Buying a business can be a smart way to grow quickly, tap into existing customers, and start earning from day one. But the way you buy matters. Should you acquire the whole company, or just pick up selected assets?
In Australia, most deals are structured as either a share (company) purchase or an asset purchase. Both can work well - the right choice depends on your goals, risk appetite and the specific business you’re buying.
In this guide, we’ll explain the key differences, the steps involved, and the legal issues to look out for so you can buy with confidence.
Why Buy A Business Instead Of Starting From Scratch?
Buying an established operation can save time and reduce some startup risks. You’ll often inherit customers, brand goodwill, systems, suppliers and trained staff.
However, you’re also stepping into an existing legal and financial footprint. That can be an advantage (a proven model) or a downside (legacy risks). The structure of your purchase is your biggest tool to manage those risks - which brings us to the choice between share purchase and asset purchase.
What’s The Difference Between A Share Purchase And An Asset Purchase?
In simple terms, a share purchase means you acquire the company itself by buying its shares. An asset purchase means you acquire selected assets (for example, equipment, stock, intellectual property, the trading name, and sometimes the lease and employees), but not the company as a legal entity.
Share Purchase (Buying The Company)
When you buy shares, you step into the shoes of the current owners and take control of the company - warts and all. The company keeps all its contracts, employees, licences, liabilities and history. This can be efficient if continuity matters (for example, to keep contracts and licences uninterrupted).
- Pros: Seamless continuity of business; no need to re‑assign many contracts; customers and suppliers experience minimal change.
- Cons: You inherit the company’s past liabilities; you’ll rely heavily on warranties, indemnities and thorough due diligence.
If you want a deeper primer on how these two structures compare, it’s worth understanding the key differences in a share sale vs asset sale context.
Asset Purchase (Buying Selected Assets)
In an asset deal, you select what you want (e.g. plant and equipment, IP, website, customer lists, stock) and leave behind what you don’t want. You’ll create (or use) your own entity to operate the business going forward.
- Pros: More control over what you take on; generally better at ring‑fencing legacy risks; flexibility to restructure operations.
- Cons: More logistics - contracts, leases and licences often need third‑party consent and assignment; employees may need to be offered new terms; continuity requires careful planning.
There’s no one-size-fits-all answer. The right structure is the one that achieves your commercial objectives while managing risk in a way you’re comfortable with.
How Do You Decide Which Structure Is Right For You?
Start with your goals, then test each option against risk, tax and operational considerations. Here are the main questions to work through.
1) What Level Of Continuity Do You Need?
If ongoing contracts, licences or accreditations are critical and hard to transfer, a share purchase can provide smoother continuity. If most third parties are willing to consent to transfers - or you’re happy to renegotiate - an asset purchase may work well.
2) What Risks Are You Prepared To Inherit?
Share purchases carry historic risk. Even with warranties and indemnities, legacy issues (tax, employment, compliance, disputes) can surface later. Asset deals let you leave unwanted liabilities behind, though you’ll still need to check for things like product liability or warranty obligations that “follow” the assets under law or contract.
3) Do The Numbers Stack Up Either Way?
Tax and stamp duty can differ between structures and between states and territories. Work with your accountant early so the price and structure reflect those impacts. Also consider working capital needs - for example, in a share sale you may inherit debts and receivables inside the company.
4) Will Key People And Contracts Come Across?
Either way, talk early about transition plans. In a share sale, the team stays with the company; in an asset sale, you’ll usually offer employment with your purchasing entity and seek consent to assign material contracts, or negotiate new ones.
5) How Complex Is The Cap Table?
For share deals, multiple shareholders, option holders or convertible notes can add complexity to completion mechanics. Make sure the sale terms deal clearly with these instruments and the release of any security interests.
Step‑By‑Step: The Legal Process To Buy A Business
Every deal is different, but most follow a similar path. Here’s a practical roadmap from first conversation to handover.
Step 1: Heads Of Agreement (Optional But Helpful)
Capture commercial terms in a short document: price, structure (shares or assets), what’s included/excluded, deposits, exclusivity, confidentiality and a target timeline. This keeps everyone aligned while you do deeper checks.
Step 2: Due Diligence
This is where you verify what you’re buying. Legal, financial and operational due diligence helps you confirm value, uncover risks and refine deal terms. A structured legal due diligence process will look at contracts, employment, IP, privacy, compliance and more.
Step 3: Draft And Negotiate The Sale Agreement
The sale agreement sets out what is being sold, the price and adjustments, conditions precedent, warranties and indemnities, restraints, employee and lease arrangements, and how completion will work. For asset deals, you’d usually work with a comprehensive Business Sale Agreement. For share deals, you’ll typically use a detailed Share Sale Agreement addressing the company’s position and completion mechanics.
Step 4: Conditions Precedent And Regulatory Steps
Common pre‑conditions include landlord consent, key customer or supplier consents, finance approval, FIRB (if applicable), and resignation/appointment of directors. In share deals, plan for share transfer forms, board resolutions and any ASIC transfer of shares filings.
Step 5: Completion (Settlement)
On completion, the purchase price is paid and the parties exchange signed documents, releases of security interests, IP assignment documents, employee transfer documents, and updated company registers (for share deals). Make sure handover of assets (physical and digital), books and records, and access credentials is covered in the checklist.
Step 6: Post‑Completion Handover And Support
Plan a practical transition: seller assistance for an agreed period, introductions to key customers and suppliers, and knowledge transfer of processes and tools. This is where continuity planning pays off.
Key Legal Issues To Check In Due Diligence
Good due diligence protects your investment and gives you leverage to negotiate risk allocation. Here are the big-ticket items we typically review with buyers.
Financial And Corporate Records
- Company constitution, share register and past board/shareholder resolutions (for share deals).
- Financial statements, tax returns, BAS, payroll records, superannuation compliance and ATO positions.
- Related‑party arrangements (for example, management fees, loans or leases) and whether they will be unwound at completion.
If you’re proceeding with a share purchase, it helps to understand the process and documents involved in a Sale of Shares and how the mechanics differ from an asset deal.
Material Contracts
- Customer, supplier and distribution agreements - check term, termination rights, change‑of‑control clauses and assignment restrictions.
- Leases and licences - is landlord consent required? Are there rent reviews or make‑good obligations approaching?
- Any government permits, industry accreditations or approvals that are critical to operate.
In asset deals, where contracts can’t be novated cleanly, understand the impact of assignment of contracts and whether third‑party consent will be needed.
Employment
- Contracts, awards and enterprise agreements, accrued entitlements and any underpayment risks.
- Workers compensation, WHS compliance and any ongoing investigations or claims.
- Whether employees will transfer and on what terms (transfer of business rules can apply under the Fair Work Act).
Intellectual Property And Brand
- Ownership and registration of trade marks, business names, domain names and key copyright assets.
- Software and technology - confirm licences, code ownership, and third‑party dependencies.
- Restraints of trade to protect goodwill post‑sale.
Privacy And Data
- Privacy compliance (Privacy Act and Australian Privacy Principles), consent and collection practices.
- Security controls and data breach history.
- Customer database quality and any restrictions on use or transfer.
Regulatory And Disputes
- Compliance with Australian Consumer Law (ACL) - advertising, refunds, warranties and product safety.
- Open investigations, infringement notices, past or threatened litigation.
- Licences and permits - confirm they exist, are current and transferrable (or replicable).
Assets And PPSR
- Clear title to physical assets; confirm no hidden security interests are registered on the PPSR.
- For stock and equipment, verify condition, maintenance and any finance or rental arrangements.
- For leased premises, verify outgoings, options to renew and any refurbishment obligations.
What Contracts And Documents Will You Need?
Each transaction is unique, but most business acquisitions will involve some combination of the following documents. Getting these right at the start reduces disputes and protects value.
- Business Sale Agreement (Asset Deal): Records the assets being purchased, price and adjustments, conditions, seller warranties and indemnities, restraints, employee and lease arrangements, and completion steps. Many buyers use a tailored Business Sale Agreement to address deal‑specific risks.
- Share Sale Agreement (Share Deal): Transfers ownership of the company and includes detailed warranties, indemnities, completion mechanics, and post‑completion obligations. It often works alongside board/shareholder resolutions and share transfer forms with ASIC filings.
- Disclosure Letter: The seller’s formal disclosures against warranties; critical for clarifying what you’re accepting.
- Assignment/Novation Deeds: Used to transfer key contracts in asset deals, aligned with any consent requirements. Where a commercial property is involved, buyers often need a Deed of Assignment of Lease.
- IP Assignment Deeds: To transfer trade marks, domain names, copyright and other IP needed for the business.
- Employment Transfer Documents: Offers of employment for transferring staff, acknowledgement of service, and treatment of accrued entitlements.
- Security Releases: Releases of any PPSR registrations and lender consents to ensure assets are delivered free of security interests.
- Transitional Services Agreement (if needed): Short-term support from the seller to ensure a smooth handover.
On top of the transaction documents, set up your ongoing trading documents (customer terms, supplier contracts, Privacy Policy, employment agreements) so the business operates cleanly under your ownership.
Special Considerations: Completing Cleanly And Protecting Value
A well‑structured contract will do a lot of the heavy lifting, but a few practical points can make or break the handover.
Price Adjustments And Working Capital
Decide whether the deal is on a debt‑free, cash‑free basis, whether you’re buying stock at valuation, and how completion accounts or earn‑outs will work. Clear definitions upfront prevent friction later.
Consents, Change Of Control And Licences
Map key customers, suppliers, landlords and licensors early and build realistic timeframes to obtain consents. If a change of control triggers termination rights in major contracts, consider whether a share or asset structure better manages that risk.
Warranties, Indemnities And Caps
Warranties and indemnities allocate risk between buyer and seller. Negotiate coverage, time limits and liability caps that reflect your diligence findings. Consider escrow or retention arrangements to secure recourse if issues are discovered post‑completion.
Restraint Of Trade
If you’re buying goodwill, protect it. Include reasonable restraints on the seller (time, geography, activities) to prevent immediate competition that undermines the value you’ve purchased.
Leases And Premises
For premises integral to the business, make lease assignment or a new lease a condition to completion and document any landlord works or incentives clearly. In asset deals, the lease assignment usually sits alongside the main sale document via a Deed of Assignment of Lease.
Employees And Transfer Of Business
In asset deals, understand which employees you’ll offer to take on and how entitlements will be dealt with. Transfer of business rules under the Fair Work Act may affect continuity of service and redundancy exposure.
Regulatory Notifications And Records
Share purchases require updating company registers and making relevant ASIC changes. Plan these in parallel with completion steps so records are accurate from day one.
Common FAQs About Business Purchase Structures
Is One Structure Always “Safer”?
Asset purchases typically give you better control over what liabilities you assume. But a well‑negotiated share deal with strong warranties, indemnities and price adjustments can also manage risk effectively - and may preserve more value if you need continuity of contracts and licences.
Can We Mix And Match?
Sometimes. You might buy the shares in a holding entity but carve out specific liabilities before completion. Or you might do an asset purchase now and a share purchase later. Get advice early if you’re considering a hybrid approach.
What If The Business Is Run Through A Group Of Companies?
Map which entity owns which assets and contracts. In group structures, assets are often spread across entities, so your structure (and documents) need to reflect the real ownership to avoid gaps at completion.
Do We Need To Tell ASIC?
For share purchases, yes - you’ll manage share transfer paperwork, update company registers and complete any necessary notifications. See what’s involved in an ASIC transfer of shares scenario so you factor in timing and documentation.
Which Agreement Do We Use?
Use the agreement that matches the structure. An asset deal uses a Business Sale Agreement; a share deal uses a Share Sale Agreement. In both cases, the agreement should be tailored to your specific risk profile and diligence findings. If you’re unsure where to start, speak to us about a due diligence and drafting approach that suits your transaction.
Key Takeaways
- Buying a business in Australia usually means choosing between a share (company) purchase and an asset purchase; each structure carries different risk and continuity outcomes.
- Share purchases keep the company intact (and its history), while asset purchases let you select what you acquire; match the structure to your goals and risk tolerance.
- Thorough due diligence across contracts, employees, IP, privacy, compliance, leases, tax and PPSR is essential to confirm value and negotiate protections.
- The sale agreement is your risk‑allocation engine - get the right warranties, indemnities, restraints and completion mechanics for your deal.
- Plan consents, employee transfer and lease arrangements early so completion runs smoothly and the business doesn’t miss a beat on day one.
- Specialist help with structure, due diligence and tailored documents will reduce risk and protect the value you’re buying.
If you’d like a consultation on buying a business in Australia - whether via company purchase or asset acquisition - you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
