Before you sign a purchase agreement for a Long Island business, you need to verify what you are really buying. Due diligence is the investigation that confirms the seller’s numbers, contracts and legal standing are what they claim, and it is the buyer’s best protection against inheriting problems.
Whether you are looking at a deli in Nassau County, a medical practice in Suffolk, or a contracting company serving the NYC metro area, the process is similar. This checklist covers the main areas to review. Every deal is different, so treat it as a starting point and have an attorney and an accountant guide the details.
1. Financial records
Start by testing whether the business earns what the seller says it earns. Ask for:
Three to five years of profit and loss statements, balance sheets and cash flow statements
Federal and New York State tax returns for the same period, so you can compare them with the financial statements
Monthly bank statements, to match deposits against reported revenue
A list of accounts receivable and accounts payable, with aging
A list of all debts, loans and equipment financing, and any liens against the business
Detail on owner compensation and personal expenses run through the business, so you can see the true earnings
In a cash-heavy business such as a restaurant, salon or retail shop, it is common for reported income to differ from actual income. Have a CPA review the numbers rather than relying on the seller’s summary.
2. Legal and corporate records
Confirm that the seller actually owns what is being sold and has the authority to sell it. Check:
The seller’s legal entity and standing: formation documents, operating agreement or bylaws, and good standing with the New York Department of State
Who the owners are, and whether any partner, spouse or investor must approve the sale
UCC lien searches and judgment, tax lien and bankruptcy searches against the seller and the business
Pending, threatened or past lawsuits, demand letters and government investigations
Insurance policies and the claims history for the last several years
Also decide early whether you are buying the company’s assets or its stock (or membership interests). An asset purchase generally lets you leave most of the seller’s liabilities behind, while a stock purchase brings them with you. That choice shapes how much of this review matters most.
3. Contracts, leases and customers
A business is only as stable as the agreements it runs on, and many of them will not transfer automatically. Review:
The commercial lease: remaining term, renewal options, rent increases, personal guarantees, and whether the landlord must consent to an assignment
Customer and vendor contracts, including any that can be terminated when ownership changes (change-of-control clauses)
Franchise agreements and any transfer fees or approval rights the franchisor holds
Equipment leases, financing agreements and service contracts
Existing non-compete, non-solicit and confidentiality agreements with employees, contractors and the seller
Customer concentration: if a few customers produce most of the revenue, ask whether they will stay after the sale
On Long Island, the lease is often the most valuable asset in the deal. A great business in a location you cannot keep is worth far less. Ask for the landlord’s written consent before closing, not after.
4. Taxes and New York’s bulk sale notice
Unpaid taxes are one of the most common surprises in a business purchase, and in New York the buyer can end up paying them. Check:
Sales tax filings and payments, for any business that collects sales tax
Payroll tax filings and payments, and whether workers were properly classified as employees or contractors
Property tax status on any real estate included in the sale
Any open audits, notices or payment plans with the IRS or New York State
How the purchase price will be allocated among the assets, since that affects both parties’ taxes
The bulk sale notice. When you buy business assets in New York, the sales tax rules call for you to notify the New York State Department of Taxation and Finance on Form AU-196.10 at least 10 days before you pay or take possession, whichever comes first. The Department then has five business days to either release you or tell you the seller owes tax and the money should be held back.
Skipping the notice can be costly. As explained in a CPA Journal article, a buyer who does not follow the procedure can be held liable for the seller’s unpaid sales and use tax, up to the greater of the purchase price or the assets’ fair market value. A National Law Review article describes two tax tribunal decisions where buyers were held liable. Both pieces are older, so confirm current filing instructions with your attorney or the Department before relying on them.
5. Licenses, permits and compliance
Many licenses and permits belong to the current owner and do not pass to you automatically. Ask the seller for every license and permit the business holds, then find out which ones transfer and which ones you must apply for yourself. Look at:
State registrations, such as sales tax registration, and any professional or industry licenses
Liquor licenses, which in New York are issued by the State Liquor Authority and generally require the new owner to apply
County and town permits, including health department permits for food businesses and local business or contractor licenses
Certificates of occupancy, zoning compliance and fire and safety inspections for the premises
Environmental issues, which matter for gas stations, dry cleaners, auto shops and similar businesses
Any violations, fines or open inspection findings
The approval timeline can affect your closing date. Start the applications early, and make the closing depend on receiving the licenses you cannot operate without.
6. Employees, intellectual property and operations
The people and the brand are often what you are really paying for. Review:
A current employee list with titles, pay, hire dates and any written agreements
Compliance with wage and hour rules, workers’ compensation and disability insurance, and payroll records
Pending or past employee complaints, claims or agency charges
Employee benefits, accrued vacation and any bonus or commission obligations you would take on
Ownership of the business name, trademarks, logo, website, domain names and social media accounts
Software licenses, customer lists and the way customer data is stored and protected
Inventory, equipment condition and the relationships with key suppliers
Employee records deserve extra attention right now. New York’s personnel records law, in effect since November 8, 2026, gives current and former employees the right to request their files, so ask whether the seller’s records are complete and organized.
Also ask whether key employees plan to stay. If the business depends on one technician, chef or salesperson, consider a retention or employment agreement as part of the deal.
Red flags, and what to do next
Some findings should make you slow down, renegotiate or walk away:
Financial statements that do not match tax returns or bank deposits
A seller who is slow or unwilling to provide records
Unpaid taxes, liens or undisclosed lawsuits
A lease that is short, expiring or cannot be assigned
Heavy dependence on one customer, one supplier or the owner personally
Licenses or permits that cannot be transferred
What you find in due diligence should shape the deal itself. It can change the price, and it can lead to protections in the purchase agreement such as seller warranties, an escrow or holdback, indemnification for undisclosed liabilities, and closing conditions tied to the lease and licenses.
If you are considering buying a business on Long Island, bring in your attorney and accountant before you sign a letter of intent, not after. The Kapoor Law Firm in Garden City helps buyers and sellers with business purchases, contracts and agreements. Contact our office to talk through your deal.
This article is general information, not legal advice. Every transaction is different, and laws and agency procedures change.