Often a step missed in planning for the sale of a business is for the seller to conduct an accounting and legal due diligence process on their own assets and legal documents.
The review should include all the following:
- Reveiw of financial reports to confirm that they accurately describe the revenues and profitability of the business.
- Review of leases, loan documents or any other asset to confirm that everything is in order.
- Review all intangible assets to determine if copyrights or patents should be filed.
- Review customer and supplier contracts to see if they are still current and up to date.
- Review any other legal or accounting documents that may be a source of representations of the seller to the buyer.
The purpose of this review is to make sure that there are no surprises in statements, representations, or warrants made to a potential buyer. All little mistake in misrepresenting the selling company could easily chase off a qualified buyer.