Here’s a scenario I see more often than you’d expect. A founder builds a business, finds a buyer, agrees on a price, and everyone starts celebrating. Then the buyer’s lawyers start due diligence, and the deal hits a wall. The trademark is registered in the founder’s personal name, not the company’s. The website and product designs were built by freelancers who never signed anything. Suddenly, the buyer is asking a very fair question: what exactly am I buying?
If you’re thinking about selling your business someday, even years from now, this post is for you.
IP doesn’t transfer automatically
A lot of owners assume that when you sell the business, everything inside it goes along for the ride. That’s true for the desks and the inventory. It’s not true for intellectual property. Trademarks, patents, and copyrights each require a written assignment to change hands, and trademark and patent assignments should be recorded with the USPTO. Without that paperwork, the seller can walk away still holding legal title to the brand they just “sold.”
Trade secrets work differently. There’s no registry to update. They transfer through the purchase agreement’s confidentiality provisions, which means those provisions need to be airtight.
The ownership problem underneath it all
You can’t assign what you don’t own, and this is where deals fall apart. The most common gaps I see:
- The founder owns the trademark, not the company. If you registered your mark before forming your LLC and never assigned it over, your company doesn’t own its own brand.
- Contractors own your creative assets. By default, copyright in work created by an independent contractor belongs to the contractor, not the business that paid for it. Your logo, your website, your product photos, even your software may not be yours to sell. I wrote recently about why verbal agreements don’t protect your IP, and a sale is exactly where those handshake deals come home to roost.
- Licensed technology that doesn’t move with the deal. If your business runs on tools or tech licensed from someone else, those licenses may require the licensor’s consent to transfer. Buyers check.
Why sellers should fix this before buyers find it
Every gap a buyer’s lawyers discover during due diligence becomes leverage. Price reductions, holdbacks, warranty claims after closing. Every gap you find and fix before going to market becomes the opposite: proof that you run a well-managed business worth paying full price for.
The fixes are usually straightforward when you have time. Ensure that the correct entity owns the trademarks. Get written assignments from past contractors. Document your trade secrets and how you protect them. The same fixes get expensive and awkward when a buyer is waiting, and a former freelancer knows they have leverage.
You don’t need a sale on the horizon to do an IP audit. You just need to own what you think you own.
If you want to make sure your business actually owns its IP, call my office at (888) 666-0062 or schedule an Initial Discovery & Strategy Session.
