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When is it a Good Time to Sell your Amazon-Based Business?

The Ultimate Guide on How to Sell Your Amazon Business

Selling an Amazon Based Business & Limitations of AMZ’s Business Solutions Agreement

How to Sell an Amazon Business – Corporations & Entities Sold – No Liabilities

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Everything You Need To Know About Selling Your Amazon Business

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One of the first things you need to do is make sure you’re developing your business under a corporate structure.

It could be an LLC. It could be a corporation. But you want to have that entity in place. And you also want to treat it like a real business. Make sure all your business related bills are going to the corporation. Make sure you have insurance for the corporation. Make sure you have separate bank accounts for the corporation and even credit cards. You want to build up as much as possible in the corporate name so that the business itself has value as opposed to the value being your own interaction.

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The 2nd thing you should do to build a business into something you could sell is develop intellectual property rights.

Get your trademark. File for copyright. These things are what builds value in an Amazon based business. Develop your private label products. Make sure that you build something that you own, not that Amazon owns, but intellectual property rights that belong to the business.

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The 3rd thing I want you to focus on in building your business so you can sell it in the future is diversity.

Diversify the sourcing, where you’re getting your products from, and also diversify where you’re selling your products. Amazon for the near future is going to be the elephant in the room, the Goliath. It will account for 90-95% of your sales, but that doesn’t mean you shouldn’t diversify. Open up an eBay account. Get on Newegg. Get on Walmart. Make sure that even if the streams of revenue are small compared to Amazon, that you are developing diversity in your revenue stream. This is how you build a business that you can sell.

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Amazon Seller Based Businesses: Dissolving Partnerships

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Unlike any other business where partners can come and go as they please, Amazon based businesses will face unique issues when partnerships end.

Common Reasons for Amazon Seller Partnerships (and All Partnerships) Ending

Business partnerships, like any other relationships, often terminate. Sometimes the ending is amicable and other times partnership dissolution’s end with animosity.

Common reasons for amicable partnership dissolution’s include:

  1. Partner retiring
  2. Partner wants to pursue other careers or businesses
  3. Relocation
  4. Business not financially able to support 2 or more partners’ families
  5. Different expectations of the business or each other

Common reasons for partnerships ending where there is animosity:

  1. Partners not working similar hours or having evenly based responsibilities
  2. Partners unable to agree on business decisions and the partners either lack a good dispute resolution system or the disagreements are so strong that there is animosity after the agreed upon dispute resolution system
  3. Personality conflicts
  4. Changing lifestyles of the partners
  5. Disagreements about reinvestment into the business
Amazon Seller Partnership Dissolution – Methods of Ending Amazon Seller Partnerships

First, you should have a partnership agreement that states how to dissolve the partnership.

Partnership agreements should have specific parameters for dissolution regardless of the reason. There should be provisions for dissolution with cause and dissolution without cause. The goal of this portion of your partnership agreement should be to prevent litigation and the disruption of the business.

The methods of ending any business partnership should always include provisions for either the remaining partner buying out the exiting partner or an asset division when the partners are going to remain in the same industry.

With specific regard to Amazon, you may want to negotiate who will maintain the partnership’s account/s or a division of specific ASINs if one or both of the partners intends to open a new account/s.

Also, with Amazon’s focus on brands, Amazon Sellers who are ending partnerships may need to address their private label or their exclusive distribution agreements.  These issues can be resolved in manners that protect the business and also fairly compensate the partners.

Amazon Seller Partnership Dissolution – Amazon Sellers Should Arbitrate, Not Litigate

Where there is conflict, I suggest that the partners agree to arbitration rather than litigation. The goal of business people is to do business, not litigate.

Amazon’s Terms of Service require Sellers to file for arbitration before suing Amazon if there is an issue.

I suggest that partnership agreements include a requirement for arbitration as well. Even where you do not have a partnership agreement or your partnership agreement fails to require arbitration, the splitting partners should consider using arbitration rather than litigation to resolve conflicts.

Arbitration is generally faster and cheaper and you can select an arbitrator that has experience in your area of business. If you end up in court, your case will likely take a long time and you will have no choice in the assignment of your judge.

A great rule of thumb: litigation is usually only good for the lawyers.

I was recently told that a competing lawyer pitched one of our clients by pointing out that he had litigated a case for ten years and won. In my opinion, both sides lost that case. Who wants to spend ten years and tens or hundreds of thousands of dollars on litigation? The only people that won that case were the lawyers who made enormous amounts of money in legal fees.

Specific Issues for Amazon Based Partnerships

When it comes to Amazon based businesses, buying out a partner and continuing the business is not as simple as it might be in all other businesses.

Amazon Seller Partnership Dissolution – Can I Transfer My Seller Account?

Seller accounts are not [generally] transferable. Seller accounts provide access to the tools Sellers use to list their products, manage their orders and utilize resources that Amazon makes available to Sellers. Seller accounts also include account activity history and customer feedback.

Every Seller on Amazon must have a Seller account and an agreement with Amazon that establishes the terms under which the Seller lists and sells its products. If the ownership of a business changes for any reason, the new owner should establish a new Seller account.

The last line creates issues for Sellers because no Seller wants to start anew and lose their reviews or the Buy Box.

Other issues Amazon Sellers know and fear include:

  • We don’t want anyone looking at my account… I could get suspended for no reason
  • What if we are accused of having related accounts?
  • What if our dissolution sparks a review of our entire business and Amazon sends us the dreaded suspension email? No review is better than any review.
Amazon Seller Partnership Dissolution – How an Amazon Based Business Can Continue When a Partner Leaves

Everything with Amazon is a business decision. Do you violate Amazon’s policies and refuse to start an entirely new account when a partner leaves or do you take the risk of getting caught by Amazon by failing to follow its rules?

If you decide to maintain the account when a partner leaves, you will need to maintain the same bank accounts, EIN number, trade name, corporate name, email addresses, etc.

The exiting partner will likely need some assurance that he or she will not be responsible for debts, liabilities or other issues that might arise from the business when he or she leaves. These issues can be addressed via a document called a “hold harmless agreement”; money held in escrow; additional funds for the buy out; licensing agreements and many other methods. Also, the remaining partner may purchase an insurance policy for the exiting partner for any errors or omissions by the remaining partner in the operation of the business.

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Another avenue the splitting partners may want to explore is continuing the “partnership” but altering it in a way that allows, in substance, for one partner to leave and one partner to stay… and maintain sole control over the business.

Amazon doesn’t require you to notify it of changes in partnership responsibilities or how you are sharing profits or costs. So, by simply renegotiating your agreement, you may avoid issues with Amazon.

Every partnership is different, and the dissolution of every partnership will have its own issues. For Amazon Sellers, if you are contemplating ending your partnership, you should seek the advice of a lawyer that is familiar with both partnership issues and Amazon based businesses.