Sacramento Tax Due Diligence for the Purchase of a Company or Asset

Cook CPA Group

It is important for both buyers and sellers to consider the impact that purchasing a major asset will have on their financial health. Companies that are involved in purchasing or selling a company or major asset can do so by using an accounting service to perform due diligence, which will ensure that all properties involved will be properly allocated tax liabilities.

If your company is currently involved in the sale or purchase of another company or major asset, seek the assistance of an experienced asset purchase due diligence accountant from Cook CPA Group. An accountant can help ensure that your transaction will go as smoothly as possible, and that your financial interests are protected. Get in touch with the Sacramento tax due diligence accountants at Cook CPA Group for asset or company purchases soon. Call (916) 432-2218 to learn more about tax due diligence for the purchase of a company or asset.

The Due Diligence Process in Sacramento, CA

When an accountant performs due diligence for a client who is about to purchase a company or asset in Sacramento, they will examine all of the business records and documents that are relevant to the purchase. This process will occur after both parties have signed intent-to-purchase documents but before they have begun a formal purchase agreement.

Accountants that are performing due diligence during the sale of a company or asset will examine documents that show potential liabilities, such as liens, sales agreements, purchase agreements, litigation and lawsuit documents, and any other documents that may clarify the financial health of the company being purchased. During the process of due diligence, accountants may also visit the business location so that they can speak to employees and appraise facilities and equipment, as well as the property itself. Future plans for expansion may also be taken into account, as well as the comprehensive history of the company.

Essentially, all aspects of the company will be assessed by an accountant during the due diligence process. The things that are taken into consideration during due diligence include:

  • Legal matters – Accountants will investigate the legal structure of the business that is being purchased during the due diligence process; this may involve reviewing copies of the bylaws of the company, as well as meeting minutes, contracts, warranties, service agreements, and product liability documents. Accountants will also review current and pending litigation and the company’s relationship with OSHA.
  • Management and employees – While they are performing due diligence as part of the sale of a company, accountants will take a look at the person or people that run the company, along with their qualifications and credentials. They will also look into executives, board members, and other people that make major decisions in the company. Contracts, the employee handbook, and other documents that contain information about employee pay, taxes, and benefits will be examined as well.
  • Products and services – Before a company or major asset is sold, an attorney will take a close look at the products and services provided by the business. If the company being sold is in the business of selling products, then the due diligence accountant will look at the catalog of their products, as well as brochures, patents, copyrights and trademarks, price listings, pricing strategies, service availability, terms of service, the projected growth rate of the product, and information about the competitiveness of the market in which the products are sold.
  • Operations – While they assess a company, a due diligence tax accountant will take a close look at the habits of customers, the company’s business model, and the market that the company operates in, as well as the trends that are driving the market. The due diligence tax accountant will examine the public perception of the company.
  • Marketing – A due diligence tax accountant will look at the marketing plan, market analysis, purchase agreements, and growth opportunities of the company that is about to be purchased. The due diligence tax accountant will also perform a SWOT (strengths, weaknesses, opportunities, and threats) analysis. The company being purchased will also have to produce a list of their competitors, both past and present.
  • Competition information – Due diligence tax accountants will examine a company’s customers, financial matters, and operations (which include supplies, fixed assets, facilities, and more). Profitability will be verified and financial data will be compared to common financial ratios.

What Can Happen Without Due Diligence by an Accountant

If a company does not use an accountant to perform due diligence prior to the purchase of a company or other major asset in Sacramento, they put themselves at risk of being misled about the value and liability of the company that they are purchasing. The buyer’s chances of making a bad investment are higher if the health of the asset is not investigated and verified before it is purchased. By failing to perform due diligence on the purchase of a company, purchasers make themselves susceptible to buying a business that has hidden debts or lawsuits or that provides faulty products or services.

Sacramento Tax Due Diligence Accountant for Asset and Company Purchases

Companies that are purchasing or selling a company or other major asset should use the assistance of an accountant to perform due diligence on the transaction. Doing so can protect financial interests and guard against trouble at a later date. The Sacramento tax due diligence accountants that work with Cook CPA Group can make sure that the transaction has been analyzed and assessed before money changes hands. To learn more about how an accountant from Cook CPA Group can help your company perform due diligence, get in touch with them today by calling (916) 432-2218.

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