Diligence is a list, and the list is broadly the same every time. Assembling it before you market is the single cheapest thing a seller can do: it shortens the process by weeks and it makes the business read as well run, which is worth more than the time saved.
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Financial
Three years of profit and loss statements and balance sheets, three years of business tax returns, year to date figures, a documented add back schedule with evidence for each item, accounts receivable and payable ageing, a fixed asset register, and any loan or finance agreements with payoff figures. Lenders want the same set, so preparing it once serves both.
Legal and operational
Formation documents and the ownership register, the operating or shareholders agreement, the lease and any assignment restriction, customer and supplier contracts with any change of control clauses flagged, licenses and permits with their transfer requirements, insurance policies and claims history, and any litigation or disputes open or recently closed.
People and process
An employee list with roles, start dates, pay and hours, any employment agreements and restrictive covenants, benefit plan documents, an organization chart, and a plain description of what the owner does day to day. That last one is not a formal document and it is the item buyers weight most heavily.
Questions people ask about documents needed to sell a business
When do I hand these over?
In stages. Financial summaries after a non disclosure agreement, detailed contracts and customer names after a letter of intent, and the most sensitive material late and sometimes only to the buyer's advisers.
What if a document does not exist?
Say so rather than improvising. Missing documents are common in small businesses; invented ones end deals.
Do I need a data room?
For anything with institutional buyers, yes, and it is inexpensive. For a small sale a well organized shared folder with access logging is adequate.