What goes in a business sale contract

What the contract needs to cover

Business.gov.au suggests getting a lawyer to draw up the contract¹. It should comply with your state's conditions, include no false statements, and cover what happens if the buyer doesn't proceed, which creditors the business owes money to, and who's paying out employee entitlements.¹ During negotiation, agree the deposit (usually 10% of the sale price), the settlement period, and any handover training.¹

Name every asset you mean to transfer, not just the obvious ones. Business.gov.au lists leases, permits, licences, IP, domain names and web registrations among the things to transfer to the new owner.² See the ecommerce guide for what that means for a business that trades mainly online.

Employees

An employer must give an employee written notice that their job is ending, or pay instead of notice.³ Exceptions include casual employees, employees engaged for a set period or season, and employees dismissed for serious misconduct³. The notice rule still applies to an employee transferring to the new owner⁴. Set out in the contract who is responsible for entitlements, rather than leaving it to be worked out after settlement.

Stamp duty varies by state

This guide covers stamp duty in New South Wales, Queensland and Victoria only. If your business is in another state or territory, check with your state or territory revenue office.

• New South Wales: transfer duty on the sale of business assets, including intellectual property, goodwill and statutory licences, was abolished from 1 July 2016. Duty still applies if the sale includes land or an interest in land, such as an assigned lease.⁵
• Queensland: transfer duty can still apply to an agreement to transfer business assets, defined to include goodwill, a statutory business licence, a right to use a statutory business licence, a business name, rights under a franchise arrangement, a debt of a business if the debtor lives in Queensland, a supply right of a business, intellectual property, and personal property in Queensland such as trading stock or plant and equipment.⁶ Transfer duty may not apply if the agreement is solely for the transfer of a debt, a supply right, or intellectual or personal property of a business, and no other property is transferred.⁶ If there's no written agreement, a transfer duty statement must be lodged instead.⁷
• Victoria: when a business sale is bundled with a transfer of land, goods used in connection with the business on that land can also become dutiable. Stock-in-trade and a few other categories are excluded. The State Revenue Office asks for a copy of the sale agreement showing the value split between plant and equipment and goodwill.⁸

Get your contract's duty clause checked against the rules in the state where the business operates, not assumed from a template written for a different one. See business valuation for how the price in the contract is usually worked out, and business brokers if one is drafting or negotiating the sale with you.