Due diligence checklist: what documents do you need to sell a business?

To prepare for due diligence, organise evidence of what the buyer is acquiring, how the business makes money, what obligations come with it and whether it can keep operating after the sale. Start with corporate records, financial information, customer and supplier contracts, employment documents, intellectual property and material risks.

The exact request list depends on the business, buyer and transaction. A share sale and an asset sale do not require identical work. A regulated software business and a local service company will not have the same data room.

Use this checklist to identify gaps before a buyer creates a deadline for you. It is a preparation framework, not an exhaustive legal disclosure list.

What is due diligence when selling a business?

Due diligence is the buyer's investigation of the business and the assumptions behind their offer. It can cover financial, legal, commercial, tax, operational, technology and other matters.

The buyer is looking for evidence, inconsistencies and risks that may affect whether they proceed, what they pay and the protections they require. Sellers should also investigate the buyer's funding, credibility and proposed terms. Diligence is not a reason to stop asking your own questions.

Your first organisational decision is simple: who owns the process? Nominate one coordinator, assign subject owners and agree how answers will be reviewed. If every request goes directly to the founder, the sale process can disrupt the business it is meant to sell.

The seller's due diligence document checklist

1. Corporate ownership and transaction scope

Prepare:

• Incorporation documents, articles and relevant company registers.
• A current ownership table, including options and other rights to shares.
• Shareholder agreements and material board or shareholder approvals.
• A group structure showing subsidiaries, related entities and relevant assets.
• A clear description of what is included and excluded from the proposed sale.

Check whether the records agree. An ownership spreadsheet that conflicts with formal records is not ready to share without explanation. If property, intellectual property or important contracts sit in another entity, make that visible early.

Ask your legal and tax advisers to help establish the structure. GOV.UK's guidance on selling a limited company is a useful introduction to the responsibilities involved, not a replacement for transaction advice.

2. Financial performance, cash and tax

Prepare:

• Recent annual accounts and the management accounts supporting current trading.
• Monthly revenue, gross margin and operating cost analysis, with explanations for material changes.
• An EBITDA adjustment schedule linked to evidence and reconciled to the accounts.
• Aged debtor and creditor reports, cash records, debt and finance agreements.
• Tax returns, payment records and details of material enquiries, exposures or unresolved issues.

Include a forecast and explain its assumptions, but keep it separate from historical actuals. Make the accounting periods and definitions consistent across files.

Do not rely on one annual profit number. A buyer may want to understand seasonality, overdue receivables, working-capital needs and the cash required to sustain the business. Underlying trading and cash costs need careful analysis.

3. Customers and the quality of revenue

Prepare:

• A customer revenue analysis, including concentration and material changes.
• Material customer contracts, amendments and side letters.
• Renewal, termination, assignment and change-of-control provisions.
• Evidence supporting contracted recurring revenue, retention and churn claims.
• A pipeline and order-book analysis that clearly separates commitments from opportunities.

Treat “recurring revenue” as something to explain, not a label to apply to every repeat purchase. A customer who usually returns next year is different from one with a binding commitment, and a signed contract can still contain termination rights.

Review data-sharing restrictions before uploading identifiable customer information. Early-stage materials can often use anonymised summaries, with detailed access controlled as the process develops.

4. People, responsibilities and operational continuity

Prepare:

• An organisation chart with roles, decision rights and key-person dependencies.
• Employment and contractor agreements, with relevant amendments.
• Remuneration, incentive and benefit schedules, shared with appropriate access restrictions.
• Details of material disputes, obligations or outstanding employment issues.
• Process documentation, backup arrangements and a realistic founder handover plan.

The point is to show who does the work and what the buyer needs to retain or replace. Do not upload sensitive employee records indiscriminately. Let your advisers determine what information is necessary, when it should be shared and which employment obligations the proposed structure creates.

5. Suppliers, property and other commitments

Prepare:

• Material supplier, distributor and partner agreements.
• Key renewal, termination, minimum-volume and exclusivity provisions.
• Property leases and relevant landlord permissions or restrictions.
• Equipment leases, software commitments and other long-term obligations.
• An analysis of single-source dependencies and realistic alternatives.

A low supplier cost is less reassuring if it relies on an informal arrangement that cannot continue after the sale. Record the commercial reality, including related-party arrangements and commitments not obvious from a monthly profit and loss account.

6. Intellectual property, technology and data

Prepare:

• An intellectual property register identifying ownership and relevant licences.
• Employee and contractor IP assignments where required, including the position on externally developed work.
• Important software licences, third-party dependencies and material usage restrictions.
• Security policies, backup and recovery arrangements, and material incident records.
• Privacy documentation and an assessment of what personal data can lawfully be shared or transferred.

Do not assume the company owns everything merely because it paid for development. Check the agreements and chain of ownership.

The ICO's M&A data-sharing guidance makes clear that a change involving personal data needs attention to purpose, lawful basis, governance and security. An NDA does not by itself settle those questions.

7. Legal, regulatory and other material risks

Prepare:

• Material litigation, claims, complaints and threatened disputes.
• Relevant licences, permissions, accreditations and renewal requirements.
• Insurance policies and material claims history.
• Relevant compliance records and any material regulatory correspondence.
• A risk register recording the issue, potential impact, owner and current response.

Adapt this section to the sector. Environmental matters, product liability, regulated activities, export controls or specialist certifications may be central in one business and peripheral in another.

The purpose is not to make the business appear risk-free. It is to identify material issues, investigate them and avoid presenting incomplete answers as certainty.

How to organise your data room

A data room should make it easy to find the right evidence and understand its status. It should not be a folder containing every file the company has ever created.

Use a structure such as:

1. Corporate and ownership.
2. Financial and tax.
3. Customers and commercial.
4. People and operations.
5. Suppliers and property.
6. IP, technology and data.
7. Legal, regulatory and insurance.
8. Questions and responses.

Create an index before uploading. Give each item an owner, date, version and status. A status can be “available”, “being updated”, “not applicable” or “requires adviser review”. Do not mark a gap complete because an empty folder exists.

For example, an index row might read:

Use version control and a single question log so the buyer does not receive contradictory answers from different people.

What should you share, and when?

Stage access according to the purpose, the recipient and the sensitivity of the material. A possible competitor does not need unrestricted access to identifiable customer pricing at the first conversation.

Use appropriate confidentiality agreements, permissions, redactions and, where advised, a clean-team arrangement. Get advice on competition and data-protection issues where relevant. Keep records of who receives material and why.

This is not about withholding a material problem. It is about disclosing accurately through a controlled process.

Questions sellers ask about due diligence

How many years of accounts should I prepare?

The buyer's request depends on the business and transaction. Several recent financial years, current management accounts and supporting records are a sensible starting point. Agree the required period with your advisers rather than treating one generic list as universal.

Should I resolve every issue before speaking to buyers?

Not necessarily. Some matters take time or require a buyer's decision. What matters is understanding the issue, presenting it accurately and having a realistic response. Do not hide a material problem or promise a fix you cannot deliver.

Does a completed checklist mean I am ready to sell?

No. It means you have organised an important part of the evidence. Sale readiness also depends on earnings, management, customers, objectives and the proposed deal. A well-labelled data room cannot repair weak trading.

General preparation guidance, not an exhaustive diligence list or legal, tax or data-protection advice for a specific sale.