How you request an audit on a business depends on whether you own a piece of it. Owners — shareholders, LLC members, and partners — can serve a formal written demand to inspect the company’s books and records under state law. Everyone else has to go through a regulator: the IRS for suspected tax fraud, the SEC for suspected securities violations. The two paths have different requirements, timelines, and costs, and picking the wrong one wastes months.
Who Can Demand an Inspection as an Owner
Your right to see a company’s financial records comes from your ownership interest. The rules vary by entity type and state, but the three main categories all have some form of statutory access.
Corporate Shareholders
Most states let shareholders inspect a corporation’s books and records, and Delaware’s statute is the model many others follow. Any stockholder can examine the stock ledger, stockholder lists, and other books and records during normal business hours, provided the request serves a “proper purpose.”1Justia. Delaware Code Title 8 Chapter 1 – Inspection of Books and Records The demand has to be in writing, made under oath, and describe both the purpose and the specific records sought with reasonable detail. Delaware reads “books and records” broadly — it covers board minutes, materials given to directors, annual financial statements for the prior three years, and written communications sent to stockholders during that same period.2Delaware Code Online. Delaware Code Title 8 Chapter 1 – General Corporation Law
LLC Members and Partners
An LLC operating agreement usually spells out inspection rights and may condition them on minimum ownership or advance notice. When the agreement is silent, the state’s LLC statute typically fills in default rights similar to those of corporate shareholders.
Partners in a general partnership have the strongest position of the three. Under the framework most states use, the partnership must give partners and their agents access to inspect and copy books and records during ordinary business hours. Former partners keep this right for the period during which they were partners. The partnership can charge a reasonable fee for copies.
Proving You Have a Proper Purpose
The single biggest hurdle in an owner inspection demand is showing the purpose is legitimate. A proper purpose is one reasonably tied to your interest as an owner, not curiosity or a fishing expedition.1Justia. Delaware Code Title 8 Chapter 1 – Inspection of Books and Records Courts have accepted purposes such as investigating suspected mismanagement, valuing shares before a sale, reviewing executive compensation, and examining conflicts of interest involving directors or officers.
Vague dissatisfaction won’t survive. You need a credible basis for suspicion — not proof, but more than a hunch. If you’re investigating waste, point to specific red flags: unexplained drops in revenue, unusual related-party transactions, or compensation that seems disconnected from performance. The more concrete the stated purpose, the harder it is for the company to reject the demand.
How to Draft the Demand
A sloppy demand is the easiest thing for a company to refuse, and a business that wants to stall will exploit any ambiguity. Getting it right the first time saves months.
What to Put in the Document
Your written demand should include:
- Your full name, address, ownership capacity (shareholder, member, partner), and the number or percentage of shares or units you hold.
- The company’s full legal name and registered address, exactly as they appear in the formation documents.
- A direct statement of proper purpose. “I am requesting inspection of financial records to investigate whether management has engaged in self-dealing transactions that have reduced the value of my ownership interest” reads far stronger than a general request to review finances.
- A specific list of records: general ledger, bank statements, accounts payable and receivable, tax returns for named fiscal years, payroll records, board meeting minutes, and contracts with related parties. Each item should tie back to the stated purpose.
- A defined time period. Three fiscal years is common and lines up with Delaware’s scope for financial statements and stockholder communications.2Delaware Code Online. Delaware Code Title 8 Chapter 1 – General Corporation Law
- A compliance deadline that gives the company time to respond but doesn’t let it stall indefinitely.
The Oath Requirement
Delaware and many states modeled after it require the demand to be made “under oath.”1Justia. Delaware Code Title 8 Chapter 1 – Inspection of Books and Records In practice that means notarization or a declaration under penalty of perjury. Skip this step and the company has an easy procedural basis to reject the whole demand. Notary fees for a single signature usually run $2 to $25 depending on your state.
Electronic Records
Business records now live in databases, email servers, and cloud accounting platforms. Say explicitly that the demand covers electronically stored information. Delaware courts have recognized that relevant emails and electronic documents fall within inspection scope when they relate to the stated purpose. If the company uses accounting software, name it and request access or exports.
Delivering the Demand and Getting a Response
Send the demand by certified mail with return receipt requested, addressed to the company’s registered agent. The registered agent is the person legally designated to accept formal communications for the entity, and delivering to that agent starts the statutory clock. Keep the signed return receipt.
Under Delaware’s statute the corporation has five business days after receiving the demand to grant access or refuse.2Delaware Code Online. Delaware Code Title 8 Chapter 1 – General Corporation Law Other states use similar windows with different day counts. Any written objection has to be specific about why the request is improper or overly burdensome; a blanket refusal will not hold up.
When the Business Refuses
Most disputes land here, and companies count on requesters giving up rather than filing suit. If your purpose is legitimate, don’t.
When a company refuses a valid demand or ignores it, you file a petition in the court that has jurisdiction over the company’s internal affairs. For a Delaware corporation that’s the Court of Chancery. Civil filing fees generally run $200 to $450 depending on the court. The judge can order the company to open its books and set the terms of the inspection.
The financial exposure for the company can be significant. Under federal rules and many state statutes, a company that forces you to file a motion to compel may be ordered to pay your reasonable expenses, including attorney fees, unless it can show its refusal was substantially justified. That fee-shifting rule exists to discourage stonewalling, and businesses that lose these fights often end up paying both sides’ legal bills.
Confidentiality Conditions
Companies worry that competitors or hostile actors will use inspection rights to grab trade secrets. Courts recognize that concern, and it’s common for a business to require a confidentiality agreement before handing over sensitive records.
A reasonable nondisclosure agreement will limit how you use the documents and restrict sharing them with outsiders. That’s standard. What the company cannot do is use a confidentiality demand as a pretext to block the inspection entirely or impose terms so restrictive that inspection becomes meaningless. If you plan to bring an accountant or attorney to help review the records, and you should, make sure the agreement covers their access. Say in your original demand that you intend to bring professional advisors so there’s no argument later.
Reporting a Business to the IRS
If you have no ownership stake but suspect a business is cheating on its taxes, you can prompt a government audit by reporting the conduct to the IRS. Two separate programs exist depending on scale.
Form 3949-A for General Tax Fraud
IRS Form 3949-A lets anyone report alleged tax law violations by an individual or business.3Internal Revenue Service. About Form 3949-A, Information Referral Reportable violations include unreported income, failure to withhold employment taxes, failure to file returns, and failure to pay taxes owed. You can submit online through the IRS website or mail the form to the Internal Revenue Service at PO Box 3801, Ogden, UT 84409.4Internal Revenue Service. Form 3949-A, Information Referral
The IRS protects the reporter’s identity but won’t tell you whether it opened an investigation or what came of it. A detailed submission with specific dollar amounts, dates, and supporting documents gives the agency a much stronger basis to act than a vague complaint.
The IRS Whistleblower Program
If the unpaid taxes, penalties, and interest exceed $2 million, and if the target is an individual with gross income above $200,000 in at least one year in question, the IRS Whistleblower Program offers a financial award. Whistleblowers who file Form 211 and provide information that substantially contributes to a successful collection receive 15% to 30% of what the IRS recovers.5Office of the Law Revision Counsel. 26 U.S. Code 7623 – Expenses of Detection of Underpayments and Fraud Where the whistleblower’s role was less central — for instance, when the IRS was already investigating — the award drops to a maximum of 10%.6Internal Revenue Service. 25.2.2 Whistleblower Awards
Form 3949-A carries no reward and is purely informational. Form 211 takes longer and requires more detailed evidence, but the payout can be substantial when large sums are in play.
Reporting Securities Violations to the SEC
When the suspected misconduct involves securities fraud, accounting irregularities, or other violations of federal securities laws, the Securities and Exchange Commission accepts tips through its online Tips, Complaints, and Referrals portal.7U.S. Securities and Exchange Commission. Information About Submitting a Whistleblower Tip Anyone can submit a tip, whether or not they apply for whistleblower status.8U.S. Securities and Exchange Commission. Welcome to Tips, Complaints, and Referrals
The SEC’s whistleblower program pays 10% to 30% of sanctions collected when an enforcement action results in more than $1 million in monetary penalties.9U.S. Securities and Exchange Commission. Whistleblower Program Identity is protected, and the SEC rarely provides updates on ongoing investigations. Specific transactions, dates, dollar amounts, and names strengthen the odds the agency will act.
Benefit Plan Records for Employees
Employees and plan participants have a separate right under federal law to obtain documents governing their retirement and benefit plans. The plan administrator must provide the latest summary plan description, the most recent annual report, and the underlying trust agreement or contract on written request, and can charge a reasonable copying fee.10Office of the Law Revision Counsel. 29 U.S. Code 1024 – Filing with Secretary and Furnishing Information to Participants Failure to comply triggers daily penalties, with DOL-adjusted figures for 2026 reaching $195 per day for failures to provide documents requested by the Department of Labor. This route is narrower than a full inspection — it covers plan documents, not general business finances — but it’s useful if you suspect mismanagement of your 401(k) or pension.
What It Costs
Requesting an inspection isn’t free, and knowing the range prevents surprises if things turn adversarial.
- Notarization: $2 to $25 per signature.
- Certified mail with return receipt: usually under $10 through USPS.
- Document copying: the company can pass on reasonable labor and materials costs per page.
- Court filing fees: $200 to $450 if you have to petition a court to compel inspection.
- Attorney fees: a straightforward demand may cost a few hundred dollars to draft; litigation climbs quickly, though a prevailing stockholder may recover fees from the company.
- Forensic accountant: budgeting $150 to $400 per hour is realistic in most markets.
The company bears its own cost of producing records and making them available. You generally cannot force it to pay for your professional advisors, but you can recover legal costs if the refusal was wrongful and you had to go to court to enforce your rights.