Buyer's guides · Before you make an offer
What documents to ask a seller for — and what each one has to prove
Ask for eleven documents: three years of tax returns, three years of profit and loss statements, the current balance sheet, bank statements, the lease, the payroll register, the customer list by revenue, the equipment list, the licences, the outstanding loan documents, and the franchise agreement if there is one. Each proves something no other document can.
What this answers
- The eleven documents worth requesting before you make an offer, and what each one proves on its own.
- Why the tax return outranks the profit and loss statement, and the profit and loss statement outranks the listing.
- What it means when a document is slow, partial, or replaced by a summary the seller typed up.
- The order to read them in, so the cheapest question kills the worst deal first.
Why the list matters more than any single number
A business is sold as a story: a headline earnings figure, a multiple, a reason for selling. Every part of that story is either supported by a document or it is not, and the difference is invisible until you line the documents up against each other. That is the whole job at this stage — not valuing the business, not negotiating, just establishing which claims have paper behind them.
Main Street businesses change hands at a median of 2.86× SDE, so the arithmetic is unforgiving: an earnings figure overstated by a hundred thousand dollars is roughly two hundred and eighty-six thousand dollars of price. Proving the earnings is not accounting pedantry. It is the best-paid hour of the entire purchase.
The eleven documents, and what each one proves
Ordered the way a careful buyer uses them, not the way a broker sends them.
| Document | What it proves that nothing else does | Ask for |
|---|---|---|
| Business tax returns | What the seller told the government the business earned — the one version of the numbers that carries a penalty for being wrong | 3 years, complete with all schedules |
| Profit and loss statements | How the earnings are built, month by month: the seasonality, the trend, and where the costs sit | 3 years plus the current year to date, monthly if it exists |
| Balance sheet | What the business owns and owes today — the debts that do not appear anywhere in a profit figure | Current, plus the same date last year |
| Bank statements | That the revenue actually arrived. Deposits are the hardest number in the packet to dress up | 12 consecutive months, all business accounts |
| The lease | Whether you get the location at all, on what terms, and for how long — see lease assignment | The signed lease plus every amendment |
| Payroll register | Who actually runs the business, what they are paid, and what it will cost to replace the owner | Most recent full year, by employee and role |
| Customer list by revenue | Whether the earnings rest on many customers or a few — see customer concentration | Top 10 by revenue, last 2 years, names can be redacted |
| Equipment list | What conveys with the sale, what is leased, and what is quietly the owner's personal property | With age, condition, and lease or loan status per item |
| Licences and permits | Whether the right to operate transfers to you, or stops with the seller | Every licence the business trades under, with expiry dates |
| Loan and lien documents | What is secured against the assets you are buying — see UCC-1 filings | Every outstanding note, plus a lien search you run yourself |
| Franchise agreement and FDD | Whether the franchisor will approve you, what they charge, and what they require you to spend — see Item 19 | If the business is a franchise: the current FDD and the signed agreement |
The hierarchy: which document wins when two disagree
They will disagree. That is not usually fraud — it is the ordinary gap between a document written for a tax authority, a document written for a bank, and a document written to sell something. What matters is knowing which one to believe.
- Bank statements. Money that arrived, on a statement the seller did not typeset.
- Tax returns. Filed under penalty, and understating income there is a crime, which makes overstatement to you visible by comparison.
- Profit and loss statements. Usually accurate, but prepared in-house and easy to reshape.
- The listing or CIM. Marketing. A starting point for questions, never evidence.
The common trap sits between levels two and three. A seller's profit and loss statement shows strong earnings; the tax return shows far less; the difference is explained as add-backs. Some of those adjustments will be perfectly fair. The ones without an invoice, a bank line or a payroll record behind them are claims, and a claim is worth what a claim is worth — before you multiply it by three.
What a refusal actually tells you
Sellers are not obliged to hand a stranger their financial life, and some hesitation is reasonable. Read the shape of the refusal rather than the fact of it.
- "After we sign an NDA." Normal. Sign it, then ask again.
- "After we have a letter of intent." Common for customer names and employee records — reasonable. For tax returns, it is not: an LOI priced on unverified numbers is an anchor you then have to argue your way off.
- "My accountant has it, it will take a few weeks." Plausible once. Twice, on the document that matters most, is information.
- A summary the seller typed up instead. This is the one to watch. A spreadsheet titled "Adjusted earnings" is not a financial statement; it is an argument about one. Ask for the document underneath it.
- "Nobody else asked for that." Probably true, and not a reason.
A request that goes unanswered is itself a finding, and it belongs in your notes with a date next to it. Unanswered is not the same as refused, and neither is the same as "does not exist" — but only one of those three is a reason to keep going.
Reading order: cheapest question first
Read to disqualify, not to confirm. The aim of the first pass is to find the one fact that makes the rest of the work unnecessary, and to find it before you have paid anyone.
- The lease. Five minutes. If the term left is shorter than your loan, or assignment needs a landlord consent that has not been sought, nothing else about the business matters yet.
- Tax return against listing. Ten minutes. Compare the revenue line in the most recent return to the revenue in the listing. A gap the seller cannot explain in a sentence is the whole conversation.
- Bank deposits against the profit and loss statement. Half an hour. Twelve months of deposits should land near the revenue claimed. When they do not, the explanation matters more than the number.
- The add-back schedule, line by line. Each adjustment either has a document behind it or moves to a list of questions.
- Payroll against the owner's role. If the owner works full time and no manager appears on the payroll, the earnings figure contains a salary you will have to pay or a job you will have to do. Both are real money — the arithmetic is in SDE.
- Everything else. Liens, licences, equipment, franchise terms. Slower, and worth doing only on a deal that survived the first five.
None of this replaces a Quality of Earnings review or an attorney. It decides whether this deal deserves them — and which questions to arrive with when it does.
Sign the NDA first, then send one written list
Ask once, in writing, for everything at once. A drip of requests over three weeks reads as indecision and gives a seller room to send documents one at a time, in the order that suits them. One list, one date, one reply.
Give each request a reason
"Twelve months of bank statements, to tie deposits to the revenue in the profit and loss statement" is answered far more often than "bank statements". The reason also tells you whether you actually need the document.
Set a date, not a deadline
"Whatever you have by Friday" gets you a partial packet on Friday, which is more useful than a complete one that never arrives. What is missing on Friday is your list of questions.
Log what arrives, what is missing, and when you asked
A dated log is the difference between a hunch that the seller is slow and a fact you can point at. It is also the document your lender and your attorney will want later.
Read to disqualify before you spend anything
Work the cheap checks above in order. A deal that fails the lease or the tax-return comparison has just saved you a professional fee, and that is the pre-screen doing its job.
Questions buyers ask
What documents should I ask for before making an offer on a small business?
Three years of business tax returns, three years of profit and loss statements plus the current year to date, a current balance sheet, twelve months of bank statements, the lease and its amendments, the payroll register, the top customers by revenue, the equipment list, the licences and permits, the outstanding loan and lien documents, and — if it is a franchise — the franchise agreement and the current FDD. Each proves something none of the others can.
Is it normal for a seller to refuse tax returns before a letter of intent?
It is common, but it is worth pushing back on. Signing an LOI sets a price anchor, and setting it on numbers no document supports means renegotiating later from a weaker position. Customer names and employee records reasonably wait for an LOI; the tax returns are the evidence the price rests on.
What if the seller's numbers do not match the tax return?
Expect a gap and ask what explains it. The usual answer is add-backs — expenses the seller argues will not exist for a new owner. Each one is legitimate only if the expense genuinely disappears when the owner does and a document proves it. Adjustments that exist only in a spreadsheet are claims, not earnings.
Do I need an accountant to read these documents?
Not for the first pass. Comparing revenue on the listing to revenue on the tax return, checking the remaining lease term against the length of your loan, and asking which add-backs have documents behind them are all arithmetic and reading. A CPA is worth paying once a deal has survived that, which is exactly the point of screening cheaply first.
Sources
- IBBA / M&A Source, Market Pulse Q4 2025 (survey of 350 brokers)
- IRS — Get transcript: how a taxpayer obtains a return transcript
Read next
- Seller's Discretionary Earnings (SDE)
- Add-backs
- Pre-screen, Quality of Earnings, or full due diligence — which does your deal need?
- how-it-works.html
Have the documents already? A DealLoupe pre-screen reads what the seller gave you and reports the red flags, the evidence gaps and the questions to ask — before you spend anything on due diligence. See what it costs →
Last updated: 2026-09-19. Educational information, not financial or legal advice — and not a substitute for a CPA, an attorney or a formal Quality-of-Earnings review.