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Can anyone provide guarantee that profit & tax documents of a Seller's business are not artificially inflated.

New York, NY |

The Seller of a business may artificially inflate all financial documents of his business in order to get a better sale price. Guarantee or insurance of no fraud in the financial documents of the Seller's business is required before purchasing the business. To sue the seller after purchase is not an option because Seller can spend everything in one day.

Attorney Answers 4

  1. Hire an accountant to examine his books, accounts, bank accounts, and records.

    I am an Attorney-at-Law, licensed to practice law only in the state of California. Unless we have both signed a formal retainer agreement, you are not my client, and my discussion of issues does not constitute legal advice. Opinions expressed herein are those of the author, and do not necessarily represent the opinions of those who hold other opinions.

  2. Tax returns are a good indicator of how a business is doing. Ask for copies of tax returns directly from the seller's CPA. A CPA is a licensed professional who most likely will not risk their license by providing false documents.

  3. Have a business appraiser or a CPA with business valuation experience review the books a d records of the seller before agreeing to purchase the business. Do a UCC1, judgement and lien search against the seller, and if the seller is a corporation etc, make sure the search is thorough.

    The responses provided to your questions are not legal advice, do not create any attorney client relationship, and are provided for informational purposes only.

  4. You would have to get a certification from the company's auditor that the books and records accurately reflect the conduct of the business. You can ask the seller to let you bring in your own accountants to conduct an audit and any other inquiries they deem necessary, and have them certify the results to you. You should be represented by a commercial attorney with a good exposure to sales and tax questions.

    I am an attorney admitted solely in NY. None of the answers I submit on this forum constitutes legal advice, even to questioners in NY, and no attorney-client relationship is hereby created.

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