Before buying an Illinois business, verify what you are acquiring, which obligations may follow it and whether operations can continue after closing. Due diligence turns the seller’s description into documented facts and identifies issues affecting price, financing or the decision to proceed.
This checklist focuses on documents and closing readiness. Our stock-versus-asset purchase guide covers structure. Before signing a letter of intent, review LOI red flags.
1. Identify the seller and purchase
Confirm legal identity, ownership and authority to sell. Request governing documents, ownership records and required approvals.
List included assets, excluded assets and assumed obligations. Check whether equipment, real estate, a website or other material property belongs to the seller, an owner personally or another entity.
Example: The seller’s separate real-estate company owns the building. Buying the operating business does not necessarily buy the property or guarantee continued occupancy. Address the lease or property purchase separately.
2. Reconcile finances with operations
Have your accountant review tax returns, financial statements, bank records, receivables, payables and payroll. Ask about owner-benefit adjustments and expenses you will incur to replace the seller’s work.
Investigate customer concentration, overdue invoices, unusual revenue timing and deferred maintenance. Verify inventory and important equipment. Historical profitability does not establish that you can reproduce it.
Record explained discrepancies, proposed price adjustments and unresolved questions. Use the findings in negotiations rather than simply collecting documents.
3. Check liens, taxes and liabilities
Arrange appropriate public-record and lien searches. Request debt schedules, payoff information, litigation disclosures and tax records. Identify liens requiring release and the evidence needed at closing.
An asset purchase does not eliminate every possible successor obligation. Have counsel evaluate tax, employment, environmental and other risks associated with the specific structure and business.
For an applicable Illinois bulk sale, the Department of Revenue’s Form CBS-1 instructions require the purchaser or transferee to file notice at least 10 business days before the sale or transfer. Determine applicability early and address required withholding, stop orders or release in the closing plan. The seller’s assurance that taxes are paid does not replace that process.
4. Check whether contracts survive closing
Review customer agreements, supplier contracts, leases, franchise documents, financing and software subscriptions. Identify assignment restrictions, change-of-control clauses, renewal dates and termination rights.
Create a consent list with deadlines and responsible people. A customer’s right to terminate or a landlord’s refusal to consent can affect the deal’s value and viability.
Confirm ownership and transfer of domains, trademarks, phone numbers and other operational assets. Plan authorized access without assuming every account is transferable.
5. Review employees and permission to operate
Identify employees expected to remain and how compensation, benefits and transition duties will be handled. Review employment agreements, accrued obligations and classification issues with appropriate advisers.
List licenses, permits, zoning approvals and registrations. Ask the issuing authority whether each transfers, requires notice or must be obtained anew. Ownership of the business and permission to operate are separate questions.
A franchise or regulated operation may need approvals before closing. The SBA’s business-planning resources provide a starting point for evaluating existing businesses and financing needs.
6. Turn findings into closing conditions
Decide which problems require resolution before closing and which can be addressed through price, holdbacks, indemnities or transition obligations. Protections need clear procedures and a realistic source of recovery.
An indemnity has limited practical value if the responsible seller has no accessible funds after closing. Evaluate its usefulness alongside its language.
Create a closing checklist for signatures, funding, consents, releases, asset delivery and post-closing tasks. Plan operational continuity and customer communications.
A starting document request
- Formation, governing and ownership documents.
- Tax returns, financial statements and supporting records.
- Debt, lien, litigation and tax disclosures.
- Material contracts and consent requirements.
- Asset and inventory lists.
- Employee, benefit, license and permit information.
- Draft agreement and transition plan.
Common purchase questions
Should review start before the purchase agreement?
It can begin during preliminary discussions with appropriate confidentiality protections. The agreement should provide access, timing and termination rights for the remaining review.
Is good standing enough?
No. It does not establish value, disclose every debt or verify that contracts and licenses remain usable after closing.
Does the seller’s lawyer protect my interests?
Do not assume so. Confirm representation and obtain advice directed to your own objectives and risks.
Review the deal before closing
Schedule a business-transaction consultation. Bring the LOI or agreement and available seller documents so we can identify decisions and coordinate with your accountant and lender. Learn about our business-transaction services.