Do I need a written contract to sell my business?.

Writing is not strictly required, but.

Unlike a sale of land, a sale of business is not required to be in writing, and it is not unusual for small operations to change hands for cash with little more than a transfer of plant and an introduction to the customers. In practice that is cold comfort, because several things make a proper written contract close to essential.

Tax and disclosure both need it in writing.

First, tax. To treat the sale as GST-free as the supply of a going concern, the parties must agree in writing that it is a going concern and the buyer must be registered for GST before settlement. Without the written agreement the exemption is simply not available, and GST can take a slice of the price. The going concern rules sit in the A New Tax System (Goods and Services Tax) Act 1999. Second, disclosure. In Victoria the sale of a small business requires the seller to give the buyer a statement of information under the Estate Agents Act 1980 before the buyer signs or pays a deposit, covered in our note on the section 52 statement.

The contract is where the deal lives.

Beyond the law, the contract records the apportionment of the price, the warranties as to the accuracy of the financial and other information given to the buyer, the restraint on the seller, and how the lease, the licences and the employees are handled. Standard contracts also attach documents such as a plant list, an employee list and a profit and loss statement, with the seller warranting their accuracy, and they make clear that rights under the Australian Consumer Law and the Fair Trading Act 1989 cannot be contracted away. A cash sale leaves all of that unresolved. Our business sale and purchase service prepares the contract and the disclosure together.

Law referenced: A New Tax System (Goods and Services Tax) Act 1999; Estate Agents Act 1980; Australian Consumer Law; Fair Trading Act 1989.