Due diligence checklist: the document request list, with who produces each item

A due diligence checklist is a request list. The buyer’s side writes it, sends it to the seller or target, and works through it until every line is received and read. It is how you test what you were told before you sign or wire money.

The SBA lists the papers a buyer should have an attorney and an accountant evaluate: the letter of intent, a confidentiality agreement, contracts and leases, financial statements, tax returns, the sales agreement and any purchase price adjustment (SBA, Buy an existing business or franchise). A full list goes further, into ownership, debt, people, insurance and claims.

One list does not fit every deal. A share purchase, a house closing and a new supplier each call for different paper, so this page holds the core list and points to the version for your deal.

The buyer’s counsel or accountant usually drafts the list, and the seller’s team answers it. On the sell side, the owner or CFO gathers financial and tax records, company counsel handles corporate and contract files, and the insurance broker supplies policies and claims history. Some items come from outside: the secretary of state for good standing and lien filings, and the IRS for transcripts.

1. Start from the letter of intent: note the deal type, the closing date and the end of the review period.
2. Copy the core list below and delete the workstreams that do not apply to this deal.
3. Add a producing party and a due date to every line before you send it.
4. Send the request email with the list attached and one shared folder for uploads.
5. Log each document as it arrives, read it, and record follow-up questions on the same line.

• Sending one long list with no owner per item, so nobody on the sell side feels responsible for it.
• Accepting a summary spreadsheet where you asked for the signed contract or the filed return.
• Reviewing returns supplied by the seller without checking them against IRS transcripts.
• Forgetting the lien search, so a lender’s claim on the assets surfaces after closing.
• Mixing deal review with a bank’s know-your-customer file, which follows separate rules.

Each row is a workstream. Ask for the items that fit your deal, and give every line an owner on the sell side.

Returns handed over by a seller are copies. To compare them with what the IRS holds, ask the seller to sign Form 4506-T, which requests return, account and wage and income transcripts (IRS, About Form 4506-T, Request for Transcript of Tax Return). Form 8821 is the alternative: it lets a firm the taxpayer names receive its tax information for the years listed (IRS, About Form 8821, Tax Information Authorization).

Liens live in public filings. Under UCC § 9-307, a corporation or LLC is located in the state where it was organized, so run the UCC search there (UCC § 9-307, Location of debtor (LII)). For a sole owner, search the state of the principal residence (UCC § 9-307, Location of debtor (LII)).

An asset purchase is a deal where the buyer takes chosen assets rather than the company’s shares. When those assets make up a trade or business with goodwill, the seller and the buyer must each file Form 8594 (IRS, About Form 8594, Asset Acquisition Statement). Ask both sides to agree the allocation before closing, so the two forms match.

Larger deals can trigger a federal antitrust filing. Above size thresholds adjusted for each fiscal year, both parties must file notification and wait out a waiting period before closing (15 U.S.C. § 18a, Premerger notification and waiting period (LII)). Deal counsel checks the current figures; the checklist only needs a line that says who checked and when.

A list that is sent and never updated is how items go missing. Keep one row per document with these columns, for example in a shared spreadsheet:

1. Item number and workstream.
2. Document requested, worded the way the seller will recognize it.
3. Producing party and the person on the buyer’s side who reads it.
4. Date requested and date received.
5. Status: open, partial, received, reviewed.
6. Reviewer notes and the next follow-up date.

Banks use the same words for a different job. Customer due diligence means the identity checks a financial institution runs on its own customers, set by federal rule. For a company customer, it identifies each person owning 25 percent or more and one person who controls the company (31 CFR 1010.230, Beneficial ownership requirements for legal entity customers (LII)).

That file is about who the customer is, not whether a deal is sound. If you need the identity side, the guide to KYC documents lists what banks ask individuals and companies for.

• SBA, Buy an existing business or franchise: An attorney and an accountant can help a buyer create and evaluate the letter of intent, confidentiality agreement, contracts and leases, financial statements, tax returns, sales agreement and purchase price adjustment.
• IRS, About Form 4506-T, Request for Transcript of Tax Return: Form 4506-T requests tax return, tax account, wage and income, record of account and verification of non-filing transcripts.
• IRS, About Form 8821, Tax Information Authorization: Form 8821 authorizes a person or firm the taxpayer designates to inspect or receive the taxpayer’s confidential tax information for the tax types and periods listed.
• UCC § 9-307, Location of debtor (LII): A registered organization organized under the law of a State is located in that State; an individual debtor is located at the principal residence.
• IRS, About Form 8594, Asset Acquisition Statement: Both the seller and the purchaser of a group of assets that makes up a trade or business must use Form 8594 when goodwill or going concern value attaches or could attach and the buyer’s basis is set only by the price paid.
• 15 U.S.C. § 18a, Premerger notification and waiting period (LII): Above set size thresholds, which are adjusted and published for each fiscal year, no person may acquire voting securities or assets unless both parties file notification and the waiting period has expired.
• 31 CFR 1010.230, Beneficial ownership requirements for legal entity customers (LII): Covered financial institutions identify and verify each individual owning 25 percent or more of a legal entity customer and one individual with significant responsibility to control it, using the Appendix A certification or the same information by other means.