How to Sell a Business Name: Legal and Financial Guide
Learn how to sell a business name legally and efficiently. Understand valuation, legal requirements, and transfer processes to maximize your sale. 6 min read updated on February 24, 2025
Key Takeaways:
- Ownership and Protection: Before selling a business name, ensure that it is properly registered and, if necessary, trademarked for exclusive rights.
- Valuation Considerations: Factors like brand recognition, online presence, and intellectual property impact the value of a business name.
- Legal and Financial Requirements: Contracts, liabilities, and financial obligations must be cleared before selling a business name.
- Methods of Selling: Options include direct sales, auctions, domain marketplaces, and business brokers.
- Negotiation Strategies: Be prepared for negotiations, establish a minimum acceptable price, and highlight unique selling points.
- Transfer Process: The sale must include legal documentation, potential escrow services, and an official name transfer agreement.
Selling a business name is necessary when transferring or selling your company to another party. While owners do have the option of maintaining ownership of the name of the business, if it has been decided that the business name will be transferred, then there are many things that need to be considered.
Do You Own Your Business Name?
In order to comply with state law, most small-business owners will register the name with their state. Generally, the process of registering a company name will ensure that no one else can utilize the same name to sell comparable services or goods. However, protection may not extend nationwide. If another party has previously registered your desired name with the state to sell similar services or goods, then most likely your registration will be denied. In addition to registering with the state, you must also use a trademark in order for the goods and services to be considered under your ownership.
Understanding Business Name Rights and Restrictions
When considering selling your business name, understanding the rights associated with it is crucial. Here are key aspects to consider:
- State Registration vs. Trademarking: State registration prevents others from using the name in your jurisdiction but does not offer national protection. A trademark, on the other hand, grants exclusive rights at the federal level.
- DBA (Doing Business As) Limitations: If your business operates under a DBA, ensure that the name can be transferred separately from the company.
- Domain Name Ownership: If the business name is tied to a website domain, confirm that you have full ownership and the right to transfer it.
- Franchise or Licensing Agreements: If your business name is part of a franchise or licensing agreement, you may face restrictions on selling it.
How to Sell a Business Name
A business name can be a company's greatest asset. It serves as a symbol of expertise, customer service, and company identity. Rarely do individuals just want to buy the name of a business. Generally, transferring a company from one party to another will consist of selling both the business and its name. When a person seeks only to purchase a business name, it generally occurs for the following reasons:
- The name has significant importance to the individual attempting to buy it.
- The reputation associated with the name is valued or unusually marketable.
Typically, the most common occurrence of a business name purchase will involve a website domain name, especially those that potentially can encourage a significant number of page hits.
There are certain steps to take when selling a business name.
- Determine if a business with a similar name exists: Selling a company name that may be mistaken for another business may be more difficult. This may also occur even if the other business is in a completely different industry. The more unique the company name, the easier it will be to sell it. The value of a company name is reduced when multiple businesses have the same name.
- Establish the right to sell the company's name: When a business is named after the owner and only the owner, then that individual has direct ownership of the name. For example, consider the business name of “Kevin Comstock Farms.” However, if the business name is not trademarked, then it is not protected by law without authority to sell it. To clarify, this means unless the business name is protected under local, state, or federal law, a business owner has no authority to sell it and gain a financial profit.
- Prove the validity of the business name: In order to prove a name's validity, there are many angles to consider. Some potential buyers may view a trademarked name to hold more value, while others may be more concerned with a name's reputation. Some future owners may value the longevity of a name. Justifying the validity of a name can be difficult because the marketing goals of each potential buyer may be different.
- Remember, shorter domain names are better: Shorter business names are easier for customers to remember and to associate with the related goods or services. Business names that are hyphenated, long, or difficult to spell and pronounce are less attention-grabbing and harder to sell.
-
Remove obstacles associated with the business name: No potential buyer wants to purchase the previous owner's problems. Remove any obstacles before attempting to sell a business name. Potential obstacles may include:
- Accumulated business debt.
- Lawsuit involvement.
- Tax liens.
- Set the dollar amount for the name of the business: Determining a realistic dollar amount can be very subjective. There are many factors to consider when establishing a name‘s value. Remember, any issues attached to the name of a business will significantly hurt the dollar value.
- Be prepared to negotiate: The majority of buyers will not pay top asking price for a business name, even one with significant value. Be prepared to disclose the minimum amount that you will accept to a potential buyer.
Determining the Value of Your Business Name
The value of a business name depends on multiple factors, including:
- Brand Recognition: A well-known name with an established reputation can demand a higher price.
- SEO and Digital Presence: A business name with strong online visibility, social media accounts, and a high-traffic website increases its marketability.
- Industry Demand: Some industries, like technology and e-commerce, place a higher value on established business names.
- Trademark and Legal Protection: A trademarked name has added value as it provides legal exclusivity.
To accurately determine your business name’s value, consider hiring a business appraiser or domain name valuation expert.
Methods to Sell a Business Name
There are multiple avenues to sell a business name, depending on its value and marketability:
- Direct Sale to Interested Buyers: If you have potential buyers, you can negotiate and transfer ownership directly.
- Online Marketplaces: Platforms like Flippa, BrandBucket, and Sedo specialize in selling business and domain names.
- Business Brokers: These professionals facilitate the sale of established businesses, including their names.
- Trademark Licensing or Assignment: If you have a trademarked name, you can license it to another party for a fee or sell the rights entirely.
Legal and Financial Considerations
To ensure a smooth sale, follow these legal and financial steps:
- Clear Any Outstanding Liabilities: Ensure the business name is free of lawsuits, debts, and tax liens.
- Draft a Business Name Sale Agreement: This document should outline the terms of the sale, payment structure, and any post-sale restrictions.
- Notify the Relevant Authorities: Depending on your state, you may need to update your business registration or dissolve the entity.
- Use an Escrow Service for Secure Transactions: Escrow services can help protect both the buyer and seller during the payment process.
Transferring a Business Name
Once you’ve secured a buyer, follow these steps to officially transfer the name:
- Finalize the Sales Agreement: Ensure both parties sign a legally binding contract.
- Transfer Trademarks and Intellectual Property: If applicable, file a trademark assignment with the U.S. Patent and Trademark Office.
- Update Business Registrations: Notify state agencies and update any business licenses associated with the name.
- Domain Name Transfer: If a website domain is part of the sale, initiate a domain transfer through the registrar.
- Notify Customers and Vendors: If necessary, inform existing customers and suppliers about the name change.
FAQs
1. Can I sell my business name without selling the business?
Yes, but it depends on how the name is registered. If it’s trademarked or a separate entity from the business, you can sell just the name.
2. How do I determine a fair price for my business name?
Factors like brand recognition, SEO ranking, trademark status, and market demand influence the price. You can use business appraisers or domain valuation tools.
3. Do I need a lawyer to sell a business name?
While not mandatory, hiring a lawyer can ensure legal compliance and proper documentation during the transfer.
4. Can I sell a business name that has debts or liabilities?
It’s best to clear any financial obligations before selling, as unpaid debts can reduce the value and make the name less attractive to buyers.
5. How long does it take to sell a business name?
The timeline varies based on demand, legal processing, and negotiations. Simple transfers may take a few weeks, while trademarked names may take months.
If you need help with selling a business name, you can post your job on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.