1. Are you buying assets or company shares?

Start by identifying the legal buyer, the legal seller and exactly what changes hands. In an asset purchase, the contract identifies the assets and rights being acquired. In a share purchase, you acquire shares in a company; the company continues with its assets and liabilities.

That distinction changes the due diligence required. An asset purchase still needs careful checks of assumed obligations, employment issues and interests affecting assets. A share purchase calls for close examination of the company’s history. Discuss the proposed structure with your solicitor and accountant before naming the buyer in an offer. See the government explanation of asset and share purchases.

Buying with another person? Agree who contributes funds, makes decisions and can exit. Our 50/50 shareholders agreement article explains why those arrangements deserve attention early.

2. What equipment and stock are actually included?

Walk through the business with a written asset list. Identify important items by make, model and serial number where appropriate, and distinguish equipment being sold from equipment supplied under hire, rental or other arrangements. Ask for invoices, relevant agreements and maintenance records; arrange a suitable inspection where condition matters.

Agree how stock will be counted and valued, including obsolete or damaged items. Record exclusions and promised repairs in the contract. A verbal assurance that “everything is included” leaves too much room for disagreement.

Our equipment ownership video guide explores this starting point. The Australian Government also explains the distinction between leasing and buying equipment.

3. Are security interests or finance arrangements involved?

An asset may secure a debt even when it is sitting in the seller’s premises. Arrange appropriate Personal Property Securities Register (PPSR) searches using the correct identifiers and obtain advice on the results, timing and any required further enquiries.

The PPSR is not an ownership register. A search alone does not establish title or resolve every risk. If a security interest affects the purchase, the contract and settlement arrangements should address the required release or other agreed treatment. Do not rely on a promise that the seller will deal with the lender later.

Read the PPSR’s guidance on buying second-hand machinery or equipment and its explanation of what the register records.

4. Can you keep operating from the premises?

A business purchase and the right to occupy its premises need to work together. Review the lease, disclosure documents, remaining term, renewal options, rent reviews, outgoings, permitted use, repairs and make-good obligations. Check any personal guarantee you are asked to provide.

Establish whether an assignment or a new lease is required, what consents and procedures apply, and how they fit the settlement timetable. Do not assume the landlord must offer a fresh lease on your preferred terms. The application of South Australia’s retail leasing legislation also needs consideration.

Use our commercial lease guide alongside the SA Small Business Commissioner’s leasing guide. For end-of-lease costs, see make-good clauses.

5. Do the records support the asking price?

Ask your accountant to assess reliable financial records, rather than relying on a sales summary. Relevant material can include profit and loss statements, balance sheets, tax returns, BAS, sales records, debts and cash flow. Explore whether the results depend heavily on the seller’s unpaid work, a particular customer or unusual trading conditions.

Build a budget for the purchase and ongoing operation. Include stock, rent security, wages, professional fees and working capital, as well as the advertised price. The Australian Government’s business purchase guide provides a useful due diligence starting point.

A practical question for your adviser: “What would these figures look like if I paid someone to perform all the work the seller currently does?”

Check South Australia’s Form 2 disclosure requirements

Ask whether the purchase falls within the small-business regime under the Land and Business (Sale and Conveyancing) Act 1994 (SA). Qualifying sales generally require a Form 2 vendor’s statement, with prescribed information and an accountant’s certificate. Statutory cooling-off rights may also apply, subject to exceptions and strict timing.

Have your solicitor check the transaction, the documents and any proposed waiver. Do not assume every business purchase has a cooling-off period, or that the period runs from signing the contract.

6. What happens to employees and their entitlements?

Review employment contracts, applicable awards or agreements, pay, leave balances, service records and superannuation arrangements. Establish who will be offered employment and whether transfer-of-business rules apply.

Recognition of previous service and responsibility for particular entitlements require careful analysis. There are exceptions, so avoid a blanket assumption that every entitlement transfers or that everything is paid out. Any agreed settlement adjustment between buyer and seller must be distinguished from the employees’ legal rights.

See Fair Work’s guidance on businesses changing owners and employee entitlements on transfer. Include employment records in the handover and check applicable long service leave rules.

7. Which licences and approvals must be ready?

List the permissions needed for the actual activities you intend to carry on. Depending on the business, these may involve the council, an industry regulator or Consumer and Business Services. Check whether each permission can transfer, needs a fresh application or has conditions affecting your plans.

For a South Australian liquor licence transfer, the new owner cannot sell or supply liquor until approval has been given and the licence transferred. Review the SA Government’s liquor licence transfer guidance and confirm the requirements for the particular licence. Link necessary approvals to realistic contract deadlines and your intended opening date.

8. Will the contracts, brand and digital assets come with it?

Identify the relationships that make the business work: major customers, suppliers, software providers, payment services and any franchise arrangements. Ask whether consent, assignment, replacement agreements or change-of-control approval is needed.

List the business name, domain, website, trade marks, phone numbers and relevant account access separately. Confirm ownership and permitted transfer; possession of a password does not settle those questions. ASIC’s business name transfer process involves both the current and new holder.

Plan how confidential information and personal data will be handled lawfully during enquiries and handover. If customer relationships depend on the seller personally, discuss introductions and any appropriate contractual protections.

9. Do the contract, price and conditions match the deal?

Have agreed outcomes recorded clearly: included assets, price, deposit, stock valuation, adjustments, warranties, completion obligations and remedies. Where required, negotiate suitable conditions for finance, due diligence, premises arrangements and approvals, with clear deadlines and notice requirements.

Ask what happens if a condition is not met, who may terminate, and how the deposit is treated. A promise to “sort it out before settlement” is not a substitute for workable wording. The government’s business sale guide outlines matters a sale agreement should address.

Get tax advice on GST and any other transaction taxes. A supply of a going concern may be GST-free only if the requirements are satisfied, including the required written agreement, buyer registration status and continuity of the enterprise. Review the ATO’s going concern ruling; the contract label alone is insufficient.

10. Is there a practical settlement and handover plan?

Turn the agreement into a dated checklist with a responsible person for each task. Coordinate the funds, required releases, consents, stock count, documents, keys, access permissions and any agreed training. Confirm when insurance and operational responsibility need to begin.

Arrange secure payment verification: independently confirm payment instructions using trusted contact details, especially if bank details change. Our payment scam article explains warning signs that are also useful when handling business purchase funds.

Before completion, ask: “What must be delivered today, what evidence confirms it, and what happens if it is missing?” Keep outstanding items visible to your advisers.