Reading time: 3 minutes

When buying a business, many purchasers do not understand the importance of considering the assets being transferred, nor ensuring that restraints of trade are in place in respect of the seller.

Intellectual Property assets

When a buyer purchases a business, they often think about assets such as plant and equipment, employees, client details and contracts, licences and permits. However, intellectual property in respect of brand names is commonly neglected in small business sales.

Quite often, the sellers of businesses do not trade mark their business names, and in some cases do not register business names with ASIC. If the brand of a business is important in terms of the sale, it is vital that the business name and trade mark are transferred to the buyer.

If there are no such registrations, the seller should either be required to do what it can to transfer any such intellectual property on completion. Alternatively, the buyer should register the business name (if available) and register the trade mark with consent from the seller.

Where branding is important to the business, it is important to register a trade mark. This will provide the buyer with exclusive rights to use or licence the trade mark. Without a registered trade mark it would be much more difficult to stop a third party, or even the seller, from using the same or a similar name.

Trade mark protection is especially important if a buyer intends to grow a business or sell the business at a later stage, having built a reputation around the brand. A careful buyer would want to know that they can protect and enforce the brand, which could affect the purchase price if they sell the business.

Without a registered trade mark, a potential competitor might register the same or a similar mark threatening the buyer’s brand. They might even demand that the buyer stop using the brand as they would have trade mark protection, whereas the buyer would not.

Restraint of Trade

A restraint of trade is an agreement between a buyer and seller of a business, which provides that the seller cannot compete against the buyer or operate a similar business to the business being sold.

A restraint is generally geographic and time-based, meaning a seller cannot compete in a certain area or for a particular time, e.g. 2 years.

As an example, if you were to buy a retail business selling particular products in the Sydney CBD, you would want to ensure that the seller cannot open near you selling competing products.

Restraint of trade clauses may be difficult to enforce depending on what is reasonable. As a result, most restraint of trade clauses contain cascading clauses to provide a court with alternatives if the geographic area and period of time are too broad. For example, a geographic area may cascade from the geographic area of NSW to the area of Sydney, to the Sydney CBD. If a court were to determine that the area of NSW was too broad, the buyer might still have comfort in limiting the seller from competing in Sydney or the Sydney CBD.

Often in small business sales, buyers are not concerned about competition or assume that the seller will not want to compete. Careful buyers must ensure that reasonable restraints are in place to protect their newly acquired asset.


LegalVision’s business purchase lawyers have decades of experience under their belts in advising clients on buying a business and protecting their assets. Please get in touch if you have any questions or would like to chat about your upcoming purchase!


Construction Contract Essentials

Thursday 12 August | 11:00 - 11:45am

Understand how construction contracts are drafted and how to protect your construction business.
Register Now

Startup 101: Understanding Cap Tables and ESOPs

Thursday 19 August | 11:00 - 11:45am

Cap tables and employee share option plans are essential for fast-growing startups. Learn more with this free webinar.
Register Now

Expanding to NZ: Structuring Your Business For Success

Thursday 26 August | 2:00 - 2:45pm

Launching a business in New Zealand? Understand how to structure your business for success with this free webinar.
Register Now

Preventing Modern Slavery: Your Business’ Legal Obligations

Thursday 9 September | 11:00 - 11:45am

Are you an Australian business with $100m+ annual consolidated revenue? Learn how to determine if you are a modern slavery reporting entity and your obligations under the legislation with this free webinar.
Register Now

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • 2020 Excellence in Technology & Innovation – Finalist – Australasian Law Awards 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice – Winner – Australasian Lawyer 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards 2021 Law Firm of the Year - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer