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Due diligence when buying a business

By , founder of SignetryLast reviewed

General information, not financial, tax or legal advice. Ask an accountant about the financial documents and a lawyer about the contracts.

Due diligence is checking that what the seller told you about the business is actually true before you pay for it: the licences, the contracts, the assets, the debts and the numbers. Have your accountant work through the financial documents and your lawyer work through the contracts before you commit to anything.

The due diligence checklist

business.gov.au sets out the core areas to check when you buy an existing business:

  • Licences and permits. Does the business hold every licence and permit it needs to operate, and are they current?1
  • Contracts and leases. Will the landlord agree to transfer the lease into your name, or will you need to negotiate a new one?1
  • Agreements. Are there any outstanding agreements between the seller and suppliers?1
  • Plant, equipment and fixtures. Does the business own equipment and machinery that is in good working order and properly licensed?1
  • Assets, including intellectual property. What assets does the business own?1
  • Inventory. Is the stock on hand included in the price, and what condition is it in?1
  • Liabilities. What does the business owe, including debts secured against its assets on the Personal Property Securities Register? What refunds and warranties still exist for the business?1

Ask for three to five years of financial records: tax returns, business activity statements, accounts receivable and payable, balance sheets, profit and loss statements, cash flow statements and sales records1. A single good year proves little on its own; a pattern across several years is what you are actually testing.

Checking who you are buying from

Two government registers are worth using before you take anything on trust:

  • ABN Lookup, run by the Australian Business Register, lets you check whether the seller's ABN is active or cancelled, its business type, its GST status and any historical trading names (where available)2.
  • ASIC's registers let you search for information about a company or a registered business name3. If you are buying a company rather than just its business and assets, check its registration here before you rely on anything else about it.

Neither register tells you whether the business is a good buy. They tell you whether the entity in front of you is who it says it is, which is the first thing due diligence has to establish before the rest of it means anything.

Questions to ask the seller

The categories above turn into direct questions once you sit down with the seller or their accountant:

  • Why are you selling, and is anyone else being told the same reason?
  • What would change on day one if I took over: staff, supplier terms, the lease, any personal guarantees you currently carry?
  • Which of these contracts, licences and accounts are in the business's name, and which are in yours personally?
  • Is there any dispute, outstanding debt or legal matter that does not show up in the accounts?
  • What has changed in the last twelve months that would not be obvious from three years of financials alone?

Get every answer that matters to your decision in writing, not just in conversation.

Where this fits in buying a business

Do your due diligence before you commit to a loan. A lender will ask about the same things; see finance to buy a business. If the business is a franchise, the franchisor's disclosure document does some of this work for you, but does not replace it; see buying a franchise. If you would rather have someone experienced run this process for you, that is what a buyer's agent does. Signetry lists the businesses for sale that start this process; it does not carry out due diligence on any of them.

Sources

  1. Buy an existing business, business.gov.au, no last-updated date shown on the page, accessed 24 Sep 2026. The due diligence checklist and the financial records to request.
  2. ABN Lookup, Australian Business Register, no last-updated date shown on the page, accessed 24 Sep 2026. Checking ABN status, GST registration and trading history.
  3. Search ASIC registers, ASIC, no last-updated date shown on the page, accessed 24 Sep 2026. Searching a company or business name before you buy it.

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