Rights to Information?

by honch1. Posted on Sep 17, 2020    15    29

An opportunity has presented itself where there is a small cafe available for purchase. I know Covid, but the price is excellent and Covid will go away at some point. Just need to weather the storm.

To say I’m interested is an understatement. As a potential buyer, do I have a right to view the last few years of books? See what the profit, expenses, loss, etc. were?

For anyone who has gone through something like this, did you hire a cpa or someone else to help you navigate the waters?



Yes, you have the right to see the financial statements.



[deleted] 2

No, there are no rights to see a businesses financials just because you claim to be interested in buying them. Please do not answer if you don't know what you're talking about. This is like saying you have a right to walk into someone's home because you're considering buying it. No, nobody can compel you to do either of these things absent a completed sale.

All financial disclosures would be voluntary, just as buying it is voluntary. A good business person would understand what is or isn't in their best interest and nobody will buy their business without such disclosures.


"This is like saying you have a right to walk into someone's home because you're considering buying it."

This is a poor analogy.

As a lawyer, I should have known better than to use the word "right," which has a specific meaning. The perils of Reddit on mobile in bed at 3AM. But in any event, the buyer should see the audited financials and go over them with an independent CPA before closing. Would a small cafe have audited financials? Likely not, but he should at least see the tax returns and all the bills to get an idea of PnL.

But yes, the buyer cannot force the seller to share financial statements. The buyer would have to walk away if they were not provided . . . or offer a reduced price for the added risk.

nobody2000 2

This is why you can't take any legal advice from this sub. Unless someone responds with the identical context to your question, the answer can never be trusted.


It wasn't legal advice, as I'm not OP's lawyer and am likely not barred in the state in which s/he resides.

If you want bad legal advice, head over to r/LegalAdvice.

ChiefKC20 1

You don't have a "right" to see financials, but you secure that right through good faith negotiations and a letter of intent. Due diligence is a key part to any purchase and you would be remiss to not look at the financials, including accounting, payroll, and tax records.

There are consultants, CPAs, and attorneys who specialize in these types of transactions. Engaging them can allow you to avoid costly mistakes and buyers remorse. There are certain tricks used to hide expenses and risks, while inflating profits and opportunities. A good advisor can spot those pretty quickly and also help you understand where a great deal is to be made.

irlcake 1


I don't mean that rudely. I just don't know which of those links is best for you. I'd check all of them.

I have a similar business and we buy and sell, we have been developing a due diligence request list for years.

Pnls and tax returns for 3 years is standard, they sometimes will refuse tax returns because of combined businesses under the same tax id, or because people are sketchy on the way they do taxes, your decision on if that bothers you.

BizCoach 2

I would not give up my day job for something like this unless you had experience in the cafe business and knew how you'd do it right. Also the past financials are not really relevant to what will happen when you run it. So assume you're just buying the name and location. How would you get good products from suppliers? What recipes would you use? How would you advertise? How would you hire, train and manage employees? If you don't have answers to these and loads of other questions, then the previous owner's numbers won't help very much and you'll make a lot of mistakes on your own.

FYI - an asset purchase means you're only buying the assets (including name, etc) and not any of the liabilities (debts or legal issues from the past ownership). You certainly need a lawyer and accountant just to make the deal in a way that keeps you out of trouble.

You might also talk to your local SCORE or SBDC office. They give advice for free.

IntoTheWildBlue 2

Theres not a right per-se, however you're going to need to see the books so it can be properly valuated.

I like to see a minimum of 24 months income statements, 2 years balance sheet, cash flow and income tax.

Unfortunately a lot of businesses I work with have minimal to no accounting, so that may fall on you to compile.

There's a whole series of restaurant related metrics you can use to compare. Here's a pretty good list

A non-disclosure agreement will probably be required, you can find on online easily. All of the above is based on the sophistication of the seller.

XenonOfArcticus 2

Given that this seems to be your first time buying a business, I'd recommend talking to and possibly engaging the services of a business broker. They know a lot more about this and can help you determine the actual value of the business, and a transition plan and all the things you aren't thinking of to ensure you don't fall on your face.


I know one personally in Colorado, but there's an international organization that does referrals to their members:


I'd call and talk to one or two so they can tell you what they do and why you really want to use one.

  honch1 1


budbusines 1

Be careful though. Brokers are like real-estate agents. They will help with the processes but their interests are getting a completed deal inked - even if it is a bad idea.

adamkru 2

This is a problematic time to take on a normally difficult business. Weathering the storm is not easy. If the current owner can't make the cashflow work, how will you? You should get a CPA involved and do some free cash flow modeling.

  honch1 1

Yeah thats my hesitation. Sale sign says owner retiring. Location is prime, when people are able to get out and about unrestricted again

NNakedLunchDate 3

Financial disclosures are key to a sale. Certainly Covid shuttered a lot of businesses, but how were they doing before that? And what debts would you be taking on, as well. Theres every chance that you’re better buying everything but the business “name,” as you could end up owing thousands to vendors the owner stiffed during Covid.
Get a lawyer familiar with business sales.

miss_six_o_clock 9

Most likely they will ask you to sign an NDA then give you whatever information you want to see in order to assess the cake and make an offer.

  honch1 1


FreeGFabs 3

Yes, you'll sign an NDA and then they should give you the info. Don't trust only quickbooks files. You want to see those as well as tax returns.

Zazenp 17

No, you don’t have a right per se to the information. But you’d be foolish to buy it without seeing it and they’d be stupid to think they can sell it without showing. However, I’d they’re doing an asset only sale then it’s not needed.

  honch1 4

It is a complete sale, everything included, including established community business name.

Zazenp 7

So you don’t have a legal right to that information prior to sale but it’s standard procedure to disclose anyway. It’s also not uncommon to sign an NDA in order to view it.

procrux 27

I wouldn't touch it without seeing financial statements and tax returns. 😳

  honch1 5

Thanks! Been walking past this place weekly for the past few months thinking about it. I don’t think its going anywhere with the current situation so I’m taking my time on this. The jump would be a huge one from my current secure office gig, but I really want to get out of corporate america and be on my own.

procrux 2

I'm sure when this all clears it will be lovely! Seems like it would be a breathe of fresh air for you. 😊

sullg26535 7

Do you have a restaurant background?

  honch1 2

10 years bar/kitchen service, 15 years ago. Then ended up in corporate after the construction wasn’t paying the bills.

searchfundsearcher 2

Be careful about acquiring a restaurant based business. They are notoriously difficult to make profits with. Especially from a purchase that may involve debt.


As mentioned repeatedly by others: you do not have 'rights' so much as they have expected responsibilities to share honest information. The typical process is: a signed mutual NDA, they send two or three years of full financials and basic business information that they think is relevant, you follow-up with both financial and operating questions, there is some back and forth as you learn enough to get a good sense of how the business is doing. Then, you can make initial offer. Sellers either accept or deny or come back with alternative. Your offer is non-binding so if they accept it can change. If accepting then you can begin your real 'due diligence' which depends on the size of the business but may include involving CPAs, lenders, bankers, lawyers, insurance agents, getting more involved and learning about day-to-day, getting more specific financial / operating understandings. Specific financials being monthly data, receivables, payables, working capital understanding, further historical than 2 or 3 years, et cetera. This can take anytime from a few days to a few months to all happen. For smaller businesses which you understand already and know, it might all be done and you own it in the next month. Bigger and more complex businesses often take three to six months and sometimes longer.

  honch1 1

Thank you. This is extremely helpful.