10 red flags before you buy a small business
Every one of these traps leaves traces in public records or in documents you are entitled to demand. Work through the list before any deposit moves.
The list is short, and it is not about instinct. Print it, take it to the negotiation.
How to read the list
Each flag says what the trap is and what to demand. “Demand” means: in writing, before a deposit. A seller who resists producing paper is answering your question another way.
01. The seller's debts can become yours
In Spain, taking over an activity can make you jointly liable for the seller's tax debts (Art. 42.1.c LGT). Unpaid social-security contributions are a separate track with their own succession rules, and Portugal has its own succession tail when an establishment changes hands. The debt doesn't stay with the person who ran it up — it follows the business you just bought.
Demand. In Spain: the seller's written consent — then you request the AEAT certificado de sucesión de actividad yourself. Art. 175.2 LGT gives that right to the prospective acquirer, not the seller. Plus a TGSS certificate. In Portugal: certidões de não dívida from AT and Segurança Social. Dated, before the deposit.
02. The lease is not automatically yours
A traspaso or trespasse is not a new lease. In Spain, LAU Art. 32 may let a business lease be assigned without the landlord's consent — but notice is required, the landlord can typically raise the rent, and the lease's own wording can change the picture entirely. Buy the business without being sure of the premises and you bought a menu.
Demand. The full current lease, and the landlord's position on the transfer in writing — not the seller's summary of it.
03. Licences may not travel with the sale
The activity licence is tied to the premises and its conditions — and a terrace on public ground is a municipal concession to a specific operator, often not transferable at all. Terrace seating can be half of a café's real capacity.
Demand. The licence documents themselves, plus written confirmation from the town hall of what transfers and what must be re-applied for.
04. The person selling may not fully own it
Companies have registered owners, and owners have spouses, partners and powers-of-attorney. Registry filings show who actually holds the business and who has authority to sell it — sometimes a minority partner or a marriage-property regime stands between the handshake and a valid sale.
Demand. A current registry extract (Registro Mercantil in Spain; the company's publications record in Portugal) matching the name on the contract.
05. Court cases don't appear in the ad
Seizures, insolvency filings and live litigation sit in public court records before the money moves. A Portuguese court annulled a restaurant sale after creditors surfaced the day after closing — the judicial seizure had been on record and checkable the whole time.
Demand. Time to check court and insolvency records on both the entity and the owner — and treat any pressure to skip this step as a flag in itself.
06. Staff come with the business
Employees transfer with their seniority, contracts and accrued rights (Art. 44 ET) — and in Spain a buyer who continues the business can also be pursued, by statute, for the previous owner's unpaid social-security contributions (Art. 142.1/168 LGSS). Three long-serving staff can mean a five-figure employment liability if the transfer is mishandled.
Demand. A staff list with contract types, seniority dates and salaries, plus the social-security position on contributions.
07. The till and the tax returns tell different stories
In cash businesses the seller's claimed takings and the declared figures often diverge. The declared numbers are the only ones a bank, a court or a tax office will recognise — don't price the deal on takings the records can't support.
Demand. VAT returns and filed accounts — not spreadsheets, not photos of a full terrace.
08. Count the competitors before you count the profit
Micro-markets saturate fast: one small town with nine near-identical venues means everyone is splitting the same customers. The listing's “steady clientele” may be arithmetic that stopped working two openings ago.
Demand. Nothing from the seller — walk the map yourself. Count the same-category businesses in the real catchment area, note their ratings and their prices.
09. Rent can quietly eat the whole business
Compare the full rent — all charges included — against realistic takings. When rent climbs into double-digit percentages of revenue, the “profitable little place” may in effect be working for the landlord, and no amount of new energy changes that lease.
Demand. The exact rent with every charge and scheduled increase, in the lease itself — then do the division before you fall in love.
10. A deposit before the certificates is a payment for hope
Sequence is everything: certificates and registry checks first, deposit after. “Reserve it now, the papers will come” reverses that order and shifts the risk entirely onto you — the pressure itself is diagnostic.
Demand. A written condition that any reservation payment is refundable until the documents on this list are produced and check out.
General information, not legal advice — rules differ by region and by contract, so verify how each point applies to your transaction with a licensed local professional. Court-record sources for the cases mentioned are documented in the field notes.
This list tells you where to look. A screen actually looks — and signs its name
These are the kinds of checks we run: against Spanish and Portuguese registries, court records, the seller's documents and the deal's own numbers, delivered as a written memo. From €550 the memo is read and signed by a person.
You can start for free: the listing self-check gives you a list of questions for the seller. What each paid tier includes is on the pricing page, and a finished sample report opens without an email or a password.