When you buy an online business, as a general rule, you will probably want to purchase the company’s assets rather than the owners’ equity (corporate stock, LLC membership equity interests, etc.).
Why?
Assets you may want to buy include the domain name, website content, client lists, and software.
Why purchase an Internet business’ assets?
Although an equity purchase might be easier from a paperwork standpoint, you also assume many potential legal risks by stepping into the shoes of the seller(s). For example, you do not want to clean up a mess if the seller’s company hasn’t observed corporate formalities or engaged in shady behavior.
In contrast, buying the assets of an Internet business (and placing them in your own business entity) reduces these risks. Let the seller(s) worry about any problems with their business entity rather than selling those potential liabilities to you.
Of course, there may be different tax consequences to a hard asset purchase than an equity purchase.
For this reason, when you buy an Internet business, you’ll want to work with your Internet lawyer and your accountant to structure the deal to protect you both from legal risks and unnecessary tax liabilities.
Update – How to Buy an Internet Business: 12 Steps to Owning Your Own eCommerce Company
Since this article was first posted, I’ve written a book that reveals in 12 simple steps how you can buy an Internet business. It’s available in paperback and Kindle ebook formats at Amazon.com.
