The sale of a business is often an exciting yet stressful time for both the seller and the buyer.
One of the biggest causes of stress is the legal aspect of the sale — ensuring that you’ve covered everything and that you’re protected during the sale and after.
The sale of an online business is no exception. Even if the deal doesn’t involve the sale of any physical stock or taking over a high-exposure retail lease, the intellectual property, reputation and client base of the business can be just as (and often more) valuable than that of a standard brick and mortar business.
In this article, we’ll focus on what’s included in an Online Business Sale Agreement where the business for sale has no physical assets — only intellectual property and goodwill.
What Exactly Is The Seller Selling?
During the sale of an online business, it is important that both parties know exactly what is for sale and what is not.
Below are some things that could be included in the sale of an online business.
Intellectual property is the intangible (i.e. not physical) assets of a business, which can include:
- the business’ name
- the business’ logos
- email addresses
- website domain and content
- social media accounts
- trade marks registered in the business’s name
Intellectual property is often the most valuable asset a business owns.
For example, consider the purchase of a software company — the buyer would want to make sure they’re purchasing the ownership and right to licence out the software that has been developed by the seller.
Goodwill is another type of intangible asset that may or may not be included in an online business sale.
Goodwill is the reputation of the business that it is being purchased. It includes the business’ customer base and the brand that has been developed.
For example, if a buyer is looking to purchase a small cafe that is well known in the area with a strong and loyal customer base, the amount of money that the parties agree to add on top of the tangible value of the business (i.e. stock, machinery and fitout) is likely to be greater than the purchase of a cafe that has just started out.
Goodwill is more valuable to some buyers than others. If the buyer wants to open a pizza restaurant in the cafe’s premises instead of continuing the cafe’s brand, the buyer would not expect to pay any goodwill in the business sale.
What Is Covered In An Online Business Sale Agreement?
Aside from clearly setting out the assets that are part of the sale, an Online Business Sale Agreement will need to cover:
- the purchase price
- any deposit that is payable (often 10% of the purchase price)
- the settlement period (i.e. the time in between signing the contract and the actual business handover)
- the obligations of each party to complete settlement
- what will happen with existing staff (i.e. whether the purchaser plans to keep existing staff on)
- restraint of trade clauses (if the buyer requires the seller not to start or work for a competing business in a certain geographical area)
- the seller’s involvement in the business after settlement (such as through providing on-going training)
- warranties and indemnities of the buyer and seller (i.e. promises and protections that each party gives to the other)
Do I Need A Lawyer to Draft My Agreement?
It’s important to make sure each of the above matters are considered and properly reflect the parties’ agreement.
A properly drafted Online Business Sale Agreement ensures that both parties are protected and all aspects of the sale are considered. Both the buyer and the seller can run into trouble if any clauses aren’t drafted properly or if key details are missed.
We’d recommend having a lawyer draft an Online Business Sale Agreement. Feel free to get in touch with Sprintlaw any time if you’d like to discuss further!
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