How to Do Due Diligence on a Small Business (The Free Way)

Due diligence is simply the work of confirming that a business is what it claims to be before you commit money or risk. For small businesses, most of that work can be done for free using public records — long before you pay for a formal valuation or hire an attorney.

This guide walks through each category of public record, what it tells you, and where to find it.

1. Entity status and structure

Start with the Secretary of State. Confirm the entity is active and in good standing, note the formation date, identify the registered agent, and see whether the structure (LLC, S-corp, C-corp) matches what you were told. A long, continuous history in good standing is a positive signal; recent reinstatements after a lapse warrant a question. Run this for any state from the Searchadex business entity directory.

2. UCC liens and secured debt

Run a UCC lien search in the state where the business is organized. UCC-1 filings reveal which lenders already have a claim on the company's assets and roughly how leveraged it is. In an acquisition, you will want lien releases or payoff letters for any filings that should be cleared at closing. Searchadex links to each state's official UCC portal.

3. Professional and business licenses

If the business operates in a regulated field, confirm its licenses are active and free of disciplinary action. A suspended license can halt operations overnight, which directly affects the value of what you are buying or lending against. Use Searchadex license lookup to reach the correct board.

4. Court records and litigation history

Search court records for the business and its principals. Active or recent litigation — especially patterns of lawsuits, judgments, or collections — can signal operational, financial, or reputational risk. Federal cases are searchable through PACER; state and county cases through local court portals. The Searchadex court records pages explain where to look for each level.

5. Property and real estate

If the business owns or leases real property, county assessor and recorder records show ownership, assessed value, mortgages, and liens against the real estate. This matters both for valuation and for spotting encumbrances.

6. The principals behind the business

A small business is often only as sound as its owner. Verify the principals' licenses, check for relevant litigation, and confirm their stated track record. Public records will not tell you everything about a person, but they will surface the major red flags.

When free records are not enough

Public records establish the facts of record. When you need a compiled, multi-source report — pulling together contact history, associated businesses, and background information into one place — a paid tool can save time. BeenVerified is one option for compiled reports that go beyond a single official record. See BeenVerified. Note that these are paid services, not government sources, and their results are not FCRA-compliant for employment, tenant, or credit decisions.

Putting it together

Worked in order, this checklist takes an afternoon and costs nothing for the official-record portion. It will not replace a lawyer or accountant on a large deal, but it will tell you quickly whether a small business is worth that next step. Searchadex links directly to the official government portal for every category above.

Searchadex links only to official government and verified sources. We do not charge for searches and do not resell your data.