As a technology attorney in New Jersey with a nationwide practice I represent parties in the purchase and sale of online internet website e-commerce websites and businesses. There are many legal challenges in purchasing a website especially if the seller represents that the site has both a certain amount of traffic and revenues from ad dollars and purchases. A prudent website purchaser will take his or her time in doing the right amount of legal and financial due diligence to make sure this is the right purchase for them.
You want to make sure that the party who owns the site actually owns the site. You want to see all of the underlying entity formation documents filed in the state where the entity incorporated to make sure that entity really owns the site. If its an LLC you want to examine the incorporation documents and ask the seller if there is an Operating Agreement for the LLC which would help you determine if there is more than one owner of the entity.
The next thing I would do is to verify that the entity is the rightful owner of all of the domain names associated with the site. You want to make certain that the site owner legally owns all of the domain names and has the ability to transfer the names to you or your company.
You also want to ask the seller in writing to represent whether or not there any debts and liabilities or whether the site owes any money to any creditors. You don’t want to buy a site that makes money only to find out it’s in the red.
You want to make sure that all of the software code and passwords have been transferred to you. You don’t want to be in a situation where you have purchased a website but the seller still has some sort of control over the site.
A big legal issue could also arise with trademarks and copyrights. If you are going to making a big purchase and be spending a lot of money on the site you want to make sure that the owner of the site has filed for the requisite trademarks and copyrights. Its not a bad idea to do your own search with the US Patent Office or hire a lawyer to do a search on your behalf. You don’t want to spend money purchasing a website only to be later sued by a third party claiming that the site infringes upon their copyright or trademark.
Then comes the issues of traffic and ad revenues. The owner of the site should be able to demonstrate via Google the amount of daily traffic to its site. With ad revenues just make sure the documents look legitimate and authentic. You don’t want to spend good money purchasing a site only to find out that it looks good but is worthless. A little due diligence goes a long way. Pay your accountant a few bucks to look at whatever financial documents the seller provides to you.
It might not be a bad idea especially if the site makes money to have the seller stay on for a certain period of time as a consultant helping you learn every facet of the business.