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Due diligence is your chance to confirm that the business is what the seller says it is, before your money is committed. Use this checklist with your lawyer and accountant. Not every item applies to every deal, but skipping a whole section is how buyers get surprised.

Financial

• Three to five years of financial statements, ideally prepared or reviewed by a CPA
• Corporate tax returns and CRA notices of assessment, which should match the statements
• Monthly sales for at least the last 24 months, to spot seasonality and trends
• Bank statements that tie back to reported revenue
• GST/HST (and provincial sales tax, where applicable) filings and any amounts owing
• Payroll records and source deduction remittances
• Accounts receivable aging and bad debts
• Inventory counts and how inventory is valued
• Normalization adjustments behind the asking price (see our valuation guide)

Legal and corporate

• Articles of incorporation, minute book and share register (for share purchases)
• Liens and security registrations against the business and its assets (search the provincial personal property registry)
• Litigation, claims or regulatory orders, past and pending
• Key contracts: suppliers, customers, franchise agreements, and whether they can be assigned to you
• Intellectual property: trade names, trademarks, website domains, social media accounts

Premises

• The lease: remaining term, renewal options, rent increases, assignment clause and landlord consent
• Zoning and permitted use for your planned operations
• Building condition, especially for hotels, care facilities and food businesses
• Environmental issues (fuel tanks, past industrial use)

Licences and compliance

• Business licences and sector licences (child care, care facilities, food service, liquor), and whether they transfer to a new owner
• Inspection reports and any outstanding orders
• Health and safety record (WorkSafe / WSIB claims history)
• Insurance policies and claims history

People

• Employee list with roles, wages, tenure and certifications
• Employment contracts, especially for key staff
• Whether staff will stay after the sale (in an asset purchase, employment generally continues under provincial employment standards rules, so get advice)
• Any unionized workforce and the collective agreement
• The owner's own role, and who covers it after the handover

Customers and operations

• Customer concentration: what share of revenue comes from the top five customers?
• Online reviews and reputation
• Supplier terms and dependencies
• Systems: booking, point of sale, accounting software, and access handover

If you're immigrating

• Confirm with a licensed professional that the business and deal structure fit your intended pathway
• Check timing rules, since some streams require registration or an invitation before purchase
• Keep clear records of your investment and the source of your funds
• If you're not a Canadian citizen or permanent resident, plan your Investment Canada Act notification with your lawyer

Before you waive conditions

Once due diligence is done, your lawyer will help you decide whether to proceed, renegotiate the price or terms, or walk away. Walking away from the wrong deal is a good outcome.

This checklist is general information only and not legal or tax advice.

Sources: Small Business BC — The tax side of buying or selling a business; Innovation, Science and Economic Development Canada — Investment Canada Act.