I personally own the patents and trademarks that our business relies on, and I license them back to the operating company. How will a buyer view this arrangement, and what is the cleanest way to restructure these assets before entering due diligence?

Question

Tyler Smith · Accepted Answer

Holding patents, trademarks, or proprietary software in your personal name or a separate entity is a common tax and liability strategy during the operating years. However, a sophisticated buyer expects to purchase a complete, self-contained business. If the core intellectual property is not owned by the operating entity being sold, it creates a massive red flag in due diligence.

A buyer will not accept an ongoing licensing agreement with you post-closing unless it is a very specific, heavily negotiated exception. They want to own the assets outright so they can scale the business without being dependent on a third party.

To resolve this, you must clean up your intellectual property ownership at least twelve months before going to market. Work with an experienced intellectual property attorney to assign all patents, trademarks, and copyright assets directly to the operating entity. Ensure that all employee and contractor agreements contain clear work-for-hire clauses, proving that any proprietary code or designs created for the company are owned entirely by the business. Having these assignments documented and filed with the appropriate government registries makes your due diligence package look clean and professional, accelerating the transaction process.