Due Diligence Checklist for Buying a Business:
Public Records That Matter Before You Close

A UCC-1 financing statement is a public notice that a creditor has a security interest in specified collateral. When a business takes out a working capital loan, an equipment loan, or a line of credit, the lender typically files a UCC-1 against the business's assets to perfect its security interest.

The filing itself is not a problem. Secured debt is normal business financing. The problem is when the buyer does not know about it - or does not understand what it means for the purchase.

A blanket UCC-1 lien from a senior lender covers "all assets" of the business: equipment, inventory, accounts receivable, intellectual property. If that lien is still active at closing, and the buyer has not negotiated a lien release or payoff, the buyer is purchasing assets that a lender still has a first-priority claim on. The buyer's ownership is subordinate.

This is the single most common catastrophic miss in small business acquisitions, particularly sub-$5M deals where full legal due diligence is often abbreviated or skipped. The UCC search runs at the Secretary of State level in the state where the business is incorporated - and in every state where it operates as a foreign entity. There is no single national UCC database. Jurisdiction matters more for UCC searches than for any other search type.

PACER (Public Access to Court Electronic Records) covers all U.S. district courts, bankruptcy courts, and courts of appeal. A federal litigation search on the selling entity and all principals will surface any pending federal civil or criminal cases.

Active litigation matters to a buyer because a judgment in an existing lawsuit can become a lien against the seller's assets before closing. In an asset purchase, successor liability for pre-existing claims is generally avoided - but only if the purchase agreement and public-record review support that position. Federal litigation searches are relatively straightforward jurisdictionally. PACER covers the entire federal court system, so one properly run name search covers all federal courts. The complexity is in running the correct names: the legal entity, all DBAs, and all principals.

A bankruptcy search runs through PACER and confirms whether the selling entity or any principal has filed for bankruptcy protection, has an active bankruptcy case, or has been a debtor in a recently closed case.

An undisclosed bankruptcy filing creates serious problems for an ongoing acquisition. Assets of a debtor in bankruptcy are typically subject to the automatic stay, meaning transfers may require bankruptcy court approval. A buyer who closes without knowing the seller is in Chapter 11 may find the transaction challenged by the bankruptcy trustee. Even a recently closed bankruptcy matters: preference payments, fraudulent transfers, and other avoidance actions can reach back years.

Federal tax liens filed by the IRS attach to all property of the taxpayer, present and future. State tax liens operate similarly under state law. Judgment liens - created when a court enters a money judgment and the creditor records it - can attach to real property and, in some states, personal property.

A tax or judgment lien against the seller is a problem for the buyer in an asset purchase because the lien may need to be paid or released before clear title can transfer. In a stock purchase, the buyer takes the entity as-is, including all of its existing lien obligations. This search requires both state-level and county-level queries. A judgment lien is typically recorded at the county recorder's office in the county where the debtor owns real property. If the seller owns the business's real estate, a judgment lien may exist that does not appear in a statewide search.

A buyer purchasing a manufacturing company in Ohio discovers after closing that the seller's working capital line of credit had a blanket UCC-1 lien on all business assets. The loan was technically paid off three months before closing, but the lender never filed a UCC-3 termination statement. The lien is still active in the Ohio Secretary of State's database. The buyer now owns assets that are, on paper, subject to a senior lender's security interest - even though the underlying debt no longer exists.

Resolving this requires tracking down the original lender, requesting a UCC-3 termination statement, and potentially involving legal counsel if the lender is unresponsive. It is a solvable problem, but it is entirely the buyer's problem to solve after closing.

Now extend that scenario: the seller's business is incorporated in Delaware - as many LLCs are, regardless of where they operate. A UCC search conducted only in Ohio misses the Delaware filing. The blanket lien was filed in Delaware at the state of organization, exactly where Article 9 of the Uniform Commercial Code requires it to be. A search that does not include Delaware produces a result that looks clean but is not.

Delaware is the most expensive and most complex single jurisdiction for UCC searches. The Secretary of State's search system requires precise name matching, and professional-grade searches run through vendors like CT Corp or CSC - both of which operate on B2B accounts that law firms hold. A solo buyer cannot simply go to CT Corp's website, pay by credit card, and order a professional Delaware UCC search. These vendors do not work that way.

The correct approach: identify the state of organization, identify all states where the entity is registered as a foreign entity or holds significant assets, and run UCC searches in each. When a UCC search returns results, the work is not done. You need to know whether the underlying obligation is still outstanding, whether a payoff has been made, and whether a termination statement is on file or needs to be filed.

The documentation to request: a payoff letter from the lienholder, a UCC-3 termination statement, or a lender confirmation that the debt is satisfied and the lien will be released at closing. All of this needs to be resolved before the closing date.

The most common failure in public-record legal due diligence is not a missed search. It is a correctly conducted search in the wrong jurisdiction.

Consider a common scenario: an Ohio-based HVAC company formed as an LLC, incorporated in Delaware, with equipment financed through a Michigan-based lender and service contracts across three states. A buyer running a UCC search in Ohio only is not conducting complete due diligence. The seller's equipment lender filed its UCC-1 in Delaware at the state of organization, as required by Article 9. The Ohio search returns nothing. The Delaware search shows the lien.

Scope is a legal judgment, not a mechanical one. Determining the correct jurisdictions requires identifying the state of formation from the entity's organizing documents, identifying all states where the entity is registered as a foreign entity, identifying states where the entity owns real property or holds significant personal property, and running UCC searches in each of those jurisdictions for the entity under all names used.

This is not complex in the abstract. It is routinely under-scoped in practice because buyers and brokers assume the state where the business operates is the state to search. For common mistakes that compound in due diligence - including the pattern of compressed timelines and abbreviated legal review in small business deals - that resource covers the landscape of what typically goes wrong.

The same scoping judgment applies to tax and judgment lien searches. A judgment lien recorded in a county where the seller owns real property will not appear in a statewide name search if that county recorder's records are not included. Getting scope right is not a function of search technology. It is a function of legal experience with how entities are structured, where UCC filings are required to be made, and what the specific acquisition's asset composition requires.

This section is written specifically for self-funded searchers and first-time ETA buyers, because this is the audience most likely to conclude that public-record due diligence is a task they can handle independently. There are four distinct barriers that make solo execution either impossible, unreliable, or more expensive than the alternative.

PACER is open to the public. Some state secretary of state portals allow public UCC name searches at low cost. That is where public access ends. The professional-grade, multi-jurisdiction UCC and lien search layer runs through established commercial vendors: CT Corporation, CSC (Corporation Service Company), Cogency Global, Parasec, and FICOSO. These are the vendors law firms use to produce certified, defensible public-record searches. None of them publish prices. None of them have a consumer-facing checkout. All of them operate on B2B accounts that require established business relationships - typically with law firms or title companies that conduct this work regularly.

A first-time buyer with a single deal cannot open a CT Corp account for one transaction, receive a quote, and have a certified multi-state UCC report produced in a commercially acceptable timeframe. These vendors are not structured for that relationship. A buyer attempting to replicate what a law firm produces through these vendors simply cannot, because the vendor channel is not available to them.

Running this properly - covering the state of formation, all foreign registration states, all states with significant asset presence, at both the state and county level, with full name-variation matching across the entity and all principals - is not a quick task. State SOS portals do not have uniform search interfaces. Some require exact-match names. Some allow wildcard searches. Some are current to the day. Others reflect filings that are weeks old. County recorder offices for judgment lien searches have no standardized system: some have online portals, some require emailed requests, some require physical mail, and some require in-person visits.

A buyer working through this systematically across three states, two counties, and four principals - including the entity's legal name plus two DBAs - is looking at days of work, not hours. And that work produces raw results, not a certified report.

Even if access and time were not constraints, the work itself requires professional judgment at two points where errors produce results that look correct but are not.

The first is name-variation matching. PACER searches, UCC searches, and lien searches all require the right name: the legal entity name, every DBA, every trade name, every prior name the entity operated under, and the individual names of all principals - searched in full, not shortened. A search run against "ABC Plumbing LLC" that does not also run "ABC Plumbing" and the owner's personal name will miss filings. The results return clean. The lien is there.

The second is interpreting what a UCC-1 filing actually means. A financing statement in the database may be stale - the loan paid off years ago, the lender never filed a UCC-3 termination. Or the lien may be current and the seller has not disclosed it. The filing looks identical in both cases. Determining which situation you are in requires contacting the lienholder, reviewing the underlying loan documents, and understanding what a termination statement requires.

Self-funded buyers typically frame this as: pay an attorney vs. do it yourself for less. That framing breaks down in practice. A complete DIY attempt across multiple jurisdictions involves individual state SOS fees, county recorder fees, expedite fees, and the buyer's own time. Delaware UCC searches through proper channels run significantly higher than most other states. Add multi-state tax lien searches, multiple county recorder requests with varying fees and turnaround times, and the aggregate cost in fees alone approaches or exceeds what a properly scoped attorney engagement costs.

More importantly, the DIY result is still not a certified legal deliverable. An SBA lender presented with a folder of self-run PACER printouts and SOS search results is not holding what their underwriting documentation requirements contemplate. The buyer who attempts to DIY this layer often ends up paying twice: once for the attempt, and once when the lender requires proper documentation before funding.