There is nothing like selling a business for testing exactly what it is you do own. Share ownership is by no means the full story and a potential buyer will want to test every claim for every element of the business to make sure they are getting exactly what they intend to pay for.
At the top of the list are obvious things like patents and trademarks. If you think they have value then they should be protected.
Less obvious may be things like domain names which are often registered in the name of service providers for internet services. Just securing the domain name does not always mean secured for your business in perpetuity.
Equally, software associated with an online service may only be 'yours' in terms of being a service subscriber and not necessarily transferable to an alternative provider.
Something else in this area that also falls through the cracks is the copyright for online content or even database content. Somewhere in a contract in the back of a filing cabinet is a clause that says you have surrendered all rights to ownership. Finding this out at the wrong time can be a devastating blow.
This list can be quite extensive so it is worth starting early and audit your 'possessions' so you can take action before you really need to.
The growing trend towards online services makes this area more problematic than it might have been in the past.
A classic example might be a cloud based customer relationship management (CRM) system. You rent access via a monthly fee, but do you own the database content? If you do own the database content, how easy is it to get a dump of it and if you can get a dump how usable is it?
For a buyer looking to take over your business, being able to integrate your CRM records with an existing system may be key in a smooth transition. If the ownership of the CRM information is in doubt, or in effect unusable, then everyone has a problem.
Sometimes the problem is sitting right in front of you in the form of a key employee or fellow director who feels they have a claim on some intellectual property in the business because they have been instrumental in creating it.
This may prove to be a fair assumption if the employment contract or Directors agreement does not rule it out. In which case you will have to make a counter claim in terms of provision of funds and/or facilities. This can be very messy and costly indeed and many potential investors will walk away if such issues cannot be resolved quickly and at minimal cost.
Employees themselves are a particular problem area. You can of course never own the employees, you can only own the contract you have with them. The problem comes in a transfer of business ownership that requires the business to be intact on transfer. If employees decide to leave, this can severely weaken the transfer or sale proposition. The business you thought you owned is much less of a business than you thought.
There are strategies that can be taken to prevent this problem such as long term incentives. However, like the other things above, the time to take action on this is when you don't really need to - not when you are pushed into a corner.
Auditing ownership is therefore not just looking at physical assets or even intellectual ones, but looking at every aspect of the business operations and asking 'how much of this do I actually own?'
