Selling your business: What to sort out before you sell your business

If you have moved past "should I sell my business", the useful question is narrower: is the business in a state where someone can buy it? A sale runs in three stages. Preparation, a signed agreement with conditions, then completion. From first approach to money in the account, three to nine months is normal for a private company, and the twelve months before that is where the price is actually decided. Buyers pay for certainty, and anything their lawyers cannot verify comes back as a price reduction, an indemnity, or a reason to stop.

How a business sale usually starts

An approach comes in. You agree a headline number on a multiple of EBITDA, sign a short term sheet, and give the buyer ninety days of exclusivity. The term sheet is not binding except for the parts that are: confidentiality, exclusivity, costs.

Then due diligence opens. Your two largest customer contracts expired eighteen months ago and have been running on purchase orders. The developer who built the platform was a contractor and never signed an IP assignment. Four people on the payroll are classified as contractors and do not look like contractors.

None of that is fatal. All of it is now leverage, because you are inside an exclusivity period with no other buyer to go to. That is how most sales lose value. Not in the negotiation, but in the answers that were fixed before it started.

Share sale or asset sale

In a share sale, the buyer takes the company as it stands, with its history, its contracts, its employees and its liabilities. Sellers generally prefer it, because the business moves across in one step and the capital gains tax concessions on shares can be available.

In an asset sale, the buyer picks the assets it wants and leaves the entity behind. Liabilities generally stay with you, which is why buyers like it. The cost is friction: every contract assigned or novated, every lease consented to, every employee re-employed, and an entity left over to deal with.

The difference changes your net proceeds materially. An asset sale puts the money in the company, taxed at the company rate, and it still has to get to you. Decide the structure with your accountant before you talk to a buyer, not after they have proposed one.

When should I sell my business?

Timing is commercial first. Sell into a strong trading period, with a management team that survives your departure and a pipeline the buyer can see.

There is now a tax date in the calendar as well. Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, from 1 July 2027 the 50% CGT discount for Australian resident individuals and trusts is replaced with cost base indexation, a minimum 30% tax applies to certain capital gains, and assets held on 30 June 2027 are deemed to be sold and reacquired at market value. Indexation does very little for an asset with a low or nil cost base, which is what founder shares and internally generated goodwill usually are, so the value of your shares at 30 June 2027 becomes the line between the gain that keeps the discount and the gain that does not.

The four small business CGT concessions survive, and the turnover threshold for the 50% active asset reduction rises from $2 million to $10 million from 1 July 2027. None of that makes 30 June 2027 a deadline. It makes it a valuation point, and a reason to get advice on your own numbers early rather than let a tax date drag you into a sale you were not ready for.

What a buyer actually tests in due diligence

Due diligence is a list of things the buyer needs to be true so that it can give its own board, its financier and its insurer an answer.

• The company itself. Register of members, ASIC record, share issues properly resolved, options granted under plan rules rather than over email, and a cap table that matches all of it.

• Intellectual property. That the company owns the code, the brand, the designs and the data. Contractors and founders do not assign IP by conduct, and a missing written assignment can stop a technology deal outright.

• Contracts. Whether your key customer and supplier agreements are signed, in term, and free of change of control clauses that let the other side terminate or renegotiate when you sell.

• People. Employment contracts, award coverage, classification of contractors, superannuation, payroll tax, leave accruals and any outstanding claims.

• Money and tax. Loan accounts, Division 7A, unpaid present entitlements in trust structures, GST treatment, and whether duty is triggered by the structure chosen.

• Encumbrances. PPSR registrations, general security deeds, personal guarantees, and what it takes to get releases at completion.

What commonly kills a deal

Change of control clauses are the most common. A customer agreement, lease, licence or finance facility that needs consent to a change in ownership turns a third party into a party to your transaction, with no reason to be quick about it. Landlords are the usual bottleneck.

Then intellectual property the company does not own, and a cap table that does not reconcile, particularly where options or SAFEs were issued informally. Employment exposure is a larger item than it was: payday super has applied since 1 July 2026, so contributions must generally reach the employee's fund within seven business days of payday, and intentional underpayment of wages has been a criminal offence since 1 January 2025. A buyer can test both across every pay cycle.

After that it is the plainer category. Records that do not reconcile to the tax returns, an undisclosed dispute, one customer at 40% of revenue on ninety days notice, and a seller who cannot give the warranties asked for because they do not know whether they are true.

Warranties, indemnities and the disclosure letter

Warranties are statements about the business that you are paid to stand behind. They are qualified by a disclosure letter, which is the document that protects you, and limited by a cap, a de minimis and time limits. Negotiate those limits properly, because an uncapped warranty on a business you no longer control is an open-ended liability. Indemnities deal with known risks dollar for dollar and usually sit outside the cap.

How much of the price you actually receive

Escrows and holdbacks park part of the price against claims. Earn-outs put part of it at risk against performance you may no longer control, which makes the earn-out mechanics and the buyer conduct obligations worth as much attention as the multiple. Warranty and indemnity insurance is available on mid-market deals and is increasingly how a clean exit gets delivered.

What happens to your employees

In a share sale, employment continues untouched. In an asset sale it does not: employment with the seller ends, the buyer makes offers, and whether the buyer recognises prior service decides who pays out accrued entitlements and whether redundancy is in play. Transfer of business provisions in the Fair Work Act 2009 (Cth) can also carry industrial instruments across. Settle that before the price is agreed, because it is a real number.

The restraint you will be asked to give

You will be asked for a restraint. One given by a vendor to protect the goodwill the buyer has paid for gets more latitude than one in an employment contract, but it still has to go no further than is reasonably necessary, and only New South Wales lets a court read down a restraint that is too wide, under section 4 of the Restraints of Trade Act 1976 (NSW).

The Federal Government released a draft Bill on 7 September 2026 to ban non-compete clauses for employees earning at or below the Fair Work Act high income threshold, currently $190,100, with commencement intended for 2027. Restraints given on the sale of a business sit outside it. If your senior people are also shareholders, which document their restraint sits in is going to matter.

The parts of the timetable you do not control

Third party consents are the main one: landlords, financiers, major customers, licensing regulators. Since 1 January 2026, Australia also has a mandatory and suspensory merger regime, so an acquisition that meets the ACCC thresholds cannot complete until it is cleared. The limb most likely to catch a mid-market seller is the buyer-side one, where the acquirer group's Australian turnover is at least $500 million and the target's is at least $10 million. If your buyer is a large corporate or a consolidating group, ask early, because Phase 1 alone runs 30 business days.

If the buyer is foreign, FIRB approval may be a condition. If the business owns real property, or the shares are an indirect interest in Australian land, 15% of the price is withheld at completion unless you produce an ATO clearance certificate. The certificate is free, lasts twelve months, and should be applied for before you go to market.

Where to start

Twelve months out, the work is unglamorous. Reconcile the cap table to the ASIC record and the share register. Get IP assignments signed by everyone who touched the product. Re-paper the customer contracts that are out of term and list every change of control clause in the business. Fix the employment classifications and the superannuation timing while the cost of fixing them is just the cost. Clear the loan accounts.

If an offer is already in front of you, the list is shorter: know what diligence will find before the buyer does, disclose it deliberately, and do not sign a longer exclusivity period than you need to.

Common questions

How long does it take to sell a business?

Three to nine months from first approach to completion is typical for a private company, with preparation sensibly starting six to twelve months earlier. A deal that needs ACCC clearance, FIRB approval or landlord consent runs longer, and those timetables are not yours to compress.

Should I sell my business before 30 June 2027?

Only if a sale is already genuinely on foot and commercially right. From 1 July 2027 the 50% CGT discount for individuals and trusts is replaced with cost base indexation and a minimum 30% tax applies to certain gains, and assets held at that date are deemed to be sold and reacquired at market value. That makes 30 June 2027 a valuation point rather than a deadline. Take tax advice on your own numbers before it changes your commercial timing.

Is a share sale or an asset sale better for the seller?

Usually a share sale. The business transfers in one step, the liabilities go with it, and the capital gains tax concessions on shares may be available to you personally. Buyers often push for an asset sale so they can leave the history behind, so model the gap between the two before you agree a structure.

What should I do first if I want to sell my business?

Find out what due diligence will turn up before the buyer does. Twelve months out that means reconciling the cap table to the ASIC record, getting IP assignments signed by everyone who touched the product, re-papering customer contracts that are out of term, and fixing employment classifications and superannuation timing. If an offer is already on the table, the priority shifts to disclosing deliberately and keeping the exclusivity period short.

What is the most common reason a business sale falls over?

Something in due diligence that the seller either did not know or did not disclose. Change of control clauses, unassigned intellectual property, a cap table that does not reconcile and unpaid employee entitlements account for most of it. All four are fixable a year out and expensive to fix inside an exclusivity period.

How Zed Law can help

If you are preparing to sell, we will run the diligence the buyer is going to run, tell you what they will find, and fix what can be fixed before anyone sees it. If an offer is already in front of you, we will read the term sheet against what you are actually agreeing to give away. Fixed fee, agreed before we start.

Book a free introductory call for business sale advice and we will tell you where your risk sits and whether we are the right people to handle the sale.

Contact us at hello@zedlaw.com.au

This article is general information only and does not constitute legal advice. It does not take account of your particular circumstances, and you should obtain advice tailored to your situation before acting. Current as at September 2026.

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