How to buy a small business in the United States: the steps, the papers, the traps (2026)

Buying an existing small business in the United States runs in seven stages: find it, screen the listing, sign the confidentiality agreement and get the seller's papers, check before the deposit, arrange the money, sign the purchase agreement, then close and take over. The stage that protects you most is the fourth, before you pay a deposit. Check the seller's exact legal name, the liens on its equipment and the court records, and find your state's tax notice deadline: in New York, for example, the buyer must notify the tax department at least 10 days before paying or taking possession.

Each stage below says what to do, which paper to ask for, the deadline or law where there is one, and the trap. Rules differ by state; where I name a state, it is one whose rule we read. A step-by-step breakdown of each stage is in the book "Buying a Small Business in America" by Grig Lien.

General information, not legal, tax or immigration advice.

Stage 1. Find the business

Do. Get a letter from your bank showing your money before you start looking: brokers answer buyers with proof of funds first. Hire your own lawyer and accountant now, not at the offer.

Ask the broker whom he represents and how he is paid, and write the answer down. He may well be the seller's agent, paid by the seller out of the price. In Florida the law presumes a "transaction broker" unless another relationship is agreed in writing, and a transaction broker "does not represent either in a fiduciary capacity" (Florida Statutes §475.278).

Trap. Treating the broker as your adviser. He must be honest with you, not on your side.

Stage 2. Screen the listing

Do. Ask the broker, in one message, three things the listing may not say: how many years are left on the lease, how many people work there, and which licenses must be transferred. Ask the seller why he is selling, how old the business is (with papers to show it) and how long he will stay to hand it over.

Trap. The asking price is not a sale price, and the profit in the listing is the seller's own figure. Both get tested in stage 3.

Stage 3. Confidentiality agreement and the seller's papers

Do. Sign the confidentiality agreement, but read the clause on approaching staff, customers and suppliers first: it decides how you can investigate for months. A broker may hand you a "buyer registration" with it. It is a contract about his commission, often payable even if you later buy around him. Read it slowly.

Then comes the broker's package (a CIM, confidential information memorandum): two or three years of summarized figures and the main lease terms. Before you agree a price, ask for:

• monthly sales for the last 24 months;
• three years of tax returns and twelve months of bank statements. Add up the deposits month by month and compare them with the sales the seller reports;
• every "add-back" (an expense the seller says you will not have) as a list, with a name and an amount against each;
• the seller's agreement, now, that his figures will be checked against his IRS tax transcripts;
• the staff on paper: role, length of service and full cost for each person, and what is owed to them;
• the lease itself, with every amendment.

Franchise? Under the FTC Franchise Rule (16 CFR part 436), a franchisor must give a new franchisee its disclosure document, often called the FDD, at least 14 calendar days before signing or payment. On a resale between franchisees it may not have to: the franchisor's "approval or disapproval of a transfer alone is not deemed to be significant involvement" (§436.1(t)). Ask the franchisor for it in writing anyway, ask the seller for his copy, and call former franchisees.

Trap. "Let's see an offer first" when you ask for tax returns in week one is the normal answer, not a warning sign. A seller who still will not open the bank statements after you have agreed terms is another matter.

Stage 4. Before the deposit: the letter of intent and your own checks

The letter of intent (LOI) sets the price in principle and starts an exclusivity period: the seller stops talking to other buyers for a set time. Most of it is not binding; the confidentiality and exclusivity parts are. In smaller deals there may be no letter: the broker's own purchase agreement form takes its place, and the same points apply.

Put in writing:

• the price "subject to verification of the stated cash flow";
• exclusivity, with an end date;
• who holds the deposit (an escrow agent, title company, lawyer or the broker's trust account, never the seller's account) and what returns it: the loan, the landlord's written consent, the license transfer, a clean tax clearance;
• the seller's papers to be opened, named one by one, with dates;
• the seller's written waiver, so that the state tax department will tell you what he owes.

Why the financing condition matters: of 40,555 SBA 7(a) loans approved for a change of ownership between fiscal year 2020 and 30 June 2026, 3,458 (8.5%) were later cancelled (our count of SBA's public 7(a) file, data as of 30 June 2026).

What you can check yourself, for free or a few dollars

1. The company. Search the state business register (the Secretary of State) by exact legal name: status, date formed, officers. Florida: search.sunbiz.org; California: bizfileonline.sos.ca.gov (Business Search is free); Texas: SOSPortal, the Secretary of State's online service, $1 a search. In Florida, an LLC that misses its annual report is administratively dissolved on the fourth Friday of September and "may only carry on activities necessary to wind up" (F.S. 605.0714).
2. Liens on equipment and stock. Search the UCC register under every legal name the business has used, in the state where the company was formed and in every state it has worked in; a trade name finds nothing if the filing sits under the LLC's name. Cost: free in Colorado, $25 in New York. The office is not always the Secretary of State: in Washington it is the Department of Licensing, in Georgia the Superior Court Clerks' Cooperative Authority. More in our note UCC lien search: how to check whether the equipment comes with the business.
3. Court cases. Federal courts and bankruptcy: PACER Case Locator, $0.10 a page, fees waived if you spend $30 or less in a quarter. State courts are searched county by county, on each state's court website.
4. Tax debts on record. New York has a public search of open tax warrants that needs no account (tax.ny.gov/enforcement/warrant-search.htm); a paid-off warrant drops out of it. In Florida, sales-tax warrants are recorded with the county clerk and become a lien (F.S. 212.15(4)).
5. Sanctions. OFAC Sanctions List Search, free, by name.
6. Licenses and inspections. Your state's licensing board; in Florida, restaurant licenses and inspection reports are on myfloridalicense.com.

The state notice: the deadline that runs out before closing

In many states the seller's unpaid sales tax can follow the business to the buyer. The protection is a notice to the tax department or a certificate from it; California has a withholding rule and adds a bulk-sale notice. Where the clock counts back from payment or possession, whichever comes first, treat your deposit as a payment and file before it. The book reads the statutes behind this rule in 13 states. Where we read the rule:

A real case shows the cost of filing late. In a New York appeal decided in 2012 (99 A.D.3d 1124), a buyer of a sandwich shop in Buffalo did not give the notice in time: a bulk sales notice was filed only after closing. The state answered that the real seller was a company with unpaid sales tax, and held the buyer liable for its debt, including for a second store of the seller company. The court: failure to give notice at least 10 days before payment or possession "renders the purchaser personally liable for the seller's unpaid tax liabilities."

If your state is not in the table, ask its tax department in writing: "Do I owe a notice before I take over this business, and how many days before?"

Before you pay the deposit: what we add to these checks

These checks go quickly once you know the seller's exact legal name and every state where the company has worked. Listings rarely say either. Send us the listing together with the business name or address the broker gave you. We work out which company stands behind it (if we cannot, we tell you what is missing before you pay), read what the public records hold on it and on the seller, and set out the legal points that apply to the deal. You get one report with a source and a date on every line, and a list of the checks the records could not answer. We work from the public records and do not contact the seller.

The €550 report: price and how to order on our pricing page · see a sample report (a restaurant in France)

Stage 5. Arrange the money

The government-backed route is an SBA 7(a) loan: SBA backs part of a bank loan of up to $5 million, and "changes of ownership" are an allowed use.

Since 1 March 2026, a 7(a) or 504 loan goes only to a business whose owners, 100% of them, are U.S. citizens or U.S. nationals whose principal residence is in the U.S., its territories or possessions. Green-card holders, E-2 investors and U.S. citizens living abroad cannot own even 1%. The same applies to every guarantor SBA requires, with a narrow exception for limited guaranties. If the seller is not eligible, he must completely exit before the SBA loan number is issued; ask the lender how that works for your deal. The rule is now in SBA's lender rulebook, SOP 50 10 8.1, in force since 1 October 2026. Details: E-2 and green-card buyers can't get SBA 7(a) or 504 loans.

If the seller will stay on to hand over: on a 7(a) purchase by a new owner, he generally may not remain an owner, officer, director or employee, but the business may hire him as a consultant for up to 24 months in total (SOP 50 10 8.1, Appendix 15).

Without SBA, you pay with your own money, a bank loan without SBA backing, or a payment plan agreed with the seller (seller financing). On an E-2 visa, the State Department's manual says loans "secured by the assets of the enterprise cannot count toward the investment" (9 FAM 402.9-6(B)). See an immigration lawyer before you pay any deposit.

Trap. Planning on an SBA loan before checking that every owner, including a spouse with a share, is eligible. Ask the lender in writing.

Stage 6. The purchase agreement: assets or the company

Asset purchase means buying the things the business is made of: equipment, stock, customer list, name. Stock purchase means buying the company itself, with everything it owes, including debts nobody told you about. Which suits your deal is for your lawyer and accountant to say.

An asset purchase does not leave every debt behind. A lender's security interest "continues in collateral notwithstanding sale" (UCC Article 9, California Commercial Code §9315), the seller's sales tax can follow you (stage 4), and in some places unpaid wages do: California's Labor Code §2066 makes a successor car wash liable for the old operator's unpaid wages, for example if it uses substantially the same site or workforce for the same services, or shares ownership or management with the old operator.

Put in the agreement:

• each item on its own line: stock, money customers owe, money owed to suppliers, deposits and gift cards already paid for; who counts the stock, how, and at what value;
• the split of the price across the assets. Under Internal Revenue Code §1060, a split agreed in writing binds both sides, and both file IRS Form 8594;
• the seller's promise not to compete, drawn around where the business really trades, and a separate promise not to approach its customers;
• what the seller does after closing, as tasks with an end date;
• conditions of closing: the landlord's written consent, license transfers, the franchisor's approval, your visa if you need one;
• a last date for closing, and what happens to your deposit on it.

Trap. The split that is best for you is generally not the best for the seller. Agree it while the price is still open.

Stage 7. Closing and the first weeks

At closing:

• pay each lien straight to the lender who holds it, out of the price, with a payoff letter on file;
• hold back a named sum for the seller's tax, and money against wage claims;
• get a draft closing statement with every line filled in before the day.

Licenses do not move by themselves. In Florida a restaurant license "may not be transferred" (F.S. 509.241): the new owner applies. A Florida alcohol license can be transferred only with the state's approval, and a complete transfer application that shows no reason for refusal entitles the buyer to a temporary license (F.S. 561.331). Ask your state's alcohol regulator how long a license transfer takes. Start transfers early.

In an asset purchase, staff do not transfer. In none of the 24 states in the book do employees pass to the buyer automatically: you hire them. In a stock purchase the company stays their employer. Final-pay deadlines start on day one: in California, wages are due immediately on discharge; in New York, New Jersey, Illinois and Maryland, by the next regular payday; in Washington, at the end of the established pay period. Arrange workers' compensation the way your state requires before your staff start work for you; California, for example, requires every employer to secure it (Labor Code §3700).

Paperwork after you take over:

• the company's EIN (federal tax number) is free from the IRS: "You never have to pay a fee for an EIN";
• a New York LLC must publish a notice for six weeks, proved within 120 days of formation;
• a company formed abroad and registered to do business in a state files a beneficial-ownership report with FinCEN within 30 calendar days of the earlier of two dates: when it learns it is registered, or when the state first makes the registration public, unless it qualifies for an exemption; companies formed in the U.S. are exempt (FinCEN final rule, in force since 14 August 2026);
• in Florida, a buyer of an existing business files form RTS-1S (succession for reemployment tax) within 90 days of the acquisition;
• search the UCC register again and check that each paid lien was ended on the record.

Questions buyers ask first

Can a foreigner buy a small business in the US? Yes; no federal rule we read forbids it. What changes is the money and the right to work: no SBA loan, and if you are not allowed to work in the U.S., you need a visa to run the business yourself (for citizens of treaty countries, the E-2).

Do I take over the seller's debts? In a stock purchase the company keeps all its debts, and you now own the company. In an asset purchase, as a rule they stay with the seller, but liens, sales tax and some wage claims can follow the business, for example at a California car wash. Your lawyer checks the exceptions in your state.

Do the employees come with the business? In an asset purchase, no: their employment with the seller ends at closing, and each one works for you only if you offer and they accept. In a stock purchase the company you buy is still their employer.

Do I get the deposit back if the deal fails? That depends on the conditions written next to it. No financing condition means the money is at risk if the loan fails.

Is the profit in the listing real? It is the seller's figure. Compare the deposits in twelve months of bank statements with the sales he reports, and his tax returns with the listing.

Do I need a lawyer? Yes, your own, from the start: the broker's duty is honesty; your lawyer's duty is to you.

Sources

1. Buying a Small Business in America (book, edition of 21 September 2026), appendices A3, A4, A5, A9, A13, A14; chapters 7, 8, 10-14, 16, 20 (retrieved 3 October 2026)
2. SBA SOP 50 10, Lender and Development Company Loan Programs (Version 8.1 with Technical Updates, effective 1 October 2026) (retrieved 3 October 2026)
3. SBA Procedural Notice 5000-876626, Revised Applicant Ownership, Citizenship and Residency Requirements for 7(a) and 504 Loans (retrieved 3 October 2026)
4. SBA, 7(a) loans (retrieved 3 October 2026)
5. SBA, 7(a) & 504 FOIA data (FOIA - 7(a) FY2020-Present, as of 30 June 2026) (retrieved 3 October 2026)
6. U.S. Department of State, Foreign Affairs Manual 9 FAM 402.9 (retrieved 3 October 2026)
7. eCFR, 16 CFR part 436 (FTC Franchise Rule) (retrieved 3 October 2026)
8. Florida Statutes 2026, s. 213.758 (transfer of tax liabilities) (retrieved 29 September 2026)
9. Florida Department of Revenue, Tax Clearance (retrieved 3 October 2026)
10. Florida Statutes 2026, s. 605.0714 (administrative dissolution of an LLC) (retrieved 29 September 2026)
11. Florida Statutes 2026, s. 509.241 (food service licenses) (retrieved 29 September 2026)
12. Florida Statutes 2026, s. 561.331 (temporary alcoholic beverage license on transfer) (retrieved 29 September 2026)
13. Florida Statutes 2026, s. 475.278 (brokerage relationships) (retrieved 3 October 2026)
14. PACER, pricing: how fees work (retrieved 3 October 2026)
15. OFAC Sanctions List Search (retrieved 29 September 2026)
16. New York Department of State, UCC fee schedule (retrieved 3 October 2026)
17. California Secretary of State, Business Entities information requests (retrieved 3 October 2026)
18. FinCEN, Beneficial Ownership Information (retrieved 3 October 2026)
19. eCFR, 31 CFR 1010.380 (beneficial ownership reports) (retrieved 3 October 2026)
20. New York State Department of Taxation and Finance, Tax Bulletin: Bulk Sales (retrieved 3 October 2026)
21. New York State Department of Taxation and Finance, Form AU-196.10 (retrieved 3 October 2026)
22. New York State Department of Taxation and Finance, Tax warrant search (retrieved 3 October 2026)
23. New Jersey Division of Taxation, Bulk Sale Act (Form C-9600) (retrieved 3 October 2026)
24. Illinois Department of Revenue, Form CBS-1 instructions (retrieved 3 October 2026)
25. Pennsylvania Department of Revenue, Bulk Sales (retrieved 3 October 2026)
26. Pennsylvania Department of Revenue, Form REV-181 (retrieved 3 October 2026)
27. Colorado Secretary of State, UCC fees (retrieved 3 October 2026)
28. Texas Secretary of State, SOSPortal (retrieved 3 October 2026)
29. Washington State Department of Licensing, Uniform Commercial Code (UCC) (retrieved 3 October 2026)
30. Georgia Superior Court Clerks' Cooperative Authority, search (retrieved 3 October 2026)
31. IRS, Get an employer identification number (retrieved 3 October 2026)
32. California Commercial Code §6103 (bulk sales: which businesses are covered) (retrieved 3 October 2026)
33. California Commercial Code §6104 (bulk sales: duties of the buyer) (retrieved 3 October 2026)
34. California Commercial Code §6105 (bulk sales: notice) (retrieved 3 October 2026)
35. California Commercial Code §9315 (security interest continues after sale) (retrieved 3 October 2026)
36. California Revenue and Taxation Code §6811 (successor withholds from the purchase price) (retrieved 3 October 2026)
37. California Labor Code §201 (wages due on discharge) (retrieved 3 October 2026)
38. California Labor Code §2066 (car washes: successor liable for unpaid wages) (retrieved 3 October 2026)
39. California Labor Code §3700 (every employer secures workers' compensation) (retrieved 3 October 2026)
40. Florida Statutes 2026, s. 212.15 (sales tax warrants become a lien) (retrieved 3 October 2026)
41. Florida Statutes 2026, s. 561.32 (transfer of alcoholic beverage licenses) (retrieved 3 October 2026)
42. Missouri Revised Statutes §144.150 (sale of business: certificate or statement of tax due) (retrieved 3 October 2026)
43. Minnesota Statutes §270C.57 (successor liability: notice to the commissioner) (retrieved 3 October 2026)
44. Pennsylvania Fiscal Code, 72 P.S. §1403 (bulk sale clearance certificate) (retrieved 14 September 2026)
45. New York Labor Law §191 (frequency of payments; wages on termination) (retrieved 3 October 2026)
46. New York Limited Liability Company Law §206 (publication) (retrieved 3 October 2026)
47. New Jersey Department of Labor and Workforce Development, selected state labor laws: N.J.S.A. 34:11-4.3 (wages on termination) (retrieved 3 October 2026)
48. Illinois Compiled Statutes, 820 ILCS 115/5 (final compensation) (retrieved 14 September 2026)
49. Maryland Code, Labor and Employment §3-505 (payment on termination) (retrieved 3 October 2026)
50. Revised Code of Washington, RCW 49.48.010 (wages due on termination) (retrieved 3 October 2026)
51. Florida Department of Revenue, Form RTS-1S (Report to Determine Succession and Application for Transfer of Experience Rating Records) (retrieved 3 October 2026)
52. 26 U.S.C. §1060 (special allocation rules for certain asset acquisitions) (retrieved 3 October 2026)
53. IRS, Instructions for Form 8594 (retrieved 3 October 2026)
54. Federal Register, document 2026-16576, 91 FR 52508 (beneficial ownership information reporting requirement revision) (retrieved 3 October 2026)
55. New York State Law Reporting Bureau, 2012 NY Slip Op 07162 (99 A.D.3d 1124), Appellate Division, Third Department, 25 October 2012 (retrieved 3 October 2026)
56. OFAC, FAQ 287 (Sanctions List Search) (retrieved 3 October 2026)
57. Uniform Commercial Code §9-301 (law governing perfection: where the debtor is located) (retrieved 3 October 2026)
58. Uniform Commercial Code §9-307 (location of debtor: a registered organization is located in its state of organization) (retrieved 3 October 2026)