Buying an established business can give you customers, employees and assets from day one. It can also bring debts, contract obligations or compliance problems you did not expect.
Before closing on an Illinois business, taking these five steps can help you spot issues that could affect the deal:
1. Check the seller’s business status
Search the Illinois Secretary of State’s business entity database to confirm the company’s status and basic filing information. For a corporation or LLC, you can also check whether a certificate of good standing is available.
2. Review tax obligations
Review the company’s state tax history for unpaid taxes or other tax debts. If your purchase qualifies as a bulk sale under Illinois law, the purchaser must file Form CBS-1 with the Illinois Department of Revenue at least 10 business days before the sale or transfer. Failing to file on time can make the purchaser personally liable for certain unpaid state tax liabilities of the seller.
3. Search for claims against business assets
Uniform Commercial Code (UCC) filings may show whether a lender has a legal claim on equipment or other business property. Comparing those filings with the assets included in the sale can help identify issues before closing.
4. Examine contracts and licenses
Review major customer and vendor contracts, commercial leases and financing agreements for terms that could affect a transfer. You can also confirm whether required state or local licenses and permits remain valid or need new applications after the purchase.
5. Review employment and privacy obligations
Check payroll records, employee policies and wage practices for unresolved obligations. If the company uses biometric data, such as fingerprints, for employee timekeeping, review its compliance with the Illinois Biometric Information Privacy Act, including notice, consent and data-retention requirements.
Know what you are taking on before closing
The risks you take on can differ depending on whether you buy business assets or ownership interests. In some asset purchases, successor liability rules can make a buyer responsible for certain debts or obligations of the seller. Identifying these issues before closing can give you a clearer basis for evaluating the price, structure and terms of the purchase. Legal guidance can also help you review the transaction documents and determine which liabilities or obligations could affect you after closing.