Business Purchase Lawyer Guide For Buying A Business In Australia

Buying an existing business can feel like the “fast track” to growth.

You’re stepping into a brand, customer base, systems, suppliers, and (hopefully) a proven profit model - instead of building everything from scratch.

But there’s a catch: when you buy a business, you’re also buying risk. Sometimes that risk is obvious (like old equipment or a messy handover). Other times, the risk is hidden in the legal details - unclear ownership of assets, problematic leases, employee entitlements, unpaid tax, or supplier contracts that can be terminated the day after settlement.

This is where working with a business purchase lawyer becomes practical, not just “nice to have”. The right legal advice helps you understand what you’re actually buying, how to structure the deal, and how to protect yourself if things don’t match what you were promised.

Below, we’ll walk you through what a business purchase lawyer does, what the buying process typically looks like in Australia, the key legal traps to watch for, and how to set yourself up for a clean settlement and a smooth transition.

Do You Really Need A Business Purchase Lawyer?

In most cases, yes - especially if you’re an SME buying a business that you plan to operate for the long term.

It’s common for buyers to think the legal work is just “paperwork” after the price is agreed. In reality, the contract and due diligence stage is where you either:

• confirm the business is what you believe it is, or
• discover issues early enough to renegotiate, add protections, or walk away.

A business purchase lawyer helps you manage risks that can be financially painful later, such as:

• Buying the wrong thing (for example, you think you’re buying equipment and a website, but key assets aren’t owned by the seller).
• Taking on liabilities you didn’t expect (depending on the structure, you might inherit issues like warranties, refunds, disputes, or employee claims).
• Overpaying because the real financial position doesn’t match what was represented.
• Settlement delays caused by missing consents (like landlord consent for lease assignment) or incomplete transfer documents.

Even if the seller is “nice” and the business looks straightforward, you still want the deal documented properly. A purchase is a high-stakes transaction - and fixing a bad contract after you’ve paid is usually much harder than getting it right up front.

What Does A Business Purchase Lawyer Do During A Purchase?

A business purchase lawyer isn’t just there to “review the contract”. In a well-run purchase, your lawyer helps you control the transaction end-to-end, so the legal, operational, and commercial parts line up.

1. Help You Choose The Right Deal Structure (Asset Sale vs Share Sale)

In Australia, business purchases are commonly structured as either:

• Asset sale: you buy specific business assets (like equipment, stock, domain names, goodwill, customer lists, IP) and usually take over the lease and certain contracts by assignment/novation.
• Share sale: you buy the shares in the company that owns the business. The company remains the same legal entity - only the ownership changes.

Each structure has different risk profiles and practical implications. For example, a share sale can mean you take on more “history” (including liabilities sitting in the company), while an asset sale can be cleaner but still needs careful documentation around what is and isn’t included.

Your lawyer can help you decide what’s appropriate for the industry, the size of the deal, and your risk tolerance.

2. Run (Or Support) Your Legal Due Diligence

Due diligence is your opportunity to verify the seller’s claims and identify risks before you commit.

This usually includes reviewing:

• ownership of assets (including intellectual property like brand names, websites, social accounts)
• key contracts (supplier/customer agreements, software subscriptions, licences)
• lease arrangements and landlord requirements
• employment arrangements (including awards, leave entitlements, contractor vs employee risks)
• regulatory licences/approvals (industry dependent)
• security interests registered over business assets

If you’re buying a business where the risk is higher or the deal is more complex, it may be worth engaging a structured legal due diligence package to keep the process organised and thorough.

3. Draft Or Negotiate The Purchase Contract

The contract is where your protections live (or don’t live).

Depending on the transaction, your lawyer may prepare or negotiate documents such as an Asset Sale Agreement or a share sale agreement. They’ll also ensure key commercial points are properly reflected, including:

• what assets are included (and excluded)
• price and deposit terms
• adjustments at settlement (stock, prepaid expenses, employee entitlements, etc.)
• restraint of trade and non-solicitation
• warranties and indemnities (what the seller promises, and what happens if it’s not true)
• conditions precedent (for example, finance approval, lease transfer, key contract novation)

4. Coordinate Settlement And Handover

Settlement is more than “pay money, get keys”. A proper completion process often involves:

• transfer of lease or new lease documents
• assignment/novation of supplier and customer contracts
• employee transfer documentation (if applicable)
• handover of logins, software accounts, websites, and domain names
• business name transfer or registrations
• final checks that payout letters, consents, and releases are in place

A lawyer helps keep these moving parts aligned so you can take over operations confidently on day one.

The Step-By-Step Legal Process For Buying A Business

Every deal is different, but most Australian SME business purchases follow a similar pattern. If you understand the sequence, you’ll make better decisions (and avoid rushing into signing something you can’t easily unwind).

Step 1: Agree On Heads Of Terms (Without Locking Yourself In Too Early)

Many purchases start with a discussion on price and broad terms, sometimes documented in a “heads of agreement” or “term sheet”.

This stage is useful for clarity, but you should be careful about accidentally creating binding obligations before you’ve done due diligence.

If you’re unsure whether a document is binding (or partly binding), it’s worth having a lawyer review it before you sign.

Step 2: Decide Whether You’re Buying Assets Or Shares

Before a contract is prepared, confirm the deal structure. This will influence:

• what you’re buying and what you’re not
• which licences and contracts need to be transferred
• what liabilities may follow the business
• how the handover is implemented

This is also where you should consider your business structure as the buyer (for example, purchasing as a company for liability management, or using a new entity for the acquisition).

Step 3: Run Due Diligence Before You Go Unconditional

Due diligence is often done during a “conditional” period - meaning the contract is signed but subject to conditions (or you delay signing until your checks are complete).

Your due diligence checklist should usually include:

• Financial review (your accountant will typically lead this, but the contract should support what you find, including tax treatment and any GST implications).
• Asset verification (does the seller own what they say they own?)
• Contract review (what obligations continue post-settlement?)
• Lease review (can you take over the premises on acceptable terms?)
• Employment review (what’s the real staffing cost and risk?)
• Regulatory compliance (licences, permits, industry rules)

One practical check that’s often missed is whether there are security interests registered over the business assets on the Personal Property Securities Register (PPSR). Understanding what the PPSR is can help you see why this matters: if a lender has a registered interest over assets you thought you were buying, it can create serious problems after settlement.

Depending on the assets involved (vehicles, equipment, inventory), it may also be worth running a PPSR check as part of your pre-purchase process.

Step 4: Negotiate The Contract Terms That Actually Protect You

This is the point where a business purchase lawyer adds significant value. It’s not just about finding “unfair clauses” - it’s about making sure the contract matches the real-world deal.

For example, if the seller says “all supplier contracts will transfer”, your contract should:

• identify which contracts are critical
• require the seller to obtain counterparty consent
• give you the right to terminate or adjust price if consents aren’t obtained

Similarly, if the seller is staying on for training, that should be documented clearly (scope, timeframes, payment, and what happens if they don’t cooperate).

Step 5: Confirm Your Finance And Security Arrangements

If you’re borrowing to buy the business, your lender may require security documents.

Commonly, financiers use a General Security Agreement (GSA), which gives them broad rights over business assets if the loan defaults.

This is not automatically “bad”, but you should understand what you’re signing - especially if you’re also providing personal guarantees, or if the security extends to assets beyond the business you’re buying.

Step 6: Complete Settlement And Document The Handover Properly

By settlement day, you want a clear completion checklist covering:

• what gets paid and when (including adjustments)
• what documents are exchanged
• what consents must be in place (landlord, franchisor, key suppliers)
• what access and credentials are handed over (banking terminals, social accounts, website hosting, software)
• what happens immediately after settlement (training, announcements, supplier notices)

If you want a more guided, end-to-end approach, a structured business purchase package can help keep the purchase process consistent and settlement-ready.

Key Legal Issues And Red Flags When Buying A Business

When you’re excited about a purchase, it’s easy to focus on the “big picture” (revenue, brand, opportunity) and underplay the legal detail.

But most business purchase disputes and regrets come from the legal detail.

Here are some of the most common red flags we see Australian SMEs run into.

The Seller Doesn’t Clearly Own The Assets

Not every seller actually owns everything used in the business.

Common examples include:

• equipment under finance or lease
• a website built by a contractor where IP wasn’t assigned
• a business name registered to a different entity
• trademarks owned personally by a founder (not the business entity)

Your contract should clearly list the assets being sold and require the seller to transfer them free of encumbrances (or disclose what encumbrances exist).

The Lease Is Not Transferable (Or The Landlord Won’t Consent)

For many businesses, the premises are a key asset. If you can’t take over the lease (or the landlord insists on new terms you can’t accept), the entire deal can fall over.

This is why lease assignment and landlord consent are often made conditions of the purchase.

Even if the business is “mostly online”, check whether there are warehouse arrangements, storage agreements, or co-working licences that are operationally essential.

Employees, Contractors, And Entitlements Aren’t Clear

Staffing issues can become expensive quickly - especially if you discover problems after you’ve taken over.

At a minimum, you’ll want clarity on:

• who is an employee vs contractor (and whether that classification is correct)
• award coverage and pay rates
• leave entitlements and whether they will transfer
• any existing disputes or underpayment risk

If you’re retaining staff, you’ll also want proper documentation ready for the new arrangement, such as an Employment Contract tailored to the role and the business.

Customer Or Supplier Contracts Can Be Cancelled After Settlement

Some businesses look profitable because of a handful of key relationships.

If those customer or supplier contracts are:

• not in writing
• not assignable
• terminable at will (or on short notice)

…your “bought goodwill” may disappear quickly.

As part of due diligence, you’ll want to identify critical contracts and build protections into the deal (for example, requiring successful novation or including a price adjustment mechanism if a key contract falls away).

The Business Has Security Interests Or Finance Attached

A seller might have borrowed against the business assets.

If those security interests aren’t released at settlement, you can end up in a situation where a third party claims rights over assets you paid for.

This is exactly why PPSR searches and payout letters matter, and why your settlement process needs to include releases.

Restraint Of Trade Is Missing Or Too Weak

One of the biggest commercial risks after buying a business is the seller starting up again down the road and taking customers, staff, suppliers, or goodwill with them.

A properly drafted restraint of trade can help reduce this risk, but enforceability depends heavily on the wording and the circumstances (including whether it’s reasonable for the specific business and market).

This clause should be reasonable and tailored to the type of business, geographic area, and market reality. If it’s too broad, it may be unenforceable. If it’s too narrow, it may not protect you.

You’re Actually Buying Shares (And Inheriting “History”)

If you’re buying shares in a company, you’re stepping into that company’s past - including its contracts, liabilities, and compliance history.

This can be workable (and sometimes preferred), but it increases the importance of due diligence and careful warranties/indemnities in the share sale agreement.

Where shares are part of the deal, you may also need to document ownership changes properly and follow the correct steps for transferring shares.

How To Choose The Right Business Purchase Lawyer

Not all lawyers approach business purchases the same way. When choosing a business purchase lawyer, you’ll usually get the best outcome when your lawyer:

• Understands SME deals and how to balance legal protection with commercial practicality.
• Explains risks in plain English so you can make informed decisions without feeling overwhelmed.
• Helps you prioritise (not every issue is a deal-breaker, but some issues absolutely are).
• Is proactive with the transaction timeline (leases, consents, and finance can create delays if not managed early).
• Has a clear scope so you know what’s included (contract drafting/review, due diligence, settlement coordination, etc.).

You should also feel comfortable asking questions like:

• “What are the top 3 risks you see in this deal?”
• “What would you negotiate if this was your purchase?”
• “What are the non-negotiables before I go unconditional?”

A good lawyer won’t just say “it depends” - they’ll help you understand what it depends on, and what your options are.

Key Takeaways

• Buying a business can be a great growth move, but the legal details determine whether you’re buying a genuine opportunity or inheriting hidden risk.
• A business purchase lawyer can help you choose the right deal structure, run due diligence, negotiate protections, and coordinate settlement so you can take over with confidence.
• Due diligence should cover assets, contracts, leases, employees, licences, security interests, and (with your accountant) tax treatment such as GST and any applicable duties - not just the headline financials.
• Key red flags include unclear asset ownership, lease transfer issues, employee entitlement risks, contracts that can’t be transferred, and missing restraint of trade protections.
• Getting the contract right upfront is usually far cheaper (and far less stressful) than trying to fix a bad deal after settlement.

Note: This article is general information only and isn’t legal, tax or financial advice. Buying a business can have significant legal and tax consequences, and you should get advice tailored to your circumstances (including from a lawyer and an accountant) before signing any documents or going unconditional.

If you’d like a consultation about buying a business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.