Selling your online business?

1. Reps and Warranties

There has to be an agreement between what seller sells and buyer buys. An important source of conflicts between business partners is when the contract does not reflect what buyer and seller orally agreed on. It is important to define this accurately in the contract. This is in the interest of both parties.

On the seller’s side, he can ask the buyer to deliver the purchase price at once or in several installments. The vendor can also negotiate a percentage of the profits in a specific period after the sale. And even a percentage from a future acquisition of the online business to a new buyer is not uncommon.

From the buyer’s perspective, he should not only be granted access to the website, its hosting, social media pages, passwords and clients’ databases. But the buyer can also demand proper instructions or training so he can keep the business up and running.

2. Disputes, claims and proprietorship issues

Possible claims from third parties are a serious risk. For example, the seller has to guarantee that there is no third party with any rights over the website’s URL. What if the seller has built up a profitable business but is not entitled to transfer its popular URL? Or the seller uses copyright protected material, such as product pictures, trademarks or logos. And the buyer finds out well after the sale.

 

3. Title retention clause

This important clause cannot be missed and has to be well-drafted. It protects the seller and can have important consequences. The title of retention clause simply means: no payment, no transfer of ownership. This gives to buyer an incentive to pay because the ownership will not transfer until the complete payment is fulfilled. In the case of buyer’s bankruptcy, the online business and its assets can be retained by the seller. In some countries this title of retention needs to be registered, and the the breadth of these clauses also differs. It is important that this is looked into.