Legal Due Diligence for Amazon Sellers: Protect Your Business Before You Buy or Sell

When buying or selling an Amazon business, many entrepreneurs focus on revenue numbers and forget that the most expensive surprises often lurk in the legal details. Legal due diligence is the process of examining a company’s legal risks and obligations to ensure there are no hidden liabilities or compliance gaps. For Amazon sellers, legal due diligence is especially critical because intellectual property disputes, contract breaches or regulatory violations can result in account suspensions or loss of brand value. Here’s a guide to the key areas you should investigate and why they matter.

Why legal due diligence matters for Amazon transactions

Legal due diligence aims to identify legal liabilities that could derail an acquisition or reduce the value of a business. Unlike financial or operational issues, legal problems can trigger immediate enforcement from Amazon – such as trademark infringement, product safety violations or breach of the Business Solutions Agreement (BSA). Buyers need assurance that the brand they’re acquiring has clean title to its trademarks, complies with consumer protection laws and has no looming litigation. Sellers, meanwhile, should address any legal weaknesses in advance to avoid price reductions or cancellations.

Components of legal due diligence

Corporate structure and governance. Review incorporation documents, board resolutions, shareholder agreements and corporate records to confirm that the entity has been properly formed and operated. Ensure that owners have authority to sell and that no disputes exist among shareholders.
Contracts and licenses. Examine supplier contracts, fulfillment agreements, software licenses and distribution agreements to ensure they are valid, transferable and free of onerous clauses. Identify any non‑compete or exclusivity provisions that could restrict future growth.
Compliance with laws and regulations. Assess compliance with product safety standards, labeling laws, tax obligations, data protection rules and Amazon marketplace policies. For example, confirm that products meet applicable safety certifications and that taxes (sales tax, VAT, GST) have been collected and remitted correctly.
Intellectual property (IP) rights. Verify the validity and ownership of trademarks, patents, copyrights and trade secrets. Check that trademarks are properly registered in the jurisdictions where products are sold and that there are no outstanding infringement claims. If the business uses proprietary software or creative assets, ensure the seller owns the rights or has transferable licences.
Litigation and disputes. Investigate any pending or past legal claims, including intellectual property disputes, consumer lawsuits or regulatory enforcement actions. Unresolved cases can result in significant liabilities or injunctive relief that restricts business operations.
Employment and labor compliance. Evaluate employment contracts, independent contractor agreements and workplace policies to ensure compliance with labor laws. Misclassification of workers or unpaid wage claims can become liabilities for the buyer.
Real estate and leased facilities. For sellers who operate physical warehouses or offices, review deeds, leases and zoning regulations. Confirm that facilities are properly permitted and transferable.
Tax issues. Assess federal, state and international tax filings and identify any unpaid liabilities or pending audits. Amazon sellers operating across borders must comply with local VAT or GST rules, and failure to do so can lead to penalties and holds on the account.

Special considerations for Amazon sellers

Brand registry and trademark assignment. Sellers enrolled in Amazon Brand Registry should verify that the trademark registration is current and will be properly assigned during a sale. Failure to update brand registry with the new owner can result in lost brand protection and hijacked listings.
Product liability and safety. If the business sells private‑label products, ensure that the products meet all safety standards and that product liability insurance is in place. A product recall or lawsuit can quickly wipe out profits.
Platform agreements. Review the Amazon Business Solutions Agreement and any other marketplace agreements to ensure the seller has not violated terms such as Section 18’s transfer restrictions. Unauthorized account transfers or policy breaches can result in suspension.

How to conduct legal due diligence effectively

Engage experienced professionals. M&A attorneys and IP specialists can spot issues that laypeople miss. Their expertise is invaluable for reviewing contracts, IP registrations and compliance documents.
Use a comprehensive checklist. Develop a checklist covering corporate governance, contracts, compliance, IP, litigation and employment. The DBL due diligence framework provides a useful starting point.
Request complete documentation. Ask the seller for copies of all relevant documents, including trademark registration certificates, supplier agreements, insurance policies and tax filings. Incomplete or missing documents are red flags.
Verify ownership and transferability. Cross‑check the seller’s ownership of all assets, ensuring that trademarks, domain names and licenses can be transferred to you. Confirm that key contracts either allow assignment or contain change‑of‑control provisions.
Plan for post‑closing obligations. Some legal obligations, like paying outstanding taxes or maintaining product liability insurance, continue after the sale. Budget for these expenses and negotiate escrow or indemnification provisions to protect against unknown liabilities.

Final thoughts

Legal due diligence may not be as tangible as inventory counts or profit margins, but it can make or break a transaction. By examining corporate governance, contracts, compliance, IP rights, litigation, employment and tax matters, you can prevent unpleasant surprises and ensure a smooth transfer of your Amazon business. Sellers should address legal issues before going to market, while buyers should use a comprehensive checklist and professional guidance to safeguard their investment.