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This sample due diligence list is NOT TO BE USED AS AN ACTUAL DUE DILIGENCE LIST. Its purpose is to act as a guide in creating a due diligence list for acquisition of a particular business. Click here to view a printable version of this 8 page due diligence list.
J. TAXES
Review all tax returns or copies of extensions of time within which to file such reports filed by the Company with the Federal government, the Internal Revenue Service, any state or local government or taxing authority, and any foreign jurisdiction or taxing authority, for at least the past three fiscal years, and any years prior there to that remain open and subject to review by the IRS or any other taxing authority. If applicable, review copies of all audit, determination and other correspondence pertaining thereto.
Review copies of all tax-sharing and other tax-related agreements.
Review all information related to any audit of any return or report filed by or on behalf of the Company for the last three fiscal years, and any pending audits for any prior periods that could affect the tax liability, credits or other tax attributes of the Company.
Review for state franchise or similar tax liabilities of the Company, a schedule setting forth, for each state in which such payments were made, the most recent period for which a franchise tax or similar tax payment was made, and the date on which each payment is due and payable each year.
For each applicable state, determine:
1. If there have been any state tax audits
2. If any adjustments made by federal revenue agents have been reported to the states affected
3. If the state tax returns have been amended to reflect IRS adjustments
Review any schedules showing the percentage of Federal Taxable Income being reported to the states in which the Company files returns (the sum of all state apportionment factors).
For personal and real property taxes, review a schedule setting forth, for each location in which such payments were made, the most recent period for which such tax payment was made, and the date on which such payment is due and payable each year.
Review a scheduling describing any ongoing tax disputes, together with copies of revenue agents' reports, correspondence, etc., with respect to any pending federal, state, provincial or similar tax proceedings, with regard to open years or items relating to the Company.
Review detailed reconciliation’s of the Company's effective tax rate for the past three years. Review an analysis of any deferred taxes.
Review schedules reconciling book income to taxable income for the last three years.
Review detail of the amounts and expirations of any carryovers of net operating or capital losses, investment tax credits, foreign tax credits and other tax credit carryovers. Determine the tax basis for the Company's assets.
K. MATERIAL AGREEMENTS AND DOCUMENTATION
Review all documentation relating to real property owned or leased by the Company (including, without limitation thereto, purchase agreements, leases, title policies, title reports, surveys, easements, rights of way, licenses and deeds). Note: for real property, title reports and surveys are especially important.
Review information regarding all mortgages and other security documents relating to any of the properties or assets (real or personal) of the Company.
Review all contracts with dealers, distributors, agents and others.
Review general sales conditions of the Company; model contracts, orders and invoices.
Review the form of product warranties of the Company.
Review general description of warranty claims during the last three years, and determine significant or unusual claims.
Review all contracts and agreements relating to the Company to which any officer, director, employee or stockholder of the Company is a party or in which any officer, director, employee or stockholder of the Company has an interest including secrecy, confidentiality, nondisclosure, assignment of inventions and non-compete agreements.
Review all equipment leases (operating or capitalized) to which the Company is a party or is bound or in which the Company has an interest.
Review all agreements and contracts concerning any acquisition or disposition in the past five years by the Company of any substantial properties or assets, whether real or personal, outside the ordinary course of business. Review all documents and agreements relating to any merger, consolidation or corporate division in the past five years in which the Company was a party or the surviving corporation.
Review all loan agreements, guarantees, indentures, promissory notes, debentures, line of credit and related documentation in connection with any loan or other indebtedness of the Company.
Review all loan agreements, guarantees, indentures, promissory notes, debentures, line of credit and related documentation in connection with any advances or loans made by the Company to an officer, director, employee or shareholder of the Company.
Review all license and royalty agreements to which the Company is a party or in which the Company has an interest.
Review all agreements and contracts between the Company and any affiliate including, without limitation thereto, any royalty and license agreements.
Review all sales, marketing and distribution agreements to which the Company is a party or by which it is bound (including documentation with any brokers and other independent sales persons or entities).
Review all contracts and agreements with suppliers of services, raw materials, finished or semi-finished materials,
or products of the Company.
Review all standard forms of purchase orders, sales orders, supply contract, service contracts and sales contracts
used by the Company.
Review all agreements to which the Company is a party or by which it is bound, for the delivery, manufacture or supply
of goods or services.
Review any other particular agreements based on Company business.
Review government contracts and subcontracts, if any.
Review all evidences of inter-company debt.
Review all insurance policies, and a claims history and any correspondence between the Company and the insurer.
Review all certificates of insurance (casualty, property, liability, errors and omissions, officer and director, etc.).
Determine to the extent coverage has changed during the past three years.
Review any other contracts, agreements or documents material to the business of the Company or any affiliate including management service and tax sharing agreements, performance guarantees, bonds and indemnification agreements, noncompete and confidentiality agreements.
Review any contracts with independent or self-employed consultants.
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For additional information regarding Due Diligence, contact a Business Team broker or use our buying a business or selling a business online forms. |
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