Buying Domain Names With a Partner | DomainInvesting.com
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Buying Domain Names With a Partner

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Buying a domain name with a partner or group of partners can have advantages such as lower acquisition cost and reduced risk, but there are also some unique issues that can present themselves. Many of these issues can be mitigated by discussing them before buying a domain name with a partner, and I thought I would share some of them for your consideration.

I think it is important to use a contract when buying or selling a domain name, but a general purchase agreement covers the sale and probably not the partnership. I think it is important for partners to have some sort of partnership agreement in place when they buy a domain name together.

Some of the issues that can come up include:

  • If someone has liquidity needs, the partner may not be willing to sell the domain name at that time for less than its optimal value.
  • The partners don’t have the exclusive ability to make a sale decision if a good offer is submitted.
  • This is different for most people who own domain names on their own.
  • In the event of a partner’s bankruptcy, the domain name may be frozen or otherwise encumbered.
  • One partner may have more lax security standards, potentially putting the domain name at risk of theft.
  • If a UDRP or lawsuit is filed, there may be disagreements on what lawyer to use and/or how to approach the action.
  • Partners may have different ideas about how to monetize the domain name
  • In the event of a death, a person’s assets may be frozen. Even if the domain name is available to be sold/transferred, the living partner may not legally be able to decide on a sale.

You are welcome to share anything I may have missed.

Keep in mind that some of these issues wouldn’t happen depending on the partnership and way the domain name is maintained. For instance, if investors own a company together, the company would likely be considered a separate entity and also have its own bylaws. For the sake of this article, I am referring to partnerships in the sense that two or more domain investors agree to share the purchase price and ownership of a domain name.

I would imagine that many people who do informal partnerships don’t think about this minutiae because of the low likelihood of the issues happening. However, if you decide to buy a domain name with someone else, you should discuss these things up front and memorialize them in an agreement. I presume most of the issues are unlikely to happen, but if they do, it could tie up the domain name.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (3)

    Tom

    Elliot:

    Great post and very timely given the meteoric rise in the price of many names: people may have to consider partnerships whether they want to or not!

    I’m of the opinion that you get the terms in writing before entering into this type of arrangement. You may not need the writing if things are going well, but you’re going be glad you have it if something goes south.

    The issues you raise are important and should be addressed in an agreement between the parties. For example, a group could form a limited liability company. The LLC agreement for the company would address the issues you describe above, especially who can act on behalf of the company (and when) and what votes of the partners are needed, for instance, to sell a name.

    A couple of other issues in addition to what you raised:

    When the group needs more money, who is paying in and in what amounts?

    Restrictions on transferring each partner’s ownership: you don’t want the other guy selling his ownership without your consent and you ending up with a partner you don’t want. Or worse yet, after his divorce, ending up with his ex-wife as your business partner. Yikes.

    November 1st, 2015 at 8:12 pm

    Andrew Richard

    I agree with your points,but we have to draw the rules by speaking with your partner before entering into any agreement,I am now looking for domain investors to create a domain portfolio.

    November 2nd, 2015 at 9:07 am

    negotiation support

    To minimize friction among partners in future, should they disagree, or other exigencies come up, suggest a required ‘put’ – aka automatic buyout self executory mechanism be provided, to help minimize delays if partners want to sell but there is a holdout, or if there is an illiquidity event with one of the partners, ie bankruptcy, divorce, death – where the partner’s share automatically up for a ‘put’ to the partnership for remaining partners to be able to buyout the non active partner for a predetermined formula price ….can be decided by arbitration, or some other mechanism

    November 3rd, 2015 at 9:12 am

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