For many people, going into business is an exciting step. But one of the first big choices is whether to buy an existing business or start a new business. While both options can lead to success, they come with different legal considerations.
Buying an Existing Business
When you buy a business, you are stepping into an established operation. This often means:
- A customer base is already in place.
- Systems, suppliers, and staff are already operating.
- The brand may already be known in the market.
That said, buying a business isn’t risk-free. The main legal issues to consider include:
- The Contract of Sale – This is the key document that sets out what you are buying (for example, stock, equipment, goodwill, or intellectual property) and the terms of the sale.
- Due Diligence – A thorough review of the business’s financial, legal, and operational position is essential. This includes checking for outstanding debts, disputes, or compliance issues.
- Lease Agreements – If the business premises are leased, you’ll need landlord consent to take over the lease, and you should understand your obligations.
- Employment Matters – You may be taking on staff and their accrued entitlements, such as annual leave and long service leave.
- Licences and Permits – Certain industries require licences that must be transferred or reapplied for.
Buying a business can be a faster way to start trading, but without careful legal checks you may inherit more problems than benefits.
Starting a New Business
If you decide to start fresh, you avoid taking on another business’s history – but you also start without its reputation, customers, or systems. The legal focus shifts towards setting up your business suitably from the start.
Key steps include:
- Choosing a Structure – Will you operate as a sole trader, partnership, company, or trust? Each has different tax and liability implications.
- Brand Protection – Registering a business name is not the same as owning the brand. Consider trademark protection to secure your intellectual property.
- Agreements Between Founders – If you are going into business with others, a shareholders’ agreement or partnership agreement helps prevent disputes later.
- Leasing or Buying Premises – New businesses often negotiate fresh leases. Lease terms can significantly affect your cash flow and flexibility.
- Compliance and Registrations – ABNs, GST registration, and industry-specific compliance should all be set up correctly from the outset.
Launching a new business gives you full control, but the legal framework you establish early on can determine its long-term success
Which Option is Right for You?
There’s no one-size-fits-all answer. Buying a business offers speed and existing infrastructure but carries the risk of hidden liabilities. Starting your own gives you a blank canvas but requires more groundwork and patience.
Whichever path you choose, obtaining legal advice early can help you avoid unnecessary costs, risks, and disputes.
How We Can Help
At Ferraro & Singh Lawyers Pty Ltd we assist clients with both business purchases and new business set-ups. We review contracts, leases, and compliance issues, and we work with you to put strong agreements in place.
If you’re considering your next business step, contact us for clear, practical advice.
