Acquiring an existing business is a significant decision that demands meticulous attention. This checklist provides a overview of some key considerations for prospective business buyers. It’s important to note that you can acquire a business by purchasing its assets or by acquiring shares in a company. 

Conducting a thorough due diligence review is a crucial step before committing to a purchase. This review aims to gather comprehensive insights into the business, enabling informed discussions with your advisor. Additionally, it’s essential to assess how venturing into a new business aligns with your personal circumstances, expectations, and skill set. 

Company-Specific Considerations: 

• Have you conducted a company search to verify the vendor’s credentials? 
• Are all ASIC compliance requirements up to date? 
• Does the company have overseas operations? 

Financial Health: 

• Have you obtained the last four years’ financial statements? 
• Do you have information on the business’s capital structure, vested interests, and outstanding debt? 
• Have you obtained an up-to-date copy of the business’s credit report? 
• Have you compared the business’s gross profits with industry trends? 
• Does the business have a loyal customer base? 
• Have you reviewed the aging of overdue debts? 
• Have you considered the financial projections and growth drivers for the next four years? 

Taxation Considerations: 

• Are you familiar with the tax obligations of the entity? 
• Have you confirmed that all tax obligations are up to date and paid? 
• Have you obtained the last four years’ tax returns and assessments? 
• Have you reviewed all correspondence with the ATO? 
• Is the business being audited by the ATO, or has it been audited in the last four years? 
• Have you considered the stamp duty implications for the purchase? 
• Have you assessed whether the business purchase qualifies as a GST-free supply? 

Asset Sale Specifics: 

• Have you obtained a fixed asset register detailing all assets being sold? 
• Have you checked the ownership and condition of the assets? 
• Have you obtained copies of existing leases for leased assets? 
• Are the assets adequately insured until the purchase’s settlement? 
• Have you apportioned the purchase price across the assets? 

Sale of Shares or Units: 

• Have you obtained a listing of all current shareholders or unit holders? 

Employee Obligations: 

• Have you obtained a list of employees, including their salaries and entitlements? 
• Do employees have close customer contacts that could impact the business if they leave? 
• Are there key staff essential for the business’s smooth operation? 
• Do you know all employment conditions and agreements? 
• Have you accounted for outstanding employee entitlements? 
• Are WorkCover premiums up to date? 

Trading Stock and Business Premises: 

• Does the trading stock include any obsolete items? 
• Has the trading stock been valued at market value? 
• Have you reviewed all real estate lease agreements, deeds, mortgages, and related documents? 
• If the business premises continue, has the vendor facilitate a lease assignment? 
• If there are premises improvements, have you obtained a register of these?  

Additional Considerations: 

• Do you know why the vendor is selling? 
• Has the business been previously listed for sale? 
• Is there a documented business plan that aligns with your expectations? 
• How complex is the business in terms of subsidiaries or products? 
• Are there government regulations affecting the business? 
• Do you know the main competitors and any new entrants? 
• Is the business involved in any lawsuits or recently finalized litigation? 
• Have you considered indemnity from the seller for activities before the sale? 
• Have you checked local council records for any potential disruptions? 
• Have you assessed the legal and tax implications of any contractual clauses? 
• Have you identified key customer and supplier contracts? 
• Have you examined current production, distribution, and marketing strategies? 
• If acquiring with others, do you have necessary agreements? 
• Have you considered potential future issues affecting the business’s viability? 
• Are there any intellectual property matters like trademarks, licenses, or patents? 

This checklist serves as a guide for due diligence when buying a business, helping you make informed decisions and mitigate risks.