Before you buy a small business in India, check what you are really buying and what comes with it: the legal owner, the true profit, the tax position, the staff obligations, the assets and licences, the customers, and any hidden debts or disputes. Then make sure the purchase agreement protects you against anything you couldn’t check. Here is a checklist to work through.
First: what exactly are you buying?
- Shares of a company: you get the company with all its history, including old liabilities.
- The business or its assets: you choose what you take, such as stock, machines, brand and customers, and old liabilities usually stay with the seller.
- A proprietorship: the business and the owner are legally the same person, so you buy assets and goodwill, not the business itself.
This decides how deep each check needs to go.
The checklist
Legal
- ☐ Company or LLP records on MCA: status, directors, shareholders, charges. Partnership firms and proprietorships are not on MCA; check GST, Udyam and the partnership deed instead
- ☐ Partnership deed, if a partnership
- ☐ Court cases against the business and its owners (eCourts, NCLT)
- ☐ Key contracts: customers, suppliers, leases, franchise or distribution agreements
- ☐ Clauses that end contracts if ownership changes
Financial
- ☐ Three years of accounts, matched with bank statements
- ☐ GST returns matched with the sales in the accounts
- ☐ Debtors list: who owes money, and how old the dues are
- ☐ Creditors and loans: everything the business owes
- ☐ Cash sales: how much of the “profit” is in cash and can’t be proven
Tax
- ☐ GST registration active and returns filed
- ☐ Income tax returns filed, and any notices. From 1 April 2026 the Income-tax Act, 2025 applies; older years still follow the 1961 Act
- ☐ TDS deducted and deposited
- ☐ Any pending tax demands or disputes
Staff
- ☐ List of staff, salaries and terms
- ☐ PF and ESI registration and payments, where required. These now fall under the Code on Social Security, 2020, in force since 21 November 2025
- ☐ Pending dues: wages, bonus and gratuity, now covered by the Code on Wages, 2019 and the Code on Social Security, 2020
- ☐ Key people who might leave after the sale
Assets and licences
- ☐ Property: owned or leased, with title or lease documents
- ☐ Machines and vehicles: ownership, loans against them
- ☐ Licences: trade, food, drug, pollution, fire, as needed; can they transfer to you?
- ☐ Trademarks and the domain name: in whose name?
Customers and market
- ☐ Top 10 customers and their share of sales
- ☐ Will key customers stay after the sale?
- ☐ Reviews, complaints and reputation
- ☐ Competition nearby
Red flags
- Profit claims that depend on cash sales you can’t verify.
- One customer gives more than a third of the sales.
- Unpaid GST, PF or salary dues.
- Licences in the owner’s personal name that can’t be transferred.
- The seller won’t let you speak to staff or customers.
Protect yourself in the agreement
- Seller’s promises (warranties) that the information is true.
- Compensation if hidden liabilities appear later.
- Part of the price held back for a period.
- A non-compete clause for the seller.
- A handover period with the seller’s help.
How Ameya Artha helps
We run due diligence on small business purchases: records, finances, tax, staff, assets, court cases and site visits, and set out what we found before you sign. See our due diligence services