Buying a business: a contract due diligence checklist

This business purchase due diligence checklist helps you review the sale agreement, lease, staff arrangements and key supplier and customer contracts before you commit. Check what transfers, whose consent is needed and which obligations you will take on. The answers depend on whether you buy assets or shares.

For each document, the guide shows what to request, which clauses to read and what to take to your adviser. This is a contract review checklist for business buyers. It does not replace financial, tax or valuation due diligence.

Do the contract checks before you sign

Due diligence is the work you do to confirm the business is what the seller says it is. The Queensland Government is direct about timing. You should investigate the business before you make a binding decision to buy. It says the process can take a week to several months.

If the timing is tight, the contract can buy you time. The same page says a sales contract can include a due diligence period. Its guidance describes periods generally limited to 5 to 10 business days after signing. The period and exit rights must be agreed in the contract; they are not an automatic right to withdraw. Ask your lawyer to specify the checks, deadline, grounds for termination and notice procedure, and negotiate enough time for this purchase.

A due diligence period only helps if you know what to look for. That is what the rest of this guide is for.

Asset sale or share sale: what you are actually buying

Start with the structure, because it decides which contracts and debts come with the business.

The Queensland Government distinguishes buying business assets from buying shares. The distinction matters to the business contracts you review and the liabilities you investigate. business.gov.au also explains that an ABN cannot be transferred.

The rest of this guide focuses on an asset purchase and flags where a share purchase changes the checks.

The contract checklist: what to request and what to read

This is the core of the guide. Ask for every document in the left column before you sign, or make the contract conditional on receiving it.

The Queensland Government's list backs most of these rows. It tells buyers to check whether the seller can transfer supplier contracts without the supplier's consent. It also lists staff and contractor contracts, awards, licences, intellectual property and ASIC company searches.

For a qualifying Victorian small-business sale, also request the Section 52 vendor statement before signing or paying a deposit. Consumer Affairs Victoria's prescribed statement identifies a threshold of $450,000 or less for goodwill, plant, equipment and fittings—not simply the whole transaction price.

There are exceptions. In particular, section 52(8) of the Estate Agents Act 1980 excludes certain sales of businesses that require a liquor licence to operate. Have your adviser check whether the requirement applies to this sale.

The lease: the contract the landlord controls

For a shop, café or clinic, the lease is often what makes the business worth buying. business.gov.au puts the question first: will the landlord agree to the transfer of the lease into your name?

A lease transfer is called an assignment. The seller (the assignor) asks the landlord to consent to you (the assignee) taking over the lease.

Retail lease laws set the rules, and they differ by state. Victoria is a clear example. The Victorian Small Business Commission says the landlord has 28 days to consent or refuse in writing. If the landlord doesn't respond and the tenant has done what's required, consent is treated as given.

In Victoria, the landlord can refuse on limited grounds. These include a proposed use that breaches the lease, or a buyer without enough financial resources or business experience. Refusal is also possible if the seller hasn't followed the assignment steps.

In New South Wales, the seller gives the landlord an Assignor's Disclosure Statement when asking for consent. A copy goes to you as the buyer. You can find each state's Act in our commercial lease guide.

Worked example 1: the lease that ends before your loan does

These are illustrative figures. You agree to buy a café for $180,000. The lease has 14 months left, with one 3-year option.

Assume your business loan starts at settlement and runs for 5 years, or 60 months. If you cannot exercise the option or obtain a new lease, you could lose the premises after 14 months with 46 months—3 years and 10 months—of scheduled repayments remaining.

Even if the 3-year option is validly exercised, 14 + 36 gives you 50 months of tenure. That is still 10 months shorter than the loan term. Check this gap when assessing the price and finance.

Ask for a sale condition covering both the required landlord consent and lease tenure sufficient for your plan. Assignment of a lease with only 14 months left does not itself extend the term. Your lawyer should document any agreed extension, new lease or usable option before you become committed to settle.

Staff: who transfers and what comes with them

Buying the business doesn't automatically make you the employer. But if you take on the staff, some of what they built up with the seller can come with them.

The Fair Work Ombudsman describes when this happens. It is a transfer of business when an employee starts with you within 3 months of their job with the seller ending. Their duties must be the same or nearly the same. There must also be a connection between you and the seller, such as you buying some or all of the business's assets.

Employment contract review: check each entitlement

Use the Fair Work Ombudsman's transfer-of-business guidance to check each employee separately. There is no single choice to recognise or reject all previous service.

Agree how the purchase price accounts for the liabilities you take on. A commercial adjustment does not override employees' legal rights.

Worked example 2: the leave you buy along with the business

These are illustrative figures. The business has 4 staff. Each has 120 hours of untaken annual leave, at an average rate of $35 an hour.

If these annual-leave balances carry over, the example identifies $16,800 of base leave value to account for in the deal. Applicable leave loading and other costs may increase the amount; your adviser should calculate the actual liability.

Negotiate the treatment in the sale agreement. For example, the parties might agree a price adjustment for annual leave that carries over. If the law permits non-recognition and the buyer chooses it, document the seller's payout obligations. Neither a dollar-for-dollar discount nor a seller payout is a universal rule. Check what the agreed price already includes.

Supplier agreement checks, customer contracts and equipment finance

Many contracts can't be moved without the other party's agreement. Read each one for an assignment clause, and for a change of control clause if you are buying shares.

Supplier agreement. Check each agreement for minimum orders, exclusivity and liability caps as well. A minimum-volume commitment can affect your cash flow if you take it on. Confirm the supplier will continue supplying on the terms your purchase assumptions rely on.

Customer contracts. If most of the revenue comes from a few customers, check whether those contracts can end on a sale. Revenue that disappears at settlement isn't worth paying for.

Equipment finance. Goods the business uses may not belong to it. Search the Personal Property Securities Register (PPSR) before you buy. The PPSR's own example is a buyer who runs a $2 search on a second-hand lathe. It shows the seller's bank has a registration over it. Going ahead would have risked the bank repossessing it later.

business.gov.au makes the same point. It lists debts owing on assets registered on the PPSR among the liabilities to check.

Use the correct seller and asset identifiers for the searches. If a registration appears, ask your lawyer to confirm the secured party's interest and arrange any required payout and release at settlement. Keep the search certificates and release evidence; a promise from the seller that the equipment is paid off is not enough for your checklist.

Licences, the business name and the franchise

Licences. business.gov.au says some licence and permit transfers can take up to 12 months. Check this early. A liquor or food licence that hasn't moved can stop you trading on day one.

The business name. Business Victoria suggests searching ASIC's business names register. It also says to confirm the seller can transfer the name, and to check for third-party copyright or IP rights.

If it's a franchise. The franchisor has to agree to the sale. The ACCC says a franchisor can't unreasonably withhold consent. Deemed consent can arise if no written refusal is given within 42 days after the later of the written transfer request or, if further information is requested, receipt of the last of that information. A buyer of an existing franchise also has a cooling-off period. Our franchise agreement guide covers the agreement itself.

Contract negotiation: changes to ask for in the sale agreement

Your business purchase agreement—also called the business sale contract—is where you document the agreed protections and allocation of risk. Business Victoria lists several clauses to ask your lawyer about. They include a minimum takings clause and a condition confirming the seller's statements. They also include a restraint on the seller and a condition transferring key contracts.

Queensland's guidance supports the warranty row. Before signing, it suggests seeking warranties and indemnities, such as for underpaid wages or unpaid superannuation. Business Victoria supports the deposit row. It suggests paying in stages, with part of the price held in trust with a solicitor or estate agent.

Three clause rewrites worth asking for

These are illustrative commercial requests, not standard legal requirements or ready-to-sign clauses. Your lawyer should adapt the wording, definitions, deadlines and remedies to the whole agreement. The restraint period and distance below are examples, not an assurance of enforceability.

The restraint on the seller

What the seller sends:

The Vendor will not compete with the Business.

What to ask for:

For 3 years after settlement, the Vendor will not own, operate or work in a café within 5 kilometres of the Premises. The Vendor will not solicit any customer or employee of the Business during that period.

The second version names the area, the time and the activity. Ask your lawyer whether a restraint is justified and enforceable in this transaction, and what activities, duration and area are appropriate. A precise clause can still be too broad.

Conditions before settlement

What the seller sends:

This contract is subject to the Purchaser obtaining finance within 14 days.

What to ask for:

This contract remains subject to the Purchaser obtaining finance within 14 days on the terms specified in the Finance Condition. It is also conditional on: (a) the required lease assignment consent and the lease term and options specified in Schedule [X]; (b) the required consents and effective transfer or replacement of the supplier and customer agreements listed in Schedule [Y]; and (c) the Purchaser holding the licences listed in Schedule [Z] from settlement. Each condition must be satisfied by its agreed deadline. The Purchaser may terminate by written notice within the notice period specified for an unmet condition, with the deposit refunded, subject to the agreed waiver and extension provisions.

Retain the existing finance protection if you need it. Set actual schedules, deadlines and notice periods with your lawyer; this illustration intentionally leaves them for the transaction. Add a separate due diligence condition if required.

Staff entitlements and underpayments

What the seller sends:

The Purchaser will offer employment to the Employees on terms it decides.

What to ask for:

The Vendor warrants that wages and superannuation due for the period up to settlement have been paid correctly and indemnifies the Purchaser against claims for underpayments relating to that period. Schedule [X] must identify the Transferring Employees, verified leave balances, service to be recognised under applicable law, payments the Vendor must make and the agreed price adjustment for liabilities the Purchaser assumes. The parties' allocation of costs does not reduce any employee's statutory entitlements.

Agree the adjustment calculation and settlement evidence before signing. A warranty or indemnity allocates risk between buyer and seller; it does not prevent an employee claim or guarantee recovery from the seller.

Business purchase due diligence checklist

Each line is a question to answer, in writing, before you sign.

1. Structure. Am I buying assets or shares, and what stays with the seller?

2. Time. Is there a due diligence period, and what lets me end the contract?

3. Assets. Does a schedule list every asset included and excluded?

4. Lease. How long is left, does the option transfer, and has the landlord agreed to the assignment?

5. Guarantees. Will I give a personal guarantee to the landlord, a supplier or a lender? On what limits?

6. Staff. Who is transferring, which entitlements and service must be recognised, and how are assumed liabilities reflected in the price?

7. Underpayments. Does the seller warrant wages and super are paid, with an indemnity?

8. Key contracts. Can the main supplier and customer contracts be transferred, and with whose consent?

9. PPSR. What security interests affect the assets, and what payout and release arrangements must be completed at settlement?

10. Licences. Which licences need to transfer, and how long will that take?

11. Name and IP. Can the seller actually transfer the business name, website and trade marks?

12. Restraint. Is the seller's restraint specific about area, time and activity?

13. Deposit. Is it held in trust until settlement?

When to call a lawyer

Before you sign anything binding. That includes a "heads of agreement" or a letter of offer that may be binding. The Queensland Government recommends a team of lawyers, accountants and advisers for due diligence.

If you are buying shares. The company retains its history and liabilities, which can affect the value of your investment. That needs a deeper legal and financial review than this checklist.

If a required consent is unresolved. Have your lawyer confirm whether valid consent, deemed consent or another agreed condition has been satisfied before settlement. Do not assume silence is sufficient or withhold a payment contrary to the contract without advice.

If you find an underpayment. Staff entitlements and super shortfalls need advice on who pays, and how to deal with the staff.

What this doesn't cover

Valuing the business, and financial and tax due diligence. Transfer duty, GST on the sale (including a sale as a going concern) and capital gains tax. Buying a business together with its land or premises. Share sales in detail. The full retail lease rules in each state. And the loan you may take out to fund the purchase — see our guide to business loan agreements.

Reviewed and corrected 21 October 2026. Government sources are linked beside the relevant checks and listed in the publishing notes. Rules differ by state and transaction.

Know which obligations your business is agreeing to take on before you sign. Explore Contractam's AI contract review for a first pass through supported business contracts, including leases and supplier agreements. Take the issues identified, the complete document bundle and your commercial questions to your lawyer before committing to the purchase.

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