Thinking of Buying a Business? Here’s Your Due Diligence Checklist

Shaun Chaudhry
May 16
2 min read

Summary:

Proper due diligence can help you avoid financial, legal, and operational pitfalls
Key areas include finances, legal risks, tax liabilities, and customer contracts
Always review financial statements, business structure, and ATO records
Engage professional advisors to uncover hidden issues before signing any deal
A well-executed review can save you from costly mistakes

Why Due Diligence Is Critical Before Buying a Business?

Purchasing a business can be a smart move—but only if you look under the hood before committing. At Proactive Tax Advisors, we often assist buyers in performing due diligence so they can make informed, confident decisions.

This process is more than a formality—it’s your safety net.

The Ultimate Due Diligence Checklist:

Before finalising any business purchase, make sure you’ve reviewed the following areas:

1. Financial Records

Profit & loss statements for the past 3 years
Balance sheets and cash flow statements
BAS and tax returns
ATO portal checks for any outstanding tax debts
Any existing loans, debts, or financial obligations
Aged receivables and payables reports

Why it matters: You need to ensure the business is profitable and not hiding financial issues.

2. Tax & Compliance

GST registration and ATO lodgement history
Payroll tax, PAYG and superannuation compliance
Review of any prior ATO audits or disputes
ABN and business name registration verification

Why it matters: Tax liabilities carry over. You don’t want to inherit unpaid obligations.

3. Legal & Contracts

Business structure and ownership verification
Leases, customer/supplier contracts, and franchise agreements
Licences, trademarks, or IP rights
Pending litigation or disputes
Transferability of licences and contracts

Why it matters: Legal risks can lead to loss of income or even lawsuits if not reviewed.

4. Employees & HR

Employee contracts and award compliance
Leave entitlements and liabilities
Superannuation and WorkCover obligations
HR policies and workplace history

Why it matters: You're responsible for employee obligations after purchase.

5. Operations & Systems

Inventory and asset register
Business processes and systems
Supplier and customer relationships
Technology and software used in the business

Why it matters: A business that runs smoothly will be easier to manage and scale.

How Proactive Tax Advisors Can Help

Buying a business without proper checks is risky. We assist clients by:

Conducting independent financial due diligence
Reviewing tax and compliance risks
Advising on business structure suitability
Working alongside legal teams for contract and legal due diligence

Conclusion

Don't buy blind. Whether it’s a café, an online business, or a franchise, proper due diligence ensures you’re buying into opportunity—not someone else’s problem.