Buying a Business in NSW: What Are You Actually Buying and What Should You Check Before Signing?

Published Updated 6 minute read Commercial Matters · Legal Guides By Biz Lawyers & Advisory

In short

Before agreeing on price, work out whether you are buying selected business assets or the shares in the company that operates the business. That choice determines what moves to you and whether the company’s existing liabilities remain inside what you buy.

The next question is whether the business will still function in your hands after settlement. The contract should deal with the premises, usable assets, key agreements and licences, employees, financial information and any third-party approval needed before you are committed to complete.

Are you buying assets or the company itself?

The first decision changes almost every other question in the deal.

In an asset sale , you buy selected items and rights from the seller. These might include equipment, stock, intellectual property, contracts, customer connections and the business name. You do not automatically receive everything used by the business; an item or right outside the agreed description may stay with the seller.

For example, you might agree to buy a café’s equipment, stock, name and goodwill without buying the seller’s company. That can keep some of the company’s history outside the deal, but it only works if each asset you need is included and can legally be transferred.

In a share sale , you buy the shares in the operating company. The company keeps its assets, contracts and employees, but it also keeps its debts and earlier history. An unpaid tax liability, employee claim or customer dispute can remain inside the company after you become its owner.

Other ownership structures require their own analysis. Whichever structure is proposed, it needs to be settled before price and risk are negotiated because the records, protections and tax treatment can differ substantially.

Our guide to choosing a business structure explains how you might hold and operate the business after completion.

Could an early offer bind you before due diligence?

Calling a document an “offer”, “term sheet” or “heads of agreement” does not automatically make it non-binding. Its effect depends on its wording, the parties’ objectively expressed intention and the surrounding circumstances.

If the document fixes the price and requires you to proceed without an effective due-diligence, finance or approval condition, discovering a serious problem later may not give you a right to withdraw.

The document should make clear which provisions operate immediately and which parts remain subject to a later sale contract. In particular, it should explain:

  • whether you can withdraw after reviewing the business records;

  • whether finance, landlord consent or another approval is required;

  • when any deposit becomes non-refundable;

  • whether the seller can continue negotiating with someone else; and

  • when the price and obligation to complete become binding.

The point is not the heading at the top of the document. It is whether its operative clauses preserve the choices you expect to have after due diligence.

Will the business be able to operate from day one?

A buyer can acquire a profitable business on paper and still be unable to open the doors after settlement. For many businesses, the lease, licences and key agreements are a large part of what the purchase price is paying for.

If the premises are leased, you will need an effective assignment of the existing lease or an acceptable new lease. The landlord may require financial information, a guarantee, security or payment of permitted costs before consenting. If that consent is not obtained, completing the business purchase does not by itself give you the right to occupy the site.

The lease should be assessed against the way you intend to operate. Its remaining term and options affect how long the location is available; the permitted-use clause affects what you can do there; and its rent, outgoings, repair and make-good provisions affect the cost of staying.

Key customer, supplier, software, franchise or distribution agreements may present the same issue. Some require consent to an assignment, while others allow termination when ownership of the company changes. A government licence or professional accreditation may belong personally to the seller and require a fresh application.

If the business cannot operate without a particular site, agreement or licence, completion should depend on that requirement being satisfied rather than on an assumption that it will transfer later.

Will the assets, names and records actually transfer?

A broad reference to “all business assets” may not tell you whether every valuable item is included. An asset schedule should describe the equipment, vehicles, stock, work in progress, digital accounts, domain names, telephone numbers, intellectual property and other rights forming part of the price.

Registering a business name with ASIC does not establish ownership of that name as intellectual property. The business-name transfer and any trade mark, copyright or branding rights need to be considered separately.

Customer records create another issue. Their disclosure by the seller and use by the buyer may be subject to privacy, confidentiality and contractual obligations. The practical question is not merely whether the database can be copied, but whether you can lawfully use it for the proposed business after settlement.

Ownership of physical equipment also needs to be established. An item on the premises may be leased, hired or subject to a security interest rather than owned outright by the seller.

A search of the Personal Property Securities Register, usually called the PPSR , can reveal registrations affecting business assets. A registration is a warning to investigate; it does not by itself prove that money remains owing or determine whether the secured party can enforce against the asset. The personal-property securities law also contains circumstances in which a buyer takes free of an interest.

Where a release is needed, it should be matched to the relevant collateral and registration and delivered before the purchase price is paid.

What happens to employees who stay?

Keeping an experienced team can preserve much of the value you are buying, but earlier service can also affect future employment costs.

The transfer-of-business rules can apply when an employee starts with you within three months, performs the same or substantially the same work and has the required connection with the former employer.

Where those rules apply, an enterprise agreement, enterprise award or other transferable instrument may continue to cover the employee. Otherwise, the modern award applying to the new employer, industry and work may govern the employment.

Earlier service can also count towards some entitlements, but the treatment differs by entitlement and by the relationship between the employers. It should not be assumed that every accrued amount transfers in the same way.

The employee records need to show who may receive an offer, their commencement date, role, pay and hours, applicable instrument, accrued entitlements and any underpayment, injury or dispute. The sale contract can then allocate responsibility for those amounts and reflect the agreed position in the settlement adjustment.

Do the records support the price?

Historical revenue does not by itself show what the business will earn under your ownership. The records need to establish both that the reported figures are reliable and that the profit can be reproduced after settlement.

For example, the seller’s profit may depend on the owner working without a market salary, a customer contract that will not continue or personal expenses being treated as add-backs. Your rent, wages, insurance or supplier costs may also be higher than the seller’s.

Financial statements should therefore be compared with tax records, bank deposits, payroll, point-of-sale reports and major agreements. Differences do not always mean the business is unsound, but they need an explanation before the price becomes unconditional.

Concentration is another practical risk. If one customer, employee, licence or location produces most of the value, losing it may reduce income immediately even though the historical accounts are accurate.

An accountant can test the tax figures, working capital and adjustments. A valuer can consider whether the sustainable earnings support the proposed price.

Which earlier liabilities could remain after settlement?

In a share sale, earlier tax, employment, customer and regulatory liabilities remain obligations of the company. Buying its shares changes the owner, not the legal identity of the business that incurred them.

The sale contract may contain warranties and indemnities . These are promises by the seller about stated facts or an agreement to compensate the buyer for defined losses.

Those clauses can give you a contractual claim against the seller, but they do not erase the company’s liability to an employee, customer, tax authority or regulator. They are also only as useful as the seller’s ability to meet a later claim.

An asset sale can leave more of the seller’s history behind, but it is not risk-free. Employee service, assumed agreements, deposits, gift cards, prepaid work and customer warranties may still affect what you must provide after settlement.

The contract should make clear which outstanding obligations you are accepting, which remain with the seller and how any assumed liability affects the price.

Could tax or government approval affect the price or timetable?

NSW duty may apply where the transaction includes dutiable property such as land. GST depends on what is supplied and how the deal is documented.

A business sale may qualify as the GST-free supply of a going concern where it is made for consideration, the buyer is registered or required to be registered for GST, and the parties agree in writing to the going-concern treatment. The seller must also supply all things necessary for the continued operation of the identified enterprise and carry that enterprise on until settlement.

If those conditions are not met, the anticipated GST treatment may fail and the sale contract will determine whether GST is added to the price or paid from it.

Mandatory ACCC notification is less likely to arise in an ordinary small-business purchase, but it must still be considered where a current notification threshold is met. That includes cumulative thresholds applying to certain acquisitions of the same or substitutable goods or services over three years. If notification is required and no exemption applies, the acquisition cannot complete until the ACCC approves it or grants a notification waiver.

Tax treatment and any approval requirement need to be resolved early enough to be reflected in the price, conditions and settlement timetable.

How can the sale contract protect what you are paying for?

The contract should describe the assets and rights being acquired, the liabilities being assumed and the conditions that must be met before completion. It should also set out what happens if information supplied by the seller proves materially wrong.

Where goodwill and customer connections form part of the price, the seller may agree not to compete, approach customers or recruit employees for a defined period. This is commonly called a restraint .

A restraint must protect a legitimate interest acquired with the business, and its duration, geographic area and prohibited activities need to be reasonable. A restriction extending much further than necessary can be harder to enforce.

The useful question is what part of the acquired goodwill genuinely needs protection, not how broad a restriction can be inserted into the contract.

Which documents and warning signs matter before signing?

The due-diligence material should show what you will own, whether the business can continue operating and whether the earnings justify the price. It will commonly include:

  • the proposed offer, heads of agreement and sale contract;

  • asset, stock and intellectual-property schedules;

  • the premises lease and landlord-consent requirements;

  • key customer, supplier, software, franchise and licence documents;

  • PPSR searches and required releases;

  • employee and entitlement records;

  • financial, tax, payroll and bank records; and

  • details of claims, customer obligations and regulatory issues.

A seller who withholds material records, an essential licence that cannot continue, unresolved ownership of key equipment or employee figures that do not reconcile may justify delaying commitment until the issue is understood and dealt with in the contract.

Our business purchase service covers the sale contract and settlement. Where the transaction depends on related agreements, our commercial contract services cover those documents.

If you are preparing an offer or reviewing a sale contract, contact Biz Lawyers & Advisory or call 1800 893 836 before you become unconditionally bound.

This article provides general information only. It is not legal, taxation, accounting or financial advice, and the result depends on the business, sale documents and required approvals.

Primary sources

Law and guidance checked 13 August 2026.

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