The Legalities of Selling Your E-commerce Business

With all the energy and effort you’ve put into your business, you want to ensure you get the best price for your business, but you also want to cover yourself on all fronts.

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While we all know there’s so much more to selling a business than just getting the best price and shaking hands, do you know all the legal considerations you need to make before embarking on this journey? 

To ensure you’re completely covered when selling your e-commerce business or internet-based business, you need to be aware of all the legal considerations first. For those who are selling their first e-commerce business, we’ve compiled a guide to help be aware of the legal side of things. 

Legal considerations when selling an e-commerce business

The process of selling your e-commerce business can sometimes be an incredibly long and drawn-out process as you and serious buyers will be navigating all the different facets of the sale, considering absolutely all costs, liabilities and more. To cover the legal side, here are some things you’ll need to consider. 

1. Ensure all Intellectual Property is transferred correctly

Australian Intellectual Property (IP) law is designed to encourage innovation and protect businesses so they can maintain a competitive advantage. This doesn’t just pertain to Australia; the country is also a signatory to several international agreements to protect IP in other countries. 

When selling your online business, you need to understand that all registered trademarks, designs, and branding should be transferred correctly. This includes everything pertaining to the business: 

• Patent protection – a mechanism for transfer is needed in the sale contract, especially if  your business relies on third-party supplies or drop-ship arrangements

• Trademark protection – Australia’s legal system does a wonderful job of protecting businesses that register a trademark as a marketing tool. It stops others from using your business brand, and so all trademarks will need to be transferred in order to ensure that the new owners have full trademark protection 
• Domain name and registration – one thing that is vital to the sale of any e-commerce business is how all the domain names and registrations with third parties, like Google, are to be handled during the transfer of ownership. This important task must be clearly set out in the agreement

• Design protection – all the designs registered under the business with the Designs Office of IP Australia must be transferred

• Copyright protection – As an e-commerce site, of course, you will have copyrighted materials like product descriptions, product images, and terms and conditions. When transferring the ownership of your business, it’s essential that the copyright is transferred, too

2. Ensure the sale contract contains releases and indemnities

When you’re in the process of selling your business or have successfully sold it, the last thing it’s possible to be hit with a lawsuit if your liability extends beyond the sale. Therefore, in order to cover yourself, you need to ensure that the sale of the business agreement contains specific indemnities and releases in order to protect both parties involved. 

3. Restraint of trade

Of course, after getting your business running successfully you’ll have all the inside information and could probably launch another identical business. However, it’s understandable that your buyer won’t want the risk or competition. In most cases, the buyer will want a well-drafted restraint provision (a provision to prevent you operating a similar business within a specified jurisdiction post-sale). 

4. List your business for sale with an NDA

   

When you take your business to the open market it’s essential to protect your property from a legal standpoint until you’ve found until it is sold. Working with a business broker, like Lloyds Business Brokers, they will handle everything up to this point. They can email your summary to their network of buyers to start generating interest. 

Any potential buyers interested in buying your business will be privy to sensitive information and will undoubtedly have to sign an NDA. This will legally bind them to keep any confidential information inside your prospectus, just that – confidential. This prevents others from passing on or using your information to other people.

Final Thoughts

With all the energy and effort you’ve put into your business, you want to ensure you get the best price for your business, but you also want to cover yourself on all fronts. Before agreeing to the sale terms, talk to a business lawyer to have legal backing throughout the deal. Should you want the best success and are new to e-commerce business sales then consulting a business broker may the best course of action for you and your future. 

Failure to do so may have serious ramifications or complications, even after the sale is completed.