Before You Sell Your Website

By Cliff Ennico

September 13, 2016 6 min read

If you have spent years building a successful business on your website and social media pages, sooner or later you will think about selling it. But selling a web-based business is different — a lot different — than selling a brick-and-mortar business.

To illustrate how the process works, I'm going to bring back a childhood memory. Do you remember spending rainy Saturdays putting together jigsaw puzzles with your siblings and friends on the kitchen table? Specifically, do you remember when Mom wanted to set the kitchen table for dinner (yes, families once ate together) and you had to move your puzzle to another location? Remember how you picked up the puzzle and struggled to keep pieces from falling out (or the whole thing from collapsing)? That's a lot like selling a website.

Unlike many businesses, a website is a jigsaw puzzle with pieces of different sizes — content you have created, content you have acquired from others, software or a SaaS program (software as a service), contracts with advertisers, suppliers and developers — and all of the pieces have to be moved to the website's new home. If pieces fall out along the way, the buyer must be notified and be willing to live without them (perhaps for a reduction of the purchase price).

If you have a corporation or limited liability company for your business, you could just sell the stock in your company to the new owner. But doing so poses tax disadvantages to the buyer, who will insist on buying the assets of your business instead. That means you will have to transfer all of the puzzle pieces, one by one.

Here are some steps you need to take to make sure your puzzle makes the transition in one piece and you get paid what it's worth.

Check Your Domain Name Registration. You should know where your domain name is registered. If you don't, check with your web hosting service. Check your domain name registration, and make sure your domain name is registered with the person who will be selling your website. For example, if your corporation or LLC is selling the website assets, the domain name should be registered in your corporation or LLC's name.

Check Your Web Hosting Agreement. Next, check your web hosting agreement and make sure it can be assigned or transferred without the host's consent. That way the hosting service invoices, tech support emails and other correspondences will be directed to the buyer once the sale takes place.

Check for Blanket Liens on Your Business Assets. Do a Uniform Commercial Code, or UCC, lien search on your state Secretary of State website (virtually all states allow this to be done electronically). If the search uncovers a lien on your business assets (if the creditor or secured party is a bank, you can be certain that the lien covers all of your assets), that lien will need to be removed of record when you sell the website, which may require you to pay off the banks loan.

Check Your Terms and Conditions or User Agreement. Hopefully you have these documents linked to your website and you clearly instruct suppliers, customers, content providers, developers and other third parties who interact with your site to review these documents before clicking the "Yes, I accept" button.

Hopefully these documents also contain two essential clauses:

—An "assignment of rights" clause by which third parties assign all of their intellectual property rights, such as copyright, to you when they interact with your website.

—A "successors and assigns" clause allowing you to transfer your users' rights to a third party without their consent.

If you do not have legal documents posted on your website, or if your documents do not contain either or both clauses, then you will have to obtain signed "Assignment of Intellectual Property Rights" agreements from each and every person who has contributed content, software or other stuff that appears on the website.

Make Sure All Licensed Software Is Transferable. If you have licensed software from other software developers (other than open-source software), make sure you have a "nonexclusive, transferable" license to use the software and transfer it to others.

Develop a List of All the Puzzle Pieces. Put together a list of all of the pieces that make up your website. This is often the first document the buyer will ask for, and it should be included in any letter of intent, memorandum of understanding or similar document that is given to prospective buyers.

Consider an Escrow Arrangement. Companies such as Escrow.com offer domain-name escrow agent services to website owners. Putting your domain name(s) into escrow with such a service will make it much easier to transfer the names when the sale takes place. The agent will also insist on escrowing the purchase price so you get your money at the same time when the transfer takes place.

Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com.

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