What is Adequate Due Diligence?
Adequate due diligence depends on the facts and circumstances of each particular purchase. Buyers should consult with their advisors, including their accountant and attorney, to determine what constitutes adequate due diligence for their purchase. There is no substitute for adequate pre-closing due diligence. A prospective buyer of a business must investigate all important aspects of the business and owner’s operation of the business because what the buyer does not know can come back to haunt the buyer after closing. Adequate due diligence should include the following at a minimum: • Investigate all entities involved in the transaction and confirm that the entities exist and are in good standing. It is very common for people to operate a business under a name that is different from the actual legal name of the entity or to operate as an entity after the government has revoked the entity’s legal existence. Confirm the exact name of all entities involved in the transaction and make sure
Adequate due diligence depends on the facts and circumstances of each particular purchase. Buyers should consult with their advisors, including their accountant and attorney, to determine what constitutes adequate due diligence for their purchase. There is no substitute for adequate pre-closing due diligence. A prospective buyer of a business must investigate all important aspects of the business and owner’s operation of the business because what the buyer does not know can come back to haunt the buyer after closing. Adequate due diligence should include the following at a minimum: • Investigate all entities involved in the transaction and confirm that the entities exist and are in good standing. It is very common for people to operate a business under a name that is different from the actual legal name of the entity or to operate as an entity after the government has revoked the entity’s legal existence. Confirm the exact name of all entities involved in the transaction and make sure
