Buying and Selling a Business
For many entrepreneurs, buying a business that is already up and running offers a faster way into the market than building a brand, finding customers and setting up operating systems from scratch. As a result, business transfers are common right across Australia — whether in restaurants, cafes, beauty salons and retail shops, or in education and training, construction and professional services.
At the same time, once a business reaches a certain stage, many operators choose to sell — whether on retirement, as part of an investment plan, to change industries, or for other personal reasons. For a vendor, a business often represents years of investment and hard work; for a purchaser, it is a significant investment. The purchaser therefore needs to understand the true state of the business, its lease, staff, equipment, licences and potential risks, while the vendor needs to ensure the deal is clearly structured, payment arrangements are secure and post-completion liability is kept to a minimum.
NS Legal can assist clients with business sales and purchases, business transfers, asset sales, share sales, franchise transfers, and the related contract review, negotiation and completion arrangements. Whether you are preparing to buy a business or selling an existing one, we can provide legal support tailored to your deal structure and commercial objectives.
What Is a Business Transfer
A business transfer can take a number of forms. Common approaches include buying business assets, transferring the right to operate a shop, selling the company’s shares, or transferring a franchise. Each structure carries its own legal risks.
In an asset sale, the purchaser is usually focused on whether the business name, equipment, stock, customer base, lease, intellectual property, licences and goodwill can be transferred cleanly. In a share sale, the purchaser often takes on more than just the business itself — potentially including the company’s historical debts, contractual liabilities, tax exposure, employee entitlements and any underlying disputes.
For this reason, before signing, it is essential to be clear about exactly what the transaction involves:
- buying or selling business assets;
- transferring company shares;
- transferring the right to operate a franchise;
- taking on the existing lease and staff;
- buying specific equipment, stock and customer relationships;
- or a combination of several of these arrangements at once.
Different deal structures call for different contract terms, different due diligence priorities and different ways of managing risk.
What to Consider Before You Commit
What the Purchaser Should Focus On
Before deciding to buy, a purchaser will usually need to review the business’s financial records, lease, staffing arrangements, key customer and supplier contracts, business licences, the condition of the equipment, stock, intellectual property, and whether there are any undisclosed debts or disputes.
In a hospitality sale, for example, the purchaser should look beyond turnover to confirm whether the lease can be transferred, whether the kitchen equipment belongs to the vendor, whether the liquor licence or other permits can continue to be used, whether staff will need to be re-employed, and how stock will be counted on the completion date. In industries such as beauty, education, health, construction or automotive, particular attention should also be paid to industry licences, qualification requirements and regulatory compliance.
The purpose of due diligence is not to make the deal more complicated, but to let the purchaser know exactly what they are taking on before they pay. Due diligence is generally how a purchaser confirms whether the business meets legal requirements, whether it matches the vendor’s description, and whether the price is reasonable.
What the Vendor Should Prepare in Advance
For a vendor, the key to a business transfer is getting the business into a state where it can be reviewed, completed and transferred smoothly.
If a vendor only starts pulling together contracts, employee records, the lease, equipment lists, licence documents and financial records once the transaction is already underway, it can easily raise doubts in the purchaser’s mind — leading them to seek a price reduction, delay completion, or even walk away from the deal.
A vendor will usually need to prepare the following in advance:
- a list of business assets;
- financial statements and trading records;
- the existing lease and any landlord consent arrangements;
- employee records and any outstanding entitlements;
- key customer, supplier and service contracts;
- equipment, stock and vehicle details;
- trade marks, domain names, websites, social media accounts and other intellectual property;
- business permits, industry licences and regulatory approvals;
- and whether there are any debts, litigation, complaints or unfinished contracts.
The clearer the documents, the smoother the transaction usually is. For a vendor, getting the paperwork in order early also makes it easier to respond to the purchaser’s due diligence enquiries, reducing the risk of being pushed down on price or asked for additional warranties simply because the information was unclear.
Buying or selling a business? Start by understanding the deal structure and where the risks lie.
Common Legal Issues in a Business Transfer
Why the Sale Contract Matters
A business sale contract is far more than a record of price and completion date — it is the central document that sets out each party’s rights and obligations.
Lease Transfer and Landlord Consent
Where a business depends on a fixed premises — such as a restaurant, retail shop, salon, clinic, office or warehouse — the lease is usually one of the most important documents in the transfer.
Handling Staff, Stock and Equipment
In a business transfer, staff, stock and equipment are often the areas most likely to give rise to disputes at completion.
Licences, Intellectual Property and Customer Relationships
For many businesses, the real value lies not in the equipment and stock but in the business licences, brand name, customer base, online accounts, website, trade marks, phone number, domain names and social media accounts.
Restraints of Trade and Handover Arrangements
When a purchaser buys a business, they are usually also buying its goodwill. If the vendor opens the same or a similar business nearby soon after completion, the value of the goodwill the purchaser has paid for can be undermined.
Why the Sale Contract Matters
A business sale contract is far more than a record of price and completion date — it is the central document that sets out each party’s rights and obligations.
A complete business sale contract usually needs to set out clearly the scope of the assets being sold, the purchase price, the deposit, the method of payment, the conditions of completion, how stock is to be calculated, lease transfer, staffing arrangements, vendor warranties, who bears which liabilities, the transfer of intellectual property, any restraint of trade, confidentiality obligations and the consequences of default.
For example, if the contract does not make clear how stock is to be counted, a dispute over its value can arise on the completion date; if the condition of the equipment is not specified, a purchaser who finds the equipment unusable after completion may struggle to hold anyone responsible; and if lease transfer is not properly dealt with, the purchaser may be unable to keep trading at the premises even after paying the purchase price.
The contract is just as important for the vendor. A vendor needs to avoid giving warranties that are too broad, and to ensure that payment arrangements, completion obligations, the division of liabilities and the limits of their responsibility after completion are all clearly set out.
Lease Transfer and Landlord Consent
Where a business depends on a fixed premises — such as a restaurant, retail shop, salon, clinic, office or warehouse — the lease is usually one of the most important documents in the transfer.
A purchaser needs to confirm whether the existing lease still has sufficient term, whether it includes options to renew, how rent is reviewed, whether there are any fit-out or repair obligations, and whether the landlord consents to the lease being transferred. The purchaser should not rely solely on the vendor’s relationship with the landlord, because the vendor is about to exit the business and may have little incentive to negotiate more favourable lease terms on the purchaser’s behalf.
Where the lease terms are unfavourable — for example, a term that is too short, an unclear rent review mechanism, strong termination rights for the landlord, or an inability to obtain landlord consent — the value of the whole transaction is affected. For this reason, the lease should generally be reviewed in parallel with the business sale contract.
Handling Staff, Stock and Equipment
In a business transfer, staff, stock and equipment are often the areas most likely to give rise to disputes at completion.
On staff, the purchaser needs to decide whether to take on all, some or none of the existing employees. The vendor, in turn, needs to deal with wages, annual leave, long service leave, termination arrangements and any associated notice obligations. Whether staff continue in employment is not just a commercial decision — it also affects the completion figure and ongoing liabilities.
On stock, the contract should make clear whether it is included in the purchase price or is to be counted separately on the completion date with a price adjustment. How stock is to be valued, and whether expired, damaged or slow-moving goods are excluded, should be spelt out as far as possible in advance.
On equipment, the purchaser needs to confirm which items belong to the vendor and which are still subject to a loan, lease or finance arrangement. Whether the equipment is in working order, whether it comes with service records, and whether any third party holds an interest in it should also be checked before the transaction proceeds.
Licences, Intellectual Property and Customer Relationships
For many businesses, the real value lies not in the equipment and stock but in the business licences, brand name, customer base, online accounts, website, trade marks, phone number, domain names and social media accounts.
A purchaser needs to confirm whether these assets genuinely belong to the vendor, whether they can be transferred, whether third-party consent is required, and whether they can continue to be used after transfer. Some industry licences cannot simply be transferred and must instead be applied for afresh by the purchaser. Regulatory requirements vary between industries, and certain permits, authorisations or approvals may need to be obtained separately by the purchaser.
If the purchaser is buying a franchise, they also need to review the franchise agreement, franchisor approval, transfer fees, training requirements, territory restrictions and ongoing operating obligations. A franchise transfer is usually not just a matter between the buyer and seller — it also turns on whether the franchisor consents and whether the incoming franchisee meets its requirements.
Restraints of Trade and Handover Arrangements
When a purchaser buys a business, they are usually also buying its goodwill. If the vendor opens the same or a similar business nearby soon after completion, the value of the goodwill the purchaser has paid for can be undermined.
For this reason, a business sale contract will usually consider a restraint of trade clause. Such a clause needs to set reasonable limits on its scope, duration and geographic area; it cannot simply be drafted as an unlimited, indefinite ban on every related industry, as this may affect its enforceability.
Beyond restraint of trade, handover arrangements also matter. Some businesses require the vendor to assist for a period after completion — for example, introducing customers, training staff, handing over supplier relationships, transferring account logins and explaining day-to-day operating procedures. If these matters are not written into the contract and rest only on verbal promises, disputes can easily arise after completion.
How NS Legal Can Help
NS Legal can assist both purchasers and vendors at every stage of a business transfer, including pre-deal assessment, contract review, negotiation of terms, due diligence, lease transfer, staffing arrangements, transfer of intellectual property, completion and any subsequent disputes.
We can assist clients to:
- review or draft business sale contracts;
- assist purchasers with legal due diligence;
- help vendors organise sale information and disclosure documents;
- review the lease and deal with landlord consent and lease transfer;
- manage the transfer of staff, outstanding entitlements and completion adjustments;
- review equipment, stock, customer contracts and supplier contracts;
- draft intellectual property transfers, confidentiality agreements and restraint of trade clauses;
- handle franchise transfers and the related documentation;
- liaise with the other party’s lawyers, accountants, banks, landlords and other relevant parties;
- and help you complete the transaction and deal with any legal issues that arise afterwards.
Whether you are preparing to buy a business or selling an existing one, the earlier we are involved, the better the risk can be managed.
Frequently Asked Questions
We’ve already agreed on a price — do we still need a lawyer to review the contract?
Yes. Price is only one part of a business transfer. It is the contract that determines exactly what you are buying, when payment is made, which conditions must first be satisfied, who bears which liabilities, and what happens if the deal cannot be completed. Many disputes arise not because the price was poorly negotiated, but because the scope of the assets, lease transfer, staffing arrangements, stocktake or vendor warranties were not set out clearly.
What does due diligence mainly cover before buying a business?
A purchaser will usually need to review financial records, the lease, employee records, key contracts, business licences, equipment, stock, intellectual property, where the customers come from, and whether there are any debts or disputes. The priorities differ by type of business:
- a hospitality business calls for particular attention to the lease, equipment and licences
- a franchise calls for review of the franchise agreement and franchisor consent
- and a service business calls for review of customer contracts and staffing arrangements
The vendor says turnover is strong — can I simply take their word for it?
It is not advisable to rely on the vendor’s word alone. Turnover, profit, where the customers come from and the cost structure should all be verified against financial records, accounting records, bank statements, point-of-sale records and tax documents. Where the transaction value is high, it is best to have both an accountant and a lawyer review the deal — the accountant from a financial perspective and the lawyer from a legal one.
When I buy a business, is the existing lease guaranteed to transfer to me?
Not necessarily. Most commercial lease transfers require the landlord’s consent. A purchaser needs to confirm the remaining term, any right to renew, rent reviews, the conditions of transfer and the landlord’s requirements. If the landlord does not consent to the transfer, or the lease terms themselves are unfavourable to the purchaser, the deal may need to be renegotiated.
Do I have to keep all of the existing staff?
Not necessarily. A purchaser can decide, based on the needs of the business, whether to offer new employment arrangements to some or all of the staff — but this needs to be clearly set out with the vendor in the contract. How wages, annual leave, long service leave and other employee entitlements are dealt with can also affect the completion figure and ongoing liabilities.
What usually needs to be dealt with on completion day?
Completion usually involves making payment, transferring the business assets, assigning the lease, handing over keys and equipment, counting stock, transferring account logins, notifying suppliers or customers, and signing the relevant documents. Exactly what is involved depends on the contract. The more clearly the completion arrangements are drafted, the less scope there is for last-minute disputes on the day.
After I sell the business, can I still be held liable?
Possibly. Whether a vendor remains liable depends on the contract terms, pre-completion debts, employee entitlements, lease obligations, any guarantee arrangements and the warranties the vendor has given. If the vendor has previously given a personal guarantee for the lease, a loan or a supplier contract, it is important to confirm whether those guarantees have been released — otherwise ongoing risk may remain even after the transaction is complete.
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