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E-commerce businesses can range from ones operated by experienced online retailers to relative newcomers operating a store as a side project to earn passive income.
No matter what camp you fall into, if you’re interested in the e-commerce world, you may have considered purchasing a monetized website or already operating e-commerce business. This gives purchasers the opportunity to skip a lot of the start-up to start making money sooner.
Anyone considering the purchase of a monetized website or e-commerce business should have a contract in place that documents the terms and conditions of the sale. Here are a few provisions that you should think about including in any contract for the sale of an e-commerce business.
The sale of e-commerce businesses can vary considerably. Some sales are of assets only. Some sales are websites only. Some sales are websites along with a certain amount of training and social media accounts and advertising accounts, maybe some relationships with suppliers. There’s a lot of different variables that go into an online business and it’s important to clearly document exactly what types of assets will be included in the sale.
For example, a sale of the assets of a business are different than the sale of the business itself. Are you buying the LLC entity or are you just buying all of the assets from an LLC? These are important questions that you should have a clear answer to. Even more important is are you buying any liabilities? The reality is that if you are buying an online business, you may be buying the liabilities that come with it. This needs to be carefully documented in the purchase agreement to make sure you’re only assuming those liabilities that you want to assume.
When you’re buying an e-commerce business, you’re likely acquiring a number of intellectual property assets associated with the business. For example, the business’s name, logo, domain name, and slogan are all trademarks that need to be protected. Additionally, any content on a website, including website copy, product reviews, user guides, user manuals, pictures, songs, videos, all of these are copyrighted material.
You may also be purchasing some formulas, methods, or processes associated with the business that are classified as trade secrets. For example, there could be a certain method of lean generation or customer acquisition or conversion that has the elements of meeting a trade secret.
The purchase agreement needs to clearly identify all of these intellectual property assets and make sure they are unquestionably transferred to the buyer. Not only that, but the buyer needs assurances that the seller has the full right to transfer this intellectual property.
The last thing a buyer of an e-commerce business wants to do is get hit with a trademark or copyright infringement lawsuit based on the trademarks or copyrights the buyer purchased. Careful drafting of a purchase agreement can reduce this risk and leave the liability of any infringement lawsuit on the seller.
While it may not technically be part of the agreement, buyers should take steps to conduct proper due diligence before making any purchase. This step can often be completed by executing a contract before the sales agreement. For example, parties may execute a non-disclosure and confidentiality agreement in connection with due diligence investigation. This gives the buyer the opportunity to look at the financial figures of the business, to look at the profits, the expenses, to understand the contacts and requirements of running the business, and to get a real look at how this business operates.
A careful due diligence investigation will turn up the risks of the business and hopefully the benefits of the business. If you’re considering purchasing an e-commerce business, you should first complete this step, which may require the execution of formal documents to keep all proprietary information secret.
If you are looking for an e-commerce attorney to help with the purchase of a monetized website or e-commerce store, contact Revision Legal’s experience Internet attorneys today.
Intellectual property is often the most valuable asset in an e-commerce acquisition, yet it receives less rigorous due diligence than financial statements in many deals. A thorough IP review should cover: trademarks (confirm registration status, renewal dates, and whether the seller owns all marks used in the business, including marks used on social media handles and domain names); copyrights (identify who created the website design, product photography, blog content, and marketing copy — contractors who created this material without a written work-for-hire agreement likely retain copyright ownership); trade secrets (evaluate whether customer lists, pricing algorithms, and sourcing relationships are protected by confidentiality agreements); and software licenses (confirm that all software used in the business is properly licensed).
Domain name ownership deserves specific attention. Confirm that all domain names associated with the business are registered in the seller’s name — not a web developer’s or hosting company’s account — and that registrar credentials will be transferred as part of the closing. A seller who cannot provide access to the registrar account for the primary business domain has a serious problem that must be resolved before closing.
Many e-commerce businesses generate significant revenue through third-party platforms — Amazon Seller Central, Shopify, Etsy, eBay, and similar marketplaces. Each platform has its own terms of service governing account transfers, and some prohibit outright transfer of seller accounts or require platform approval before a change of ownership takes effect. An acquisition agreement that assumes smooth transfer of all platform accounts without first confirming each platform permits the transfer can result in post-closing loss of critical revenue channels.
Amazon’s policies are particularly consequential. Amazon Seller Central accounts are frequently non-transferable as a matter of Amazon’s terms, requiring the buyer to open a new account and transition the product catalog — a process that can temporarily disrupt sales velocity and affect product search ranking. Experienced e-commerce acquisition attorneys address platform restrictions explicitly in the representations and warranties section of the purchase agreement, requiring the seller to disclose any platform terms that restrict transfer and to cooperate with the buyer in obtaining necessary approvals.
The representations and warranties section of an e-commerce acquisition agreement is your primary contractual protection against undisclosed liabilities. Standard representations should include: (1) that the seller has good title to all assets being transferred, free and clear of liens; (2) that all customer data was obtained in compliance with applicable privacy law, including CCPA, COPPA, and any international regulations; (3) that there are no pending or threatened claims, including intellectual property infringement claims, product liability claims, or tax disputes; (4) that all contracts with suppliers and advertising platforms are in good standing and assignable without counterparty consent; and (5) that the seller’s revenue and traffic data is accurate and has not been artificially inflated through click fraud, review manipulation, or other deceptive practices.
Indemnification provisions should require the seller to indemnify the buyer for pre-closing liabilities, including tax obligations, product liability claims, and IP infringement claims arising from the seller’s pre-closing operations. Consider requiring the seller to fund an escrow account at closing — typically 10-15% of the purchase price held for 12-18 months — to ensure funds are available to satisfy indemnification claims that surface after closing.
Acquiring an e-commerce business without thorough legal due diligence is one of the most common and costly mistakes buyers make. Revision Legal’s internet and e-commerce attorneys advise buyers and sellers on all phases of e-commerce transactions — from initial due diligence through purchase agreement drafting, closing, and post-acquisition platform transitions. Contact us to discuss how to structure your e-commerce acquisition to minimize risk and protect your investment.
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