inventory List (if Relevant)
  • List of Fixtures, Furnishings and Equipment
  • Marketing plan with Marketing Materials included
  • Photos of Business and it’s Staff
  • Products/Service Descriptions and Price Lists
  • Standard Operating Procedures (SOP) Manual

South Florida Law

Due diligence is a highly detailed legal and financial investigation into a business. It is ideally led by experienced corporate attorneys representing either the sell side or buy side of the transaction.  From the buy side, the right corporate attorney can greatly reduce the risk involved with a business transaction or investment.  On the sell side, a well-managed due diligence process can add multiples to the value of the business and streamline the transaction.  Because every matter requires its own unique legal assessment, contact South Florida Law, PLLC or call us on (954) 900-8885 for a free consultation to determine how the due-diligence process can best suit your objectives. 

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