Financial Records

Why: This gives the prospective buyer a current view of the business’s financial health. Gather the year-end balance sheets and income statements for the previous three years. If you don’t have these records, your accountant should be able to provide them (accountants usually keep some type of trial balance report in order to prepare corporate returns).  Why: This gives the prospective buyer a view of the business’s financial health and growth over the last three years.

Gather the corporate tax returns and your personal tax returns for the same three years.

Why: The buyer‘s accountant can verify the numbers in the financials using the returns and vice versa. (These documents should be provided only after a deal “in principle” is agreed upon.) Confirm with your accountant that the tax returns, both corporate and personal, will support the financial records. Why: If the numbers don’t support each other, you will need to explain this to the buyer. If you do not disclose this information and the buyer finds out, he or she will likely terminate negotiations. If this occurs after a deal is completed, it may be grounds for the buyer to rescind the entire deal on the basis that you provided false information. Lawyers will charge that “the books were cooked.” You may be held personally liable, and worst of all, you may get back a business that has been run into the ground—not to mention the substantial attorney’s fees you‘ll have to pay in the interim. IT’S NOT WORTH IT.

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