When buying a sole proprietorship in Austria, check business continuation, section 38 UGB, contract transfers, staff and legacy liabilities.
BRANDAUER Rechtsanwälte
Salzburg law firm for corporate, company and transaction law
Every transaction is handled by a coordinated team of lawyers, legal staff and specialists. In company acquisition matters we look at structure, contract, tax and liability together.
The acquisition of a sole proprietorship may look smaller than a classic company acquisition. Legally, however, it is delicate because no shares in a company are transferred; instead a business with name, customer relationships, contracts, inventory and employees is taken over. The assets and liabilities therefore have to be described precisely.
Continuing the existing business name is often central. A buyer who takes over the name, customer base and ongoing contracts may face old business-related liabilities under section 38 UGB. Important contracts usually also require the consent of the respective contract partner.
From a legal perspective, the concrete acquisition scenario must be described narrowly instead of merely repeating the general share deal or asset deal scheme.
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The transaction perimeter must first be defined cleanly.
The perimeter should be clarified before the next negotiation round. From a legal perspective, the concrete acquisition scenario must be described narrowly instead of merely repeating the general share deal or asset deal scheme.
First prepare a list of the assets, contracts, employees and consents to pass.
The structure is robust; the exact documentation now matters. Now check whether the closing list, warranties and indemnities reflect the same risk position.
Open consents or liability questions should be resolved before signing. Open points do not belong in a side list but in the agreement: as a condition, indemnity, warranty or price mechanism.
In a sole proprietorship much depends on whether the business is continued externally as the same operation. If the name or a distinctive business appearance is taken over, creditors and contract partners will quickly ask whether the buyer is liable for old liabilities. A clear provision in the purchase agreement and transparent information to contract partners are therefore risk management, not formalities.
Important customer, supplier and lease contracts do not pass automatically. The transfer of contract usually requires an agreement with the respective contract partner. Without that consent, the buyer may acquire inventory and customer contacts while the commercially most important contract stays with the seller. The post on legacy liabilities in an asset deal explains the liability angle.
If an organised business passes, the Austrian rules on transfer of business under AVRAG may apply. Employment relationships then pass to the buyer with all rights and obligations. Due diligence must therefore cover employment contracts, open holiday, overtime and collective-bargaining classification, not only inventory and price.
It must also be clarified whether the buyer has the necessary trade licence or can put it in place in time. In small businesses, the licence often depends on a specific person. The post on transfer of business under employment law explains the employment consequences.
The agreement should contain a precise list of inventory, contracts and receivables. Equally important is the allocation of liabilities that remain with the seller and those economically assumed by the buyer. A single sentence stating that no legacy risks are assumed is often insufficient if the business is continued externally.
Seller warranties on taxes, social security, employment law, pending proceedings and customer contracts are useful. Part of the purchase price can also be secured until critical consents are clarified. The structure can be pre-assessed with the M&A transaction risk profile.
This overview shows which questions must not disappear in general clauses.
| Point | Why it matters | Contract consequence |
|---|---|---|
| Business name Business name | Continuation may trigger liability | Check name, external appearance and registry position |
| Contracts Contracts | Transfer requires consent | Secure critical contracts before signing |
| Employees Employees | AVRAG may transfer employment relationships | Review staff risks and open claims |
The overview does not replace case-specific review but shows the typical risk fields.
Practice note: If a point drives the value of the target, it belongs not only in due diligence but also in the purchase agreement. Book an initial consultation (72 euro).
First define the exact acquisition perimeter: which assets, contracts, people, rights and obligations are to pass and which remain with the seller. Due diligence, price logic and contract mechanics follow from that perimeter.
The data room should contain the value-driving contracts, permits, staff documents, pending proceedings, financial data, insurance policies and evidence on critical consents. Relevance and completeness matter more than volume.
A risk must be addressed expressly if it is known, can endanger completion or affects price. General warranties are often not enough; usually an indemnity, condition or price adjustment is needed.
Further post or topic page for the next stage of review.
Further post or topic page for the next stage of review.
Further post or topic page for the next stage of review.
Further post or topic page for the next stage of review.
When buying a company, structure, review and contract decide. Call us directly or send an email, callback within one business day.
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