Buying an established business looks like the safer path. The customers exist, the equipment is installed, the staff know the work, and there is a set of figures to look at. Compared with starting from nothing, it is.

But a business sale transfers something far less tidy than a house. What you are actually acquiring is a bundle — plant, stock, goodwill, a lease, employees, licences, supplier arrangements and a trading name — and each element in that bundle transfers in a different way and can fail in a different way. South Australia provides purchasers with a statutory disclosure regime, but it applies only at the smaller end of the market. Above that line, what protects you is the work you do before settlement.

Assets or Shares: The Threshold Decision

Almost every other question follows from this one.

In an asset sale, you buy the identified assets of the business and leave the vendor's company behind. Its history stays with it — its tax position, its litigation, its unknown liabilities. You take what is listed in the contract and nothing else. This is how most small business sales are done, and for good reason.

In a share sale, you buy the company itself, and the company keeps operating with everything it already has: its contracts, its licences, its registrations, and also its liabilities, including the ones nobody has mentioned. A share sale is sometimes unavoidable, usually where a licence, a lease or a key contract cannot be assigned but would survive a change of shareholding. When it is unavoidable, the diligence has to be deeper and the warranties and indemnities have to do much more work. If you are buying into a business alongside other owners rather than buying it outright, our article on shareholder agreements covers the arrangements that should be in place from day one.

The Form 2, and Why It May Not Apply to You

South Australia requires a vendor's statement for the sale of a small business under section 8 of the Land and Business (Sale and Conveyancing) Act 1994. That statement is the Form 2, and it is the business-sale counterpart of the Form 1 in a property transaction.

The definition is where the surprise sits. A small business is one sold for total consideration not exceeding $300,000 (excluding GST) — but in working out that figure, the value of stock-in-trade is excluded, and so is the value of any land included in the sale. A business changing hands for $280,000 plus $40,000 of stock is still a small business for these purposes, because the stock does not count towards the threshold.

Where the Form 2 applies, it is substantial. It sets out the gross income, purchases and operating expenses from which the net profit of the business for the last twelve months can be calculated, together with information about the premises, the operations, the equipment and the stock. The financial information is certified. For a buyer, it is the closest thing to an audited starting point that a small acquisition will produce.

The Form 2 must be served on the purchaser at least five clear business days before settlement. The purchaser can then cool off by written notice given before the end of the fifth clear business day after the day the Form 2 is served, or before settlement if that comes first. There is no cooling-off right at all, however, if the Form 2 was served at least five clear business days before the contract was made — so a buyer who receives the Form 2 early should finish their review before signing. As with a property purchase, the cooling-off right can be given up on a legal practitioner's certificate of independent advice, and compliance with the Form 2 requirements can be waived by a signed instrument of waiver after independent legal advice — but waiving the Form 2 itself is rarely wise, because it also affects your remedies after settlement.

Failure to provide a Form 2, or providing a defective one, is an offence carrying a maximum penalty of $10,000, and a purchaser who has been prejudiced may be able to rescind or recover damages.

Above $300,000, You Are On Your Own

Most business sales that reach a lawyer's desk are above the threshold, and there the Act offers no disclosure document, no certified figures and no cooling-off period. Everything you know about the business is what you have asked for and verified.

At a minimum, that means going behind the profit and loss statement. Ask for at least three years of financials together with the corresponding tax returns and BAS lodgements, and reconcile them against bank statements. Understand which expenses have been added back and whether they are genuinely non-recurring. Test whether the revenue is concentrated in a handful of customers, and whether those relationships attach to the business or to the departing owner personally. Ask what the owner actually does day to day, and what it would cost to replace them — a business that produces $120,000 of profit while the owner works sixty hours a week is not producing $120,000 of profit.

The Lease Is Often the Business

For a retail or hospitality business, the lease may be worth more than every physical asset combined. A cafe with three years of secured term in a good location is a different proposition from the same cafe holding over month to month.

Two things need to happen before settlement. The lease must actually be assigned to you, with the landlord's consent obtained in the form the lease requires, and you must know what you are inheriting: the remaining term, the options and whether they are still exercisable, the rent review mechanism, the outgoings, the make-good obligation at the end of the term, and any personal guarantee you will be asked to give. Our guide to retail and commercial leases in South Australia sets out the statutory protections that may apply, including the minimum five-year term, the disclosure statement, and the prohibition on passing land tax to the tenant.

Landlord consent is also a timing risk. It frequently takes longer than the parties allow, and a contract that goes unconditional before consent is secured puts the purchaser in an uncomfortable position.

Employees, Restraints and the Rest of the Bundle

Employees. In an asset sale, employment does not transfer automatically. The vendor terminates and you offer new employment. The commercial question is who pays for accrued annual leave and long service leave, and whether prior service is recognised. If you recognise prior service, you inherit the liability, and the purchase price should reflect that. Get the position stated explicitly in the contract, because it is a common source of post-settlement dispute.

Restraint of trade. If you are paying for goodwill, you are paying for customers who could follow the vendor to a new business two suburbs away. A restraint clause is essential, and it needs to be drafted to be enforceable — reasonable in duration, geographic scope and the activities restrained — rather than drawn so widely that a court will not uphold it.

GST. The sale of a business as a going concern can be GST-free where the statutory conditions are satisfied, which requires the right contractual terms and both parties being registered. It is worth getting right, because it is real money and it is easy to lose through drafting.

Licences and permits. Liquor licences, food business registrations, professional registrations and industry-specific approvals do not simply follow the assets. Establish early which are transferable, which must be applied for afresh, and how long each takes, because settlement often has to wait on the slowest of them.

Plant, equipment and security interests. Search the Personal Property Securities Register against the vendor and the assets. Leased or financed equipment that the vendor treats as their own is a recurring problem, and it is a cheap search to run.

Deposit. Your deposit should be held in a trust account by the agent or a solicitor, released on settlement — not paid directly to the vendor.

Structure Before You Sign

How you hold the business determines your tax position, your asset protection and how easily you can sell or bring in a partner later. Changing it afterwards can trigger duty and capital gains tax that a decision made two weeks earlier would have avoided entirely. We compare the common options in our article on sole trader versus company structures, and it is a conversation worth having with your accountant and your lawyer together, before the contract is signed rather than after.

How Zed Legal Can Help

Our commercial law team acts for buyers and sellers of South Australian businesses. For a purchaser, that typically means advising on asset versus share structure, reviewing the Form 2 where the sale is caught by section 8, running and interpreting the searches, negotiating the contract, warranties and restraint, dealing with the landlord on the lease assignment, and coordinating settlement so that consents, licences and employee arrangements all land on the same day. Where the transaction sits inside a larger group or involves changes to ownership, our corporate law practice handles the structuring.

The most useful time to involve us is before you sign a heads of agreement or an offer, while the terms are still open. Contact us at hello@zed.legal.

Sources and Official Guidance

This article is general information only and current as at October 2026. It is not legal, financial or taxation advice and does not take your circumstances into account. Disclosure obligations for business sales are governed by the Land and Business (Sale and Conveyancing) Act 1994 (SA) and the regulations made under it, and GST and capital gains tax outcomes depend on your particular facts. Please obtain advice from your lawyer and your accountant before entering into a contract.