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.