Buying a Business : Basic Checklist for Legal Due Diligence Should Cover

Intro

Buying a business can be exciting. But behind the buzz of branding, clients and potential lies the less glamorous—but absolutely essential—legal due diligence.

What are you actually acquiring? What’s being left out? Are the risks sitting quietly in someone else’s filing cabinet?

Here’s a due diligence checklist to think about before you commit to buying a business—based on what actually goes wrong, and how to stop it from becoming your problem.

1. Asset vs Share Sale: Structure First, Fixes Later

Not all business sales are created equal.

An asset sale means you’re picking and choosing—equipment, goodwill, client lists, maybe the lease—and leaving behind legacy liabilities. A share sale, on the other hand, means stepping into someone else’s legal shoes, complete with their history, employees, and any skeletons.

Most SME deals are structured as asset sales to reduce risk—but don’t assume. Confirm what’s being sold, and what isn’t.

2. Suppliers, Clients etc: Who Owns the Relationships and Will They Stay?

A business isn’t just an ABN and a logo. It’s people: clients, suppliers, contractors, collaborators. And many of those relationships are informal, undocumented, or quietly non-transferable.

You’re buying trust and continuity—so make sure the paperwork (or lack of it) supports that.

3. Staff: The People You Inherit

Employees don’t always come with contracts. And if they do, they’re often outdated, under-compliant, or based on handshake deals from a different era.

A good team is an asset. A messy payroll history is a liability.

4. IP & Assets: Is It Actually Theirs to Sell?

You’d be surprised how often a business doesn’t own the name on its door. Or the website. Or the training manual they send to clients.

If it’s essential to running the business, make sure it’s coming with the deal.

5. Industry-Specific Compliance: No Surprises, Please

What looks like a clean transaction can unravel fast if compliance has been sloppy.

Sometimes it’s just an expired registration. Sometimes it’s something bigger. Either way, you need to know now—not later.

6. Restraint Clauses & The Handover

The seller has built goodwill. You’re paying for it. You don’t want them setting up shop next door or starting again online.

A strong restraint clause protects the value you’re buying—and the future you’re building.

7. The Lease: Can You Stay—and On What Terms?

For most small businesses, the location is part of the value. But unless the lease transfers with the business—or you negotiate a new one—you may not have the right to stay.

Check:

• Assignment clause - Does the current lease allow for assignment? Does the landlord need to approve you in writing?

• Remaining term & options - How long is left on the lease? Are there renewal rights—and are they documented?

• Fit-out and make-good - Who owns the fit-out? Will you be responsible for repairs or reinstatement?

• Landlord incentives - Were there rent-free periods or contributions to the previous owner that won’t carry over?

If the lease isn’t secure, neither is the business. You need clarity before you commit.

And always confirm whether you’re taking over the existing lease, negotiating a fresh one, or subleasing. These are legally and financially very different positions.

Why a Due Diligence Checklist Matters when Buying a Business

Legal due diligence isn’t about being suspicious—it’s about being smart. It’s the difference between buying a business and buying a mess.

You don’t need perfect paperwork—you just need to know what’s really there.

Need Help?

I advise clients across Australia on business purchases—reviewing contracts, clarifying risk, and making sure you’re buying what you think you are. Fixed-fee. Fast turnaround. Always practical.

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