The purchase of an eCommerce business can be a very profitable venture. Although start-up costs may be minimal compared to the purchase of a retail store, you may also need to invest a large proportion of your time in marketing and publicity for your eCommerce business. Starting off on the right foot means doing your legal due diligence so you can continue to operate the business smoothly as soon as your purchase of the business is settled.
An eCommerce store is involved in the sale of goods. If you plan to purchase an eCommerce store, you need to find out whether or not the actual goods will be included in the purchase price. If it is included, where are all these goods stored? Will you need to rent a storage facility? Will you be able to check the stock before the business is purchased? Occasionally eCommerce stores work on a different business model where manufacturers may be shipping products directly to the customers. If this were the case, you will need to discuss with the vendor whether or not existing contracts are in place with manufacturers or suppliers and if you can have these contracts transferred to you. If there are no written agreements, make sure you have contact with the supplier or manufacturers before the business is settled and consider including this requirement in the Sale of Business Agreement.
Intellectual property will always form a large part of the purchase of an eCommerce business. If you haven’t thought about this as yet, then you definitely should! This can include aspects of the purchase such as the business name, domain name or social media pages. If you and the vendor are happy with transferring intellectual property ownership, make sure this is not only legally outlined in a written agreement, but also that the practical aspects are also finalised within a given timeframe, e.g. the vendor will need to change ownership of the domain name within 10 business days of settlement. This will help ensure you are ready to manage the eCommerce business in all platforms that exist, not only the website!
This is just a snapshot of the legal considerations you need to make when purchasing an eCommerce business. Our specialist team of contract lawyers have not only helped to set up online businesses, but also assisted clients with their sale and purchase! If you want to start an eCommerce business, speak to one of the LegalVision team by calling us on 1300 544 755!