Buying a business in Victoria: what to check before you sign

Buying an established business can be the fastest route into ownership: the customers, the equipment, the premises and the trading history are already there. But you are buying whatever the contract says you are buying — nothing more — and the difference between a good purchase and an expensive lesson is almost always settled before anything is signed. This is the checklist we work through with buyers across Melbourne and Victoria: what to verify, what the seller must disclose, what the contract has to cover, and the three things — the lease, the employees and GST — that catch buyers who move too fast.

Are you buying the assets or the company?

The first question is one many buyers never consciously answer. In an asset purchase, you buy the things the business is made of — goodwill, plant and equipment, stock, the business name, intellectual property and, ideally, the key contracts — and leave the seller's entity behind, along with its debts and its history. In a share purchase, you buy the company itself, and the company keeps everything it has ever done: its contracts and licences, but also liabilities you may not know about, from tax exposures to employee claims to disputes that have not yet surfaced.

Most purchases of small businesses are asset purchases for exactly that reason. A share purchase is sometimes the better route — for example, where the company holds licences that are hard to transfer — but it demands deeper due diligence and stronger warranties. The structure you buy through matters too: whether to hold the business as a sole trader, in a company or through a trust is a decision for before you sign — our guide to choosing a business structure in Victoria explains the trade-offs, and if you are buying with others, a shareholder agreement belongs in the plan from day one.

What due diligence should you do before signing?

The golden rule: verify, do not trust. A seller's figures are a starting point, not a fact. Before you commit:

• Test the financials. Review several years of financial statements and tax lodgements with your accountant, and ask what happens to revenue when the current owner — and their personal relationships with customers — walk out the door.
• Ask why they are selling. Then check whether the answer holds up: a new competitor, a redevelopment next door or an expiring lease can all be the real reason.
• Confirm who owns the equipment. Search the Personal Property Securities Register (PPSR), the national register of security interests over equipment, vehicles and other personal property. Equipment that looks like part of the business may be under finance, and a registered security interest that is not released at settlement can survive the sale.
• Read the key contracts. Supplier arrangements, customer contracts and franchise or licence agreements may need consent to transfer, or may simply end on a change of ownership — taking the value you paid for with them.
• Check licences and permits. Some cannot simply be handed over with the keys. A liquor licence, for example, must be formally transferred and approved before you can lawfully trade under it. Confirm what the business needs to operate and how each item transfers.
• Ask about disputes. Current or threatened claims, employee complaints and regulator attention all belong on the table before price is agreed.

What is a section 52 statement?

Victoria gives buyers of smaller businesses a specific protection. For the sale of a small business — currently one priced under $450,000 — the Estate Agents Act 1980 (Vic) requires the seller to give the buyer a prescribed statement about the business, commonly called a section 52 statement, before the contract of sale is signed. It sets out information about the business, including its financial performance.

Two practical points. If you are buying at that level and no statement has been offered, stop and ask why — and get advice before you sign anything or pay a deposit. And treat the statement as a floor, not a ceiling: it is a minimum disclosure requirement, and it does not replace the due diligence above.

What should the contract of sale cover?

The contract of sale of business is where everything you have negotiated either becomes enforceable or quietly disappears. At a minimum it should deal with:

• Exactly what is included — an itemised list of plant and equipment, plus the intangibles buyers forget: the business name, phone numbers, domain name, social media accounts, customer lists and intellectual property.
• Price and apportionment — how the price is split between goodwill, equipment and stock, which can matter for tax, and how stock will be counted and valued at settlement.
• Conditions the deal depends on — finance approval, the landlord's consent to the lease transfer, and the transfer of any licence the business cannot trade without. If a condition fails, you want a clean exit with your deposit back.
• Seller warranties — promises about the accuracy of the financials and the absence of undisclosed liabilities, which give you remedies if the business you were sold is not the business you get.
• A restraint of trade — preventing the seller from opening up again nearby and taking the goodwill you just paid for. Courts only enforce a restraint that goes no further than is reasonably necessary to protect that goodwill — in activity, area and duration — so it needs to be drafted for this sale, not copied from a precedent.
• Handover — a training and transition period, introductions to key customers and suppliers, and what the seller must keep doing between signing and settlement.

Our guide to the contracts every Victorian business should have covers what you will need once you own it.

What happens to the lease?

Most businesses trade from leased premises, and the lease can matter as much as the business itself. Taking it over — an assignment of lease — needs the landlord's consent, and for retail premises the process is regulated by the Retail Leases Act 2003 (Vic): the request must be made in writing, the seller has disclosure obligations to you as the incoming tenant, and the landlord can only withhold consent on limited grounds, which include the proposed tenant lacking sufficient financial resources or business experience.

Before you rely on the lease, read it. Check the rent and outgoings you are actually taking on, how long the term has left and what options to renew exist — buying a business with eighteen months left on the lease and no option is buying a countdown. Our guide to retail leases in Victoria covers the protections retail tenants have and the traps to look for.

What happens to the employees?

Decide early which staff you want to keep, and deal with their entitlements in the contract. Accrued entitlements such as annual leave are typically adjusted at settlement, so you are compensated for liabilities you inherit.

One entitlement deserves special attention in Victoria: long service leave. Where a business changes hands and an employee continues working in it, their service is treated as continuous — and the new owner becomes responsible for long service leave built on the employee's entire period with the business, including the years before you arrived. A contract term saying otherwise does not remove the employee's entitlement; it only determines what you can recover from the seller. Federal workplace law also has transfer-of-business rules under which a transferring employee's service can count with the new employer for some entitlements. The practical answer is the same either way: get a full list of staff, service and accruals, have it checked, and make sure the settlement adjustments reflect it.

Is GST payable when you buy a business?

Not always. The sale of a business as a going concern can be GST-free if the conditions are met: the sale is for payment, you are registered (or required to be registered) for GST, the parties agree in writing that the sale is of a going concern, and the seller supplies everything necessary for the business to continue operating and carries it on until the sale. The contract wording matters, and so does what is actually supplied — a "going concern" clause does not work if a critical asset is left out. Get specific tax advice before settlement, and make sure the contract says who bears the cost if the conditions turn out not to be satisfied.

How we help

Spencer Alexander Lawyers acts for business buyers across Melbourne and Victoria: reviewing and negotiating the contract of sale, running the legal due diligence, dealing with the landlord and the lease transfer, and getting you to settlement with what you paid for actually in your hands. We also act for sellers preparing a business for sale — the same checklist read in reverse. Learn more about our commercial law practice.

Common questions

Do I need a lawyer to buy a business in Victoria? There is no legal requirement to use a lawyer, but the contract of sale binds you from the moment it is signed, and it decides what you actually acquire: the assets, the liabilities, the lease, the seller's promises about the figures, and whether the seller can open up again in competition. Having it reviewed and the due diligence done before signing costs a fraction of unpicking a bad purchase afterwards.

What is a section 52 statement? For the sale of a small business in Victoria — currently one priced under $450,000 — the Estate Agents Act 1980 (Vic) requires the seller to give the buyer a prescribed statement about the business, commonly called a section 52 statement, before the contract of sale is signed. It sets out information about the business including its financial performance. It is a minimum disclosure requirement, not a substitute for your own due diligence.

Is GST payable when you buy a business in Australia? Not always. The sale of a business as a going concern can be GST-free if the conditions are met: the sale is for payment, the buyer is registered or required to be registered for GST, the parties agree in writing that the sale is of a going concern, and the seller supplies everything necessary for the business to continue operating and carries it on until the sale. Whether those conditions are satisfied depends on the facts and the contract wording, so take specific tax advice before settlement.

What is the difference between buying the assets and buying the company? In an asset purchase you buy the things the business is made of — goodwill, plant and equipment, stock, the business name and intellectual property — and leave the seller's entity, with its debts and history, behind. In a share purchase you buy the company itself, which keeps everything it has ever done, including liabilities you may not know about. Each route has different risks, due diligence and tax consequences, so the choice should be deliberate, not accidental.

This guide reflects the law applying in Victoria as at August 2026. It is general information only, not legal advice, and does not take your circumstances into account.