Selling a small business in NSW

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When selling your business, you will have to decide if you are selling the shares in the company, or only the business and its assets.

Once the business has been valued by a business valuer, you determine a sale price and advertise the sale, either personally or through a broker.

What should I include in my Sale of Business Contract?

What are the commercial details?

The contract must clearly set out the commercial details of the transaction. This includes vendor and purchaser details, the purchase price, settlement date, any guarantors, and the assets included within the sale.

You should consider whether things like fixtures or trading stock form part of the sale or remain separate from the transaction.

Any conditions to the sale?

If the sale transaction is conditional on certain things (e.g. if the sale is subject to the purchaser obtaining finance or receiving a client list before settlement), these should be detailed in the contract.

Any restraints of trade?

A restraint of trade clause prevents the vendor from soliciting clients, customers, suppliers or employees from the purchaser or competing with their business. The vendor is restricted for a specified period and/or within a specified area.

A restraint of trade clause that goes further than necessary to protect the purchaser’s business interests is unenforceable and void.

What happens to employees?

Your contract should address whether the sale has the effect of transferring or terminating employees, or whether existing employees must be re-interviewed by the new owner.

The vendor must comply with their obligations under the Fair Work Act 2009 (Cth) to employees, honouring any employee entitlements (e.g. annual leave, flexible working arrangements, sick leave, redundancy pay for employees not transferred to the new business).

What happens to intellectual property?

The contract should set out who retains ownership of intellectual property rights (e.g. phone numbers, trade marks, social media accounts, copyright, designs and patents) and whether they are licensed or transferred as part of the sale. 

Transfer of ownership

All the rights, responsibilities, liabilities and assets of your business are in the contract.

Assets may include:

  1. goodwill and stock-in-trade;
  2. contracts with suppliers;
  3. licenses and permits the purchaser may need;
  4. leasehold interests;
  5. your intellectual property rights in the business name or logo; and
  6. franchise agreements.

Before exchanging contracts

A standard contract for the sale of business will cover all the legal requirements. However, you may wish to add special conditions.

The purchaser will conduct preliminary searches, reviews and inspections of the business documents and premises.

Exchange of contracts

Upon finalising negotiations on the terms of the sale, each party signs an identical copy of the contract and they are exchanged. The purchaser pays the vendor the deposit and a time and place is agreed for exchange of contracts. After exchange, the contract is legally binding.

Between exchange and settlement

During this stage, the vendor must fulfil the obligations set out in the contract’s standard clauses and special conditions, including:

  1. completing documents required to transfer ownership;
  2. obtaining the landlord’s consent to transfer the lease;
  3. discharging securities, mortgages and other encumbrances held over the business; and
  4. maintaining the business’s goodwill.


At settlement, the vendor provides the purchaser with documents passing to them ownership rights and the purchaser pays the vendor the sale price.


After settlement, the purchaser has to ensure that they have full ownership of the business. To ensure the that the vendor is no longer responsible for assets transferred to the purchaser, the vendor’s lawyer may:

  1. cancel licenses and insurance in the vendor’s name relating to the business;
  2. hand over any stock or inventory;
  3. give the agent an order to transfer the purchaser’s deposit to the vendor;
  4. give the purchaser passwords to accounts;
  5. ensure that the vendor pays out staff leave entitlements for staff the purchaser has not taken on;
  6. transfer assets into the purchaser’s name; and
  7. provide the purchaser with the business client list.


If the vendor is registered for Goods and Services Tax (GST), they may be liable to pay GST. However, if the business is being sold as a going concern, that is, if:-

  1. the purchaser is registered for GST;
  2. payment is being made for the business;
  3. the vendor is supplying everything the purchaser needs to operate the business;
  4. the vendor and purchaser agree that the sale is of a going concern; and
  5. the vendor intends to carry on the business until it is sold to the purchaser.

then the sale may not attract GST.


If you make a profit on selling the business, the profit may be subject to Capital Gains Tax (CGT), which applies to:

  1. intangible assets (e.g. intellectual property);
  2. business assets; and
  3. goodwill.

Tax concessions may be available to a vendor who is a small business owner.

Where to now?

Contact us for legal advice and assistance in selling a small business.