5 Legal Documents You Need to Buy & Sell Websites

The process of selling your website can be an emotional roller coaster. It can be a long process with negotiations going back-and-forth for days between buyers and sellers. In these emotional exchanges of information, people are human and they can sometimes forget exactly what they said and agreed to. This is why the written word was invented. It’s absolutely important to have agreements in writing as negotiations move along.

Don’t wait to agree to terms before you have the corresponding legal documents prepared. It’s best to have all your legal document templates ready before you go out there to buy or sell a website. These templates can then be customized by an attorney as you agree to terms along the way. Having these templates ready at the beginning enables the process to move forward much faster.

As a website broker, with the help of our attorney, I prepare and provide these important documents to website buyers and sellers. I provide customized documents for each client as each website transaction is different. If you’re not working with a broker, you’ll need to prepare these documents yourself with your attorney. These are the 5 important documents that you should have when you need to buy or sell websites:

1. Business Prospectus

If you’re a website seller, you’ll need to prepare a Prospectus which outlines the website’s operations. A prospectus contains all the details that a buyer would need to know in order to decide whether or not to purchase the website.

Some sellers choose not to prepare a prospectus. You can go without one but it makes the sale process much more complicated. Your website listing will attract many potential buyers who will each ask for information about the website operations. Without a prospectus, you’ll have to verbally explain how the website business is managed. Or you may have to explain this in numerous emails to lots of buyers. It can be extremely exhausting and time-consuming as most buyers will ask similar questions.

It’s so much easier to put it all in writing in a prospectus and forward the prospectus to every potential buyer who requests information about the website. This speeds up the process significantly.

A typical Website Business Prospectus will provide the following information to buyers:

– Executive Summary that summarizes the key selling points in the rest of the Prospectus.

– Ownership & Personnel which states the people that own, maintain, and manage the website. This includes both employees and contractors. And it outlines the wages and salaries paid to the team members.

– Financial Statements showing all Monthly Revenues and Expenses associated with the website’s operations. Financials can be laid out in a simple Excel spreadsheet or in more complex audited financial reports supplied by the seller’s accountant. Most buyers want to see monthly financials for at least 12 months.

– Traffic Reports showing the website’s Monthly Traffic. This document can be exported directly from a traffic account such as Google Analytics. Most buyers want to see monthly traffic for at least 12 months.

– Marketing Plan that states the promotional methods that are used to drive traffic to the website. This could be paid advertising such as with Google AdWords campaigns or unpaid SEO.

– Technology tells buyers what technology products were used to build the website such as WordPress. And it also tells buyers what software products the seller uses to manage the website.

– Competition indicates what other websites compete directly with the website in its niche. It gives buyers an idea of who they’ll be up against if they acquire the website.

– Website Valuation or Due Diligence Report (if available) may be included in the prospectus if the seller has had the website appraised by a professional website broker or reviewed by a website due diligence firm. In both cases, the seller’s objective is to show the buyer that the website’s value has been vetted by professionals.

2. Confidentiality Agreement or NDA

Before the Prospectus is handed over to potential buyers, it’s advisable for a seller to ask buyers to sign an NDA. An NDA or non-disclosure agreement is a legal document signed by a buyer in which he agrees not to disclose certain information pertaining to the website transaction between the buyer and seller.

If you’re a website seller, the last thing you want is for the buyer to disclose confidential information about your website to the public. By signing an NDA, he agrees to keep his mouth shut.

An NDA is also a great tool to screen buyers. Every potential buyer must disclose his personal information in the NDA. Therefore, he can’t hide behind the anonymity provided by a computer screen on the Internet. Real buyers have no problem signing NDAs. Tire-kickers who are just curious about the website will disappear once an NDA is presented to them. An NDA enables you to separate real buyers from tire-kickers.

As website brokers, we use a customized NDA. But there are lots of standard confidentiality agreements available online for free that can be modified to serve your purpose.

3. Offer Letter (Letter of Intent)

After submitting the Prospectus to numerous potential buyers, every seller hopes to receive an offer. A verbal or emailed offer is nice. But, in business, always get offers in writing so the details of the offer are understood clearly by all parties.

– What exactly are the terms of the offer?

– Is it an all-cash deal?

– Does it involve seller financing?

– When does the offer expire? Buyers sometimes include a deadline by which a seller must accept or decline the offer. After that date, the offer expires.

All these questions and more are answered in an Offer Letter. An offer letter is a LOI, which is a non-binding document. It outlines the offer terms agreed to by the buyer and seller before they finalize the binding website purchase agreement later.

The Offer Letter may contain certain conditions that need to be met and fulfilled before the binding purchase agreement is signed after a period of due diligence by the buyer.

The Offer Letter is not legally binding. Its purpose is to put the offer and its terms in writing rather than in verbal form. This clarifies what both parties agreed to and moves the process forward more effectively.

4. Website Purchase Agreement

If everything goes well after the offer letter is signed and the buyer completes his due diligence, then both parties are ready to sign the most important document of all 5 documents listed here: the website purchase agreement.

The terms of the purchase agreement supersede any terms in the offer letter. More importantly, it is legally binding. This binding agreement signed by the buyer and seller details the final terms and sale price of the website.

Every term, clause, asset, or payment plan is included in this legal document. The length and level of detail in this contract depends on the size and complexity of the transaction.

Short and simple purchase agreements are used in small website transactions of under $100,000 which include simple, basic terms.

We have closed larger transactions over $500,000 with complex financing arrangements and terms using purchase agreements of over 20 pages. The clauses in these contracts outline the precise assets to be sold, how the payments will be made, liabilities incurred (if applicable), closing procedures, indemnification, governing law, purchase price allocation, domain name assignments, related exhibits, bill of sale, and so much more.

We always recommend that you hire an attorney to prepare your website purchase agreement.

5. Escrow Agreement

At some point after all the back-and-forth negotiations, due diligence, and signing contracts, you expect to receive cash for your website. Well, there’s a legal document during this process too.

Website sales always involve using an escrow service such as Escrow.com or Agreed.com for payments. The escrow company is an independent third-party that receives the money from the buyer and website assets from the seller. The escrow company then transfers each of these assets to the appropriate party to close the deal.

In some cases involving complex high-dollar transactions, customized escrow solutions are required. Some buyers and sellers opt to use a law firm to provide these escrow services. This is more expensive than using an escrow company with its standard procedures and agreements for every transaction.

During escrow, an escrow agreement outlines the escrow terms  agreed to by the buyer and seller. Fortunately, escrow companies have standard agreements that they provide for each transaction. As such, neither a buyer nor a seller need to prepare an escrow agreement. But they each set the terms that are added to the agreement prepared by the escrow company. Terms include the amount to be paid, assets to be sold, how much time the buyer has to inspect the assets once he receives them, and much more.

Once the buyer receives the website assets and confirms he is satisfied with the assets, the escrow service subtracts its escrow fee, and sends the rest of the cash to the seller. This effectively closes the deal.

The website purchase process can be long and exhausting and therefore requires careful preparation. It’s always best to be ready with these 5 important legal documents before going out there to buy and sell websites.

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