The assumption that fails: that the business owns it
Intellectual property is created by people, and it belongs to whoever the law says it belongs to — which is frequently not the entity being sold. This is the single most common avoidable finding in small business diligence, and it is almost always a paperwork failure rather than a real dispute.
| Asset | Commonly registered to | Should be |
|---|---|---|
| Domain name | The owner personally, or a former web developer | The entity |
| Trademark | The owner personally, or an earlier entity | The entity being sold |
| Website code | The agency that built it | The entity, by written assignment |
| Custom software | The contractor who wrote it | The entity, by written assignment |
| Social accounts | An employee's personal email | A company email the entity controls |
| Photography | The photographer | Licensed or assigned in writing |
| Customer database | The entity, usually | Check the CRM contract terms |
Under US copyright law, work created by an employee within the scope of employment belongs to the employer automatically. Work created by an independent contractor does not — it belongs to the contractor unless there is a signed written assignment. Most small businesses have used contractors for their website, logo and software and never obtained one.
Running the audit before a buyer does
Every item below is checkable in an afternoon, and every one is expensive to resolve under time pressure.
- Domain registrant — run a WHOIS lookup. Confirm the registrant organisation is the entity and that you control the account, not a former developer.
- Trademark records — search the USPTO database for your marks. Confirm the owner of record matches the selling entity exactly, including any name change or reorganisation.
- Assignment agreements — find the signed contract for every contractor who created anything. Logo, website, software, photography, copy.
- Employee agreements — confirm that staff who create work have signed IP assignment and confidentiality terms.
- Software licences — check whether each is assignable on a change of control. Many are not.
- Social and platform accounts — confirm they are registered to company email addresses you can access without the current holder.
- Third-party content — stock photography, fonts and plugins each carry licence terms, and some do not survive a transfer.
A business that started as a sole proprietorship, incorporated in 2016, and reorganised into an LLC in 2021 may have a trademark still registered to an entity that no longer exists. The chain of title has to be complete, and reconstructing it means filing assignments between entities you may have dissolved. Find this early.
Fixing what the audit finds
Most gaps are fixable, and the cost rises sharply once a buyer knows about them.
| Problem | Fix | Difficulty |
|---|---|---|
| Domain in owner's name | Transfer registrant to the entity | Easy — hours |
| No contractor assignment | Obtain a confirmatory assignment now | Easy if the relationship is good |
| Contractor unreachable | Rebuild the asset, or disclose and price it | Hard |
| Trademark on a dead entity | File assignment records with the USPTO | Moderate — weeks |
| Unregistered but used mark | Common-law rights may exist; consider filing | Moderate |
| Non-assignable software | Seek consent, or plan a replacement | Varies by vendor |
| Social account on personal email | Migrate to a company address | Easy, do it now |
If a contractor built your website in 2019 with no written assignment, you can usually ask them to sign one now. Most will, for a nominal sum or nothing. The time to ask is while you are still a client with an ongoing relationship — not after they hear the business is selling and their signature has acquired leverage.
How IP moves in the deal
How IP transfers depends on the deal structure, and this is one of the practical arguments for a stock sale where the IP position is messy.
In an asset sale the assignment schedule is doing real work. Anything not named is excluded, and buyers have discovered after closing that a domain, a phone number or a social account was never on the list.
- Trademark assignment recorded with the USPTO, not merely signed.
- Copyright assignment for software, written materials and design work.
- Domain transfer through the registrar, with account credentials handed over.
- Account handover for social platforms, analytics, advertising and payment processors.
- Source code and repositories, with access transferred and any third-party licences identified.
What the agreement will say about it
A buyer will ask the seller to represent that the business owns or has the right to use all intellectual property it uses, that this does not infringe anyone else's rights, and that no claim has been made or threatened.
That representation is usually fundamental — meaning it survives longer than ordinary reps and is often carved out of the indemnity cap. A title problem discovered two years after closing can therefore reach you well beyond the normal claim window.
A gap you disclose is a schedule exception. The same gap discovered after closing is a breach of a fundamental representation.
If a contractor cannot be reached and the assignment does not exist, say so in the disclosure schedule. The buyer prices it, or asks for a specific indemnity, or accepts it. What you avoid is a breach claim against a representation you knew was not accurate when you signed it — which is a materially worse position than a discount.