Where smaller deals tend to slip
Many small business acquisitions are structured as asset purchases, which let the buyer leave many liabilities behind but require transferring leases, licenses, and contracts one by one. Financing often comes from an SBA-backed loan, a conventional lender, or a seller note, and lenders impose their own conditions and timelines. Diligence is frequently lighter than in larger deals, so problems with unpaid taxes, misclassified workers, or customer concentration may surface only after closing. New York generally requires a buyer of business assets to notify the state tax department before closing in a bulk sale, and skipping that notice can leave the buyer exposed to the seller's unpaid sales tax. A seller's ongoing role after closing, whether as an employee or a consultant, also needs to be defined in writing.
A practical diligence checklist
Ask for several years of tax returns and financial statements, payroll records, and sales tax filings, and compare them to the bank statements. Review the lease and confirm whether the landlord's consent is needed and on what terms. Collect key customer and supplier contracts, licenses and permits, and any pending claims or government notices. List equipment, inventory, and intellectual property such as domain names and social media accounts, and confirm who actually owns them. For sellers, prepare these records early, because delays in producing them can stall a lender's approval.
What gets settled early
We start by confirming the structure, the financing terms, and what the letter of intent actually binds the parties to. Purchase price allocation among assets affects both sides' taxes, so it should be agreed rather than left to the end. We look at the seller's non-compete, which courts usually treat more favorably in a sale of business than in ordinary employment, along with training and transition terms. Escrow, holdbacks, or seller financing can provide security for representations about the business. The closing checklist then includes permits, lease assignments, and notices that must be completed on time.
