Buying a small business

If you are considering buying a small business, there is a legal process after you shake hands which may take weeks or months to finalise.

Finance is often one a big impediment to a buying a business so it’s prudent to apply for your business loan as soon as possible. Once you have located a business you want to buy, you should contact a lawyer and other professionals such as financial advisors, valuers and accountants, who can help you decide if the purchase would be a good investment.

The seller usually instructs their solicitor to draft the contract for sale which is forwarded to the buyer’s solicitor. Your solicitor and/or accountant can advise you in regards to:

  • The key elements being purchased, and whether it is necessary to purchase the business. There may be taxation or other financial reasons to only purchase the equipment used in the business, or have a licence granted to operate the business, or purchase the company that operates the business, rather than purchasing the whole business. All of these options will result in you operating a business but each is accompanied by different legal implications;
  • advice on the contract for sale our business;
  • Licensing or qualification requirements for your industry;
  • The type of entity to operate your business (e.g. sole trader, incorporated company, trust).

Contract Advice and Negotiation

We closely examine the contract for sale of business drafted by the seller’s solicitor. We advise you in regards to the terms of the contract and, if necessary, negotiate amendments with the seller’s solicitor to better suit your requirements. This process involves the consideration of aspects of the purchase which may have not as yet have arisen including:

  • Ensuring that the appropriate and complete equipment is listed as inclusions in the contract and that the description in the contract matches the equipment on site;
  • Ascertaining whether any of the equipment is subject to hire purchase arrangements, a finance charge, or a mortgage to ensure clear title on settlement;
  • Any training period to be provided by the sellers;
  • Treatment of any debt/creditors, unbilled fees, and work in progress up to the point of sale;
  • Whether a lease is to be assigned to you;
  • Whether you are re-employing existing employees; and
  • Whether registered intellectual property is to be transferred to you.

Between exchange and completion

Upon agreement being reached on the terms of the contract, it is signed and contracts are exchanged by the solicitors, making the agreement legally binding.

The agreement will specify the role of the parties between exchange and settlement (when you pay the balance of the purchase price). During this post exchange – pre settlement period you must attend to some or all of the following:

  • Finalise loan documentation (if the contract is not subject to finance loan documentation it must be finalised prior to the exchange of contracts);
  • Enter into employment contracts;
  • Obtain Public Liability Insurance, Worker’s Compensation and any other necessary insurance (such as plate glass);
  • Obtain bank guarantees in compliance with the terms of the lease (if any);
  • Obtain any required licenses or approvals;
  • Notify suppliers/clients of new ownership, ABN, and bank details.

The next step

We are experienced in acting for purchasers of businesses. If you are thinking about, or have already struck a deal to buy a business, contact us to support and guide you through the process.

Selling a small business

When selling your business, you will first need to decide if you are selling the company itself (i.e. the shares in the company) or just selling the business and its assets. You will need to have the business valued by a business valuer. You must then decide on the price you are willing to sell the business for. If a buyer has not already approached you directly, you will then need to advertise the sale, either personally or through a broker.

A lawyer can only provide you with legal advice, not financial advice. If you require financial advice (e.g. how much you should value the business, whether it is the right time to sell the business), you should speak with a financial advisor.

Transfer of Ownership

If the ownership of a business is not effectively transferred to the purchasing party, this may later cause you legal difficulties. To make sure that you are transferring all ownership of the rights, responsibilities, liabilities and assets of your businesses, you must understand what these items are and that they are included in the Contract for the Sale and Purchase of Business 2021 (NSW).

Assets that you can transfer during a sale of business include:

  • goodwill and stock-in-trade;
  • contracts with suppliers;
  • licenses and permits the purchaser may need to conduct the business;
  • leasehold interests, if you are currently leasing a business premises which the purchaser may wish to use after the sale;
  • your intellectual property rights in the business name or logo; and
  • franchise agreements.

Before Exchanging Contracts

Usually, a standard contract for the sale of business is used, which contains extensive clauses covering all legal requirements under Australian law. However, as all businesses are different, you may need to add clauses or special conditions. Special conditions can be added to the end of the contract. These must be drafted properly to avoid any uncertainty or confusion. The purchaser will use this time to conduct preliminary searches, reviews and inspections of the business documents and premises to familiarise themselves with all the aspects of the purchase.

Exchange of Contracts

Following completion of all negotiations on the terms of the sale, you and the purchaser each sign an identical copy of the contract and exchange them. It is your responsibility to arrange for a time and place for exchange of contracts. After exchange, the contract is legally binding. The purchaser will usually give you a cheque for the deposit during exchange.

Pre Settlement

During this stage, you are required to fulfil the obligations outlined in the contract. There are standard obligations and there may be additional obligations in the special conditions that you must fulfil. Some standard obligations are:

  • completing all documents required to transfer ownership to the purchaser;
  • getting the landlord’s consent to transfer the lease to the purchaser;
  • discharging securities, mortgages and any other encumbrances held over your business; and
  • maintaining your business’s goodwill.


At settlement, you may need to exchange certain documents. You will have to provide the purchaser with documents passing ownership rights to them. The purchaser may give you bank cheques or deeds in return. For example, in the case of a share sale, you may give the purchasers:

  • share transfers;
  • a director resignation document;
  • an appointment of directors document;
  • approvals for share transfers;
  • share certificates; and
  • items listed in the second schedule.

In exchange, the purchaser may give you a:

  • bank cheque for the sale price of your business or the shares;
  • signed deed of guarantee by the purchasers; and
  • deed of guarantee if there is a lessor.

Post Settlement

After settlement, the purchaser has to undertake tasks to ensure that they have full ownership of the business. Your lawyer has tasks to complete to ensure the cessation of your responsibility for assets transferred to the purchaser. These may include:

  • cancelling licenses and insurance in your name relating to the business;
  • handing over any stock or inventory;
  • giving the agent an order to transfer the purchaser’s deposit to you;
  • giving the new owner a list of passwords to accounts;
  • ensuring you pay out staff leave entitlements for any staff the purchaser has not taken on;
  • finding out from your lawyer the settlement proceeds, and your lawyer’s costs;
  • transferring assets into the new owner’s name; and
  • passing on the business client list.

Taxes – Including CGT, GST and Other Costs

A major concern when selling a business is the tax implications the transaction may attract. You should consider any taxes that may apply, which may reduce the money you end up with after the sale. If you are registered for Goods and Services Tax (GST), you may be liable to pay GST. However, if you sell your business as a going concern, the sale may not attract GST. If your business is being sold as a going concern:

  • the purchaser is registered for GST; and
  • you will sell the business in return for payment; and
  • you are supplying everything to the purchaser so they can continue operating the business; and
  • you have agreed with the purchaser that the sale is of a going concern; and
  • your intention is to carry on the business until you sell it to the purchaser.

If you sell your business and make a profit, the profit may be subject to Capital Gains Tax. This tax applies to:

  • intangible assets (e.g. intellectual property);
  • business assets; and
  • goodwill.

Tax concessions may be available to you as a small business owner. The sale of your business may also be subject to transfer duty, to be paid by the purchaser.

The next step

Selling a business can be very exciting but the process can also be rather tricky. It is a good idea to get legal assistance during this time so you are aware of all your risks, obligations and duties as the seller. If you are thinking about, or have already struck a deal to sell your business, contact us to help you through the process.

Commercial/Retail Leases

What is a Lease?

A lease is a legal agreement between a landlord (or ‘lessor’) and tenant (or ‘lessee’) for use of the landlord’s business premises.

When does a lease commence?

A lease generally commences when both parties have signed it. After the lease is signed, neither party can end it without the other’s consent.

However, a lease is valid even if a lease has not been signed if the tenant :

  • takes possession of the premises; or
  •  begins to pay rent

It is good business practice not to pay rent or open for business until the lease has been signed. 

What should be included in a lease?

A lease should include:

  • the start and end date;
  • a description of the premises;
  • how much the rent is;
  • by how much the rent can be changed;
  • the type of business;
  • outgoings the tenant must pay;
  • what bond, security or guarantee is required;
  • who is to repair and maintain the property and equipment;
  • core trading hours (when the premises must be open for business).

Retail Lease Act Leases

What is the Lease Period?

The lease period is the length of time the tenant rents the premises. It may include an option to renew or extend the period.

Schedule 1 of the Retail Leases Act 1994 (NSW) (the Act) lists categories of businesses to which the Act applies. 

What is Permitted Use?

“Permitted use” is the type of business you can run from the premises.

Before signing the lease, you must ensure that the council permits the premises to be used for the type of business you intend to run. If your intended use of the premises is not permitted, you must seek the landlord’s and the council’s consent.

You should ensure that the description of the permitted use of the premises in the lease and the landlord’s disclosure statement is broad enough to allow you to expand and sell the business.

When buying a business and taking over a lease, you should not rely on the landlord’s verbal assurances that your intended use of the premises is permitted. You should confirm this by making enquiries with the council.  

What is a Shopping Centre Lease?

A ‘shopping centre’ as defined by the Act is a cluster of shops:

  • owned by the same person where at least five shops are used for retail business; and
  • regarded or promoted as a centre, mall, court or arcade.

Issues when commencing a lease in a shopping centre include:

  • you may be required to contribute to the cost of advertising and promoting the shopping centre;
  • you can not be required to promote or advertise their business;
  • you can not be prevented from conducting business outside the centre;
  • the landlord can not change the centre’s core trading hours without the written agreement of a majority of shops.

What are some costs of Leasing?

Lease preparation

The landlord pays for preparation of the lease unless you ask for changes after you have returned the tenant’s disclosure statement to the landlord. 

You pay transfer duty and fees for registering the lease. The Act requires leases with a period of over three years (including an option) to be registered.


The tenant is usually responsible for the cost of installing fixtures and fittings (‘the fitout’). Shopping centres usually specify standards of construction for fitouts.

Tenants may also be responsible for some/all of the landlord’s costs of preparing the shop for the fitout (‘landlord’s works’). The landlord’s disclosure statement must state whether the tenant pays these costs. The tenant must agree in writing to the maximum cost of landlord’s works before commencing the lease.

The tenant should ensure that they:

  • know what expenses they will incur in preparing the shop to trade and
  • follow the fitout standard specified by the lease.

The tenant should:

  • check whether the landlord has nominated them as the principal contractor for any fitout works; and
  • become familiar with their occupational health and safety responsibilities.

Payment of Rent

Rent is one of your biggest ongoing costs and is normally paid monthly in advance.

If the lease says you will keep actively trading in the lease period, during that period you:

  • can not close the business;
  • must use the premises only for the permitted use; and
  • must pay the rent despite any financial problems.

If you do not pay the rent on time, the landlord may lock them out or end the lease without notice.

Changing the Rent

The lease states when and how rent can be changed.

If the lease says that the rent is set at current market value and you and the landlord cannot agree what that is, the Act provides that a specialist retail valuer appointed by the NSW Civil and Administrative Decisions Tribunal (‘NCAT’). determines the rent. You and the landlord equally share payment of the valuer’s costs.  


Outgoings are the landlord’s expenses that you have agreed to pay under the lease.

The Act says that outgoings must be:

  • directly and reasonably related to the premises being leased; and
  • attributable to the operation, maintenance or repair of the building/shopping centre.


The landlord may ask you for security when negotiating the lease, which may be:

  • a cash bond;
  • a third party guarantee (a third party promises to pay the landlord if you break the lease); or
  • a bank guarantee (your bank promises to pay the landlord up to an agreed amount if you break the lease). You must usually give the bank security to obtain a bank guarantee.

Cash Bond

If you agree to pay the landlord a cash bond as security, within 20 business days the landlord must deposit the bond with the NSW Government’s Retail Bond Scheme, which holds it in trust.

The advantages of giving the landlord a cash bond include:

  • it is held by the NSW Government;
  • there are no fees;
  • unlike most third party guarantees, it is for a specified amount,
  • unlike most third party and bank guarantees, it can not without your agreement be called on before the lease ends;
  • there are legal procedures for paying out bond money at the end of the lease and for disputes, which can help minimise your costs.

Landlord’s Intended Works

Before you sign the lease the landlord must tell you in writing whether they intend to do any works that may disrupt your business.

Disclosure statements

The Act requires that you and the landlord give each other a disclosure statement using a specific form.

If you are unsure about the meaning or implications of any aspect of the landlord’s disclosure statement you should consider seeking legal and/or financial advice.

What can we do for you?

We check the landlord’s disclosure statement for:

  • the annual sales of the centre;
  • the turnover for specialty shops of your kind per square metre;
  • the centre traffic count;
  • fitout details;
  • construction standards; and
  • when the leases for major tenants end.

We check that the landlord’s disclosure statement includes:

  • all the agreements reached during negotiation; and
  • any promises made by the landlord

and if necessary request a new disclosure statement.

The tenant’s disclosure statement must say if:

  • you have received the landlord’s disclosure statement;
  • you have a draft lease;
  • you have had professional advice about your lease obligations;
  • you can meet your obligations; and
  • the landlord has made any other agreements or representations to you and if so their details.

The tenant’s disclosure statement should note all the verbal commitments the landlord or their agent made to you. You should therefore tell us and we will write in the tenant’s disclosure statement all verbal commitments the landlord has made to you about the premises, such as:

  • the level of passing trade;
  • the tenancy mix;
  • any works they expect to do that may disrupt your business;
  • your right to be the only retailer selling particular products or services.

We ensure that:

  • you receive a landlord’s disclosure statement at least seven days before you begin a new lease; 
  • the tenant’s disclosure statement is provided to the landlord within seven days after you have received the landlord’s disclosure statement.

If you plan to enter into or assign a retail lease for premises such as a shop, for a reasonable fixed fee for professional costs we will advise and represent you and deal with the landlord on your behalf. This includes:

  • checking whether the type and size of the shop require that the lease complies with the Act;
  • asking the landlord detailed questions about the impact on your business of any expected development of the building/shopping centre if the landlord’s disclosure statement contains insufficient detail;
  • checking that your business is a type permitted in the premises;
  • reviewing and explaining the terms of the proposed lease and associated documents (including opening hours, lessee’s/assignee’s and lessor’s/assignor’s disclosure statements, penalties for breaching terms of the lease, interest rates for late payment of rent, insurance required, whether the landlord requires a bond or a guarantee, the number and length of options, minimum required notice to the lessor if you wish to take up an option etc.).

We negotiate with the landlord as required (e.g. ground rules for rent increases, interest rates, number and period of options, period within which tenant can exercise option), witnessing your signature and facilitating registration of the lease with NSW Land Registry Services. 

Contact us to guide you through the process of commencing a commercial lease.