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What is a Business Background Check?

Lawsuits filed by a company against other businesses are included in a business background check.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 27 September 2014
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A business background check is a process that allows potential customers, investors, and partners to become acquainted with pertinent information about the history of the company. At the same time, running a background check on a corporation will reveal or verify data about the current status of the business. This data includes financial data that would be important to know before investing in the company or entering into a partnership with the corporation.

Conducting a business background check involves looking into a number of different types of public records in order to get a true picture of the history and present status of the company. As part of the process, legal records will be checked for any evidence of past or pending lawsuits involving the corporation. In the case of settled lawsuits, the background check will yield information about the outcome of the suits, including any tax liens or other penalties that were rendered. If any suits are currently pending, the background check will provide details on the current status and nature of those outstanding issues.

Along with researching an evidence of legal actions aimed at the company, the business background check will also look for data on legal activities initiated on the part of the corporation. This will include searching for any applicable bankruptcy records, mergers and dissolution of mergers, and lawsuits filed by the company against other businesses or individuals.

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It is not unusual for a business background check to also include information about consumer issues regarding the goods and services provided by the company. In the event that consumer complaints are registered on a regular basis and are not addressed in a timely manner by the corporation, this may be an indication that the business is not as stable as it appears on the surface.

The main value of a business background check is to ensure there are no factors present in the circumstances or the operating culture of the business that would prove to be a liability for a customer, investor, or partner. Taking the time to run a background check will either reinforce the data provided by the company to the prospective partner, or reveal issues that the company would rather not discuss.

While it is always possible for any company to accidentally overlook some important piece of information about the corporate past, running the business background check provides the investor with the chance to ask pointed questions about the omission. If the company is forthcoming about details, the omission was probably an honest mistake. However, if the omission is treated as unimportant and there is an attempt to gloss over the undisclosed incident, that is a clear sign that it would not be in the best interests of the investor or partner to do business with the company.

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