Buying or selling a business in Queensland: what you need to know

Asset sale or share sale?

In an asset sale the buyer picks up identified assets and generally leaves the seller's history behind — old tax debts, past employee claims and existing contracts stay with the seller unless the contract says otherwise. In a share sale the buyer takes the company as it stands, warts and all, which means far deeper due diligence and much more detailed warranties and indemnities.

For most Sunshine Coast businesses — cafes, trades, salons, small retail, professional practices — an asset sale is the safer structure for a buyer. Sellers sometimes prefer a share sale for tax reasons, so get accounting advice on structure before terms are agreed, not after.

Due diligence: what a buyer should actually check

Price is set by the last three years of trading, not by what the seller hopes. Make the contract conditional on due diligence to your satisfaction, and use the condition period properly:

• Financials: three years of profit and loss, balance sheets, BAS and tax returns, reconciled against bank statements — not just a spreadsheet from the seller
• Lease: term left, options, rent reviews, outgoings, make-good, permitted use and whether the landlord will consent to assignment
• Employees: entitlements accrued, awards and rates, contracts, and who pays out leave at settlement
• Equipment: what is owned, what is leased, and PPSR searches for security interests over the plant you think you are buying
• Licences and permits: liquor, food, trade licences and council approvals, and whether they transfer or must be applied for fresh
• Contracts and suppliers: key customer contracts, franchise agreements, software and subscription accounts, and whether they can be assigned
• Online assets: domain names, website, socials, Google Business Profile and reviews — commonly forgotten and hard to recover later

The lease is often the whole deal

For a retail or hospitality business the lease is usually the most valuable asset. If there is only eighteen months left and no option, you are buying a short runway. Assignment needs the landlord's consent, and for a retail shop lease in Queensland the process is regulated — disclosure statements, a financial and retailing skills statement from the buyer, and timing requirements that can delay settlement if left to the last week.

Make the contract conditional on the landlord consenting to assignment, or on a new lease being granted on agreed terms. Never settle on a handshake that the landlord 'will be fine with it'.

Employees

In an asset sale employment does not automatically transfer. The seller terminates and the buyer offers new employment to the staff it wants. Who pays accrued annual leave and long service leave is a commercial negotiation, and it is usually resolved as an adjustment at settlement. If the buyer recognises prior service, it inherits those entitlements — so the adjustment should reflect that.

Redundancy exposure, personal leave balances and any underpayment history all belong in due diligence. Underpayments can follow a business practically even when they do not follow it legally.

GST, going concern and apportionment

A sale of a business as a going concern can be GST-free if the statutory conditions are met — both parties registered for GST, written agreement that it is a going concern, and the seller supplying everything necessary for continued operation and carrying on until settlement. Get this confirmed with your accountant before signing; treating a sale as GST-free when it is not leaves someone with an unexpected one-eleventh bill.

The contract should also apportion the price across plant and equipment, stock and goodwill. That split drives depreciation for the buyer and capital gains treatment for the seller, so it is worth agreeing deliberately rather than leaving it blank.

Restraint of trade and handover

Goodwill is worth nothing if the seller opens again down the road. A restraint should be reasonable in area, time and scope — cascading clauses are standard so a court can read down an overreaching restraint rather than strike it out. Tie the restraint to the seller personally as well as to their company.

Agree a training and handover period in writing: how many days, paid or unpaid, and introductions to key customers and suppliers. Two weeks of genuine handover often protects more value than another clause in the contract.

Settlement and after

At settlement stock is usually counted and adjusted, employee entitlements adjusted, utilities and licences transferred, keys and passwords handed over, and any security interests released on the PPSR. A retention or holdback for a short period after settlement can be sensible where warranties matter or where a licence transfer is still pending.

Sellers should not forget the tail: final BAS and tax returns, cancelling registrations they no longer need, keeping records, and checking that guarantees they gave to landlords and suppliers are formally released.

Glossary: business sale terms explained

Business contracts use a vocabulary that residential conveyancing never touches. These are the terms that come up in almost every Queensland business sale, in plain English.

• Asset sale — the buyer purchases the business assets (goodwill, plant, stock, lease, contracts) rather than the shares in the company that runs it. Most small Queensland business sales are asset sales, because the buyer takes the business without inheriting the company's history and liabilities.
• Share sale — the buyer purchases the shares in the company itself, so the company keeps its contracts, licences and ABN, along with every liability it has ever incurred. Due diligence and warranties matter far more in a share sale.
• Due diligence — the buyer's investigation of the business before the contract becomes unconditional: financials reconciled to bank statements, the lease, employee records, equipment ownership, licences, supplier and customer contracts, and any litigation. It is a defined period in the contract, and the buyer usually has a right to terminate if not satisfied.
• Going concern — a GST concept. Where a business is sold as a going concern (the seller supplies everything needed to keep operating and keeps trading until settlement, both parties are GST-registered, and they agree in writing in the contract), the sale can be GST-free. Get the clause wrong and 10% appears on the price.
• Goodwill — the value of the business over and above its physical assets: the customer base, reputation, location, systems and trading history. It is the part of the price that a restraint of trade and a handover period are designed to protect.
• PPSR (Personal Property Securities Register) — the national register of security interests over personal property such as vehicles, plant, equipment and stock. A buyer searches it to find out what is financed and requires a release at settlement; without a release the financier can repossess equipment the buyer thought they had bought.
• Restraint of trade — a clause stopping the seller from competing with the business within a defined area and for a defined period. Queensland courts enforce restraints only so far as they are reasonable, so contracts use cascading area and time options that can be read down rather than struck out.
• Warranties — the seller's contractual promises about the business: that the financials are accurate, that the equipment is owned and working, that there is no undisclosed litigation, that employee records are complete. Breach gives the buyer a damages claim, subject to any limits or time bars in the contract.
• Retail shop lease — a lease of retail premises regulated by the Retail Shop Leases Act 1994 (Qld), which imposes disclosure statement and legal/financial advice certificate requirements on assignment. It is the reason a lease assignment takes longer than people expect.
• Assignment of lease — the transfer of the existing lease from seller to buyer with the landlord's consent. Consent usually requires the buyer's financials, references and personal guarantees, and it is the most common cause of delayed settlement.
• Landlord's consent — the landlord's formal approval of the assignment. It cannot be unreasonably withheld, but it can be conditioned, and the process runs on the landlord's timetable, so start it the day the contract is signed.
• Stocktake and adjustment — stock on hand is usually counted the night before or the morning of settlement and added to the price at agreed valuation rules (excluding obsolete or damaged stock). Employee entitlements, rent, outgoings and utilities are adjusted at the same time.
• Employee entitlements — accrued annual leave, long service leave and personal leave. The contract must say who pays them: usually the seller pays out, or the buyer takes over the balances and receives an adjustment against the price.
• Transfer duty — Queensland stamp duty payable by the buyer on the dutiable value of the business assets, including goodwill and plant. It is assessed by the Queensland Revenue Office and must be paid before the transfer of certain assets is effective.
• Heads of agreement — a short document recording the commercial terms agreed in principle before the formal contract. Parts of it can be binding (confidentiality, exclusivity) even where the commercial terms are not, so it should be read before it is signed.
• Settlement — the day the price is paid, the assets transfer, releases are handed over, keys, passwords and accounts change hands, and the buyer takes possession.

Frequently asked questions