Due Diligence Checklist for Buying a Business

Due diligence is the step where you confirm you’re buying what you think you’re buying—financially, legally, and operationally—before your conditions are removed. It’s how buyers avoid hidden liabilities, overstated profits, surprise lease problems, lien issues, and “one customer runs the whole business” risk.

Use this page as a structured checklist to review the business, validate the numbers, and coordinate with the right professionals (accountant, lawyer, lender, and industry specialists) so you can move forward with clarity.

Ready to take the next step? (587)-719-5523 / Get in touch or visit MohitDhillon.com with us today to discuss your commercial real estate goals or schedule a personalized property tour.

Business Due Diligence Snapshot

What you must verify before you commit to closing

Key Highlights

  • Confirm earnings are real and repeatable

  • Verify taxes, registrations, and compliance status

  • Check liens/security interests against business assets

  • Review the lease and landlord consent requirements

  • Audit contracts, staff, systems, and transferability

Financial Review

Confirm the business performance with real records, not summaries. Review historical financial statements, bank statements, revenue concentration, margins, expenses, and the logic behind any “add-backs” so you understand what cash flow is truly sustainable after you take over. A due diligence process should explicitly validate financial statements, assets, receivables, and inventory before you rely on a valuation or multiple.

Tax Compliance

Validate the business is properly registered for the tax accounts it needs (and that registrations are active where required). Confirm GST/HST details and understand whether you’ll need a new business number or updated accounts after purchase, depending on your structure and what you acquire. If a seller can’t clearly verify registrations, treat it as a red flag that requires proof, not promises.

Legal Checks

Your lawyer should confirm ownership, transaction structure (asset vs share), and what liabilities follow the deal. Review corporate records, existing contracts, disputes, and any obligations that could carry forward, and ensure representations/warranties and conditions match the real risk profile you uncover during review.


Lease Transfer

For many businesses, the lease is the business. Review the full lease, options, rent increases, operating cost clauses, permitted use, assignment provisions, and landlord consent requirements. If the lease can’t be assigned on acceptable terms, the deal economics can change immediately—even if the business “looks profitable” on paper.

Operations Audit

Confirm how the business runs day-to-day: key suppliers, vendor terms, systems, staffing, operating procedures, customer acquisition channels, and handover/training requirements. The question is simple: can the business operate profitably without the seller’s personal relationships, special pricing, or informal workarounds that won’t transfer to you.

Risk Flags

Run checks to catch hidden claims and structural risk. For Alberta buyers, that includes searching for liens or registrations against personal property (equipment and other assets) before purchasing, so you don’t inherit secured claims tied to what you’re paying for. Combine that with customer concentration checks, unusual revenue spikes, unexplained expense gaps, and any compliance gaps that could create immediate costs after closing.

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Deal Protection

How to turn your checklist into conditions that actually protect you

Due diligence works best when the purchase contract is structured to match what you still need to verify. Conditions should give you time to review financials, leases, tax status, and any lien/security issues, and they should be specific enough that you can walk away (or renegotiate) if the facts don’t match what was represented.

A practical workflow is: request documents early → verify numbers against source records → confirm lease transfer path → run lien/tax verification → finalize financing and legal review → remove conditions only after the file is clean. When buyers skip steps, the “surprise costs” usually show up in the first 90 days after takeover.

BDC’s guidance emphasizes using a structured due diligence process and collaborating with experts; CFIB similarly frames due diligence as a readiness and “do you know what you’re buying?” exercise—not a formality.

Tell Us What You Need

MOHIT DHILLON

Calgary Commercial & Business Acquisition Advisor

Mohit Dhillon

I help Alberta buyers evaluate business purchases with a practical, deal-first approach—reviewing the numbers, lease risk, transferability, and the conditions you need so you’re protected before waiving subjects. My focus is helping you avoid overpaying, prevent financing surprises, and build a clean path to a smooth takeover.

FAQ's

What’s the biggest due diligence mistake buyers make?
Relying on summaries (or pro-forma claims) instead of verifying source records like bank statements, detailed financials, lease terms, and tax registrations.

How many years of financials should I review?
Enough history to confirm trends and stability (and to explain any unusual spikes or drops). The exact range depends on the business, seasonality, and lender requirements.

What documents should I demand early?
Financial statements, bank statements, tax filings/registrations, full lease, rent roll (if applicable), contracts, employee/payroll details, supplier terms, and an asset list.

Should I do a lien search in Alberta when buying a business?
Yes—especially if you’re buying equipment or other personal property assets. A search helps identify whether assets have registrations or claims tied to them.

Why does the lease matter so much?
If the lease can’t be assigned or renewed on acceptable terms, location-dependent businesses can lose value immediately regardless of historical profits.

What’s the difference between an asset sale and a share sale for due diligence?
The structure impacts what you’re buying and what liabilities can follow. Your lawyer should explain the implications and tailor the agreement and conditions accordingly.

How do I verify GST/HST registration?
CRA guides confirming a GST/HST account number and what to do if it’s not provided.

Who should be on my due diligence team?
Typically: a commercial lawyer, accountant, and lender/financing partner—plus industry specialists where needed (equipment, environmental, or technical systems).

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