Khaled Azar 
You can sell your business and still keep the new product you built inside it. To do that, start a new company and have it buy the product from your current one. Do this before any outside buyer sees your numbers. Once they’ve seen what you built, they’ll assume it comes with the deal.
Under US copyright law, an employer owns the code its employees write for the job. If your business pays you a salary, you’re one of those employees. So until your new company buys the product, it belongs to the business you’re selling.
Moving it late costs more than moving it early. SRS Acquiom handles payments for sellers after company sales. In its 2026 study of 1,174 sales, nearly 3 in 10 ended with the buyer claiming money from the seller after the sale. Those claims rest on promises in the sale contract, and one standard promise is that the company owns what it sells.
By the end of this post you will know the 3 ties that hold a product to the company that built it, and the order to cut them before you go to market.
How to carve out a product before selling your business
A buyer prices what it sees. Move the product before it sees it.
A carve out is simply moving a product, and everything it needs to run, into a separate company. Big companies do it when they sell a division. A founder does it for the opposite reason: to keep the newest thing and sell the rest.
Timing decides most of the outcome. A buyer makes an offer based on the numbers you show it. If the new product’s users, revenue or costs sit inside those numbers, the offer includes them. Pull the product out after that, and you are asking the buyer to pay the same price for less. Expect a lower offer, or a long list of questions about what else is leaving.
There is a legal way to leave something out of a sale. The contract can list it as an excluded asset, which is simply something the buyer agrees not to buy. That works for a car or a building. It works badly for software the team you are selling still touches every day. The buyer will ask who maintains it after the sale, and whether it competes with the company they just paid for.
That second question matters more than founders expect. You will sign a promise not to compete with the company you sell. Read our guide to non-compete agreements when selling your SaaS before you decide what the new product does. A broad one can cover the exact market your new product sells into.
Why the best time to move it is when it is worth the least
Moving the product out is a sale in the eyes of the IRS. When your new company buys the product, your old company owes tax on the profit from that sale. If a corporation hands the product to you instead, section 311(b) of the tax code treats that as a sale at full market value too. Either way, the profit is measured at what the product is worth on the day it moves.
Who pays depends on your company type. A C corporation pays the tax itself. In an S corporation, the profit flows through to your own tax return. An LLC follows different rules, so ask your tax advisor before you pick a route.
Here is what that does to your money. This is an illustration, not tax advice. Say an outside appraiser values the new product at $100,000 today. Assume the company’s tax cost in the product is close to zero, which is common for software your own team wrote. At the 21% federal corporate tax rate, a C corporation owes about $21,000 on the move.
Now wait a year. The product takes off, and the same appraiser values it at $1,000,000. The same move now costs the company about $210,000 in federal tax. Nothing changed except the date.
The low value has to be honest. If an appraisal months before the sale says $100,000 and the buyer then pays as if it were worth much more, the IRS and the buyer can both question it. Use an outside appraiser and keep the report.
Federal tax a C corporation pays on moving the same product out, at a $100,000 value today or a $1,000,000 value next year. Illustration at the 21% rate, assuming a tax cost near zero.
You may also owe tax yourself on what you receive, and state tax comes on top. A tax advisor sets the real numbers. Our guide to tax planning before you sell covers how your company type changes the bill.
The 3 ties that hold a product to your company
A new product is tied to the old company in 3 ways. A buyer checks all 3.
I call these the 3 ties. A product is separated only when all 3 are cut, on paper, before the sale starts.
| Tie | What ties it to the old company | How you cut it |
|---|---|---|
| 1. The code | Employees and contractors of the old company wrote it | A signed transfer of the product to the new company, at an appraised price. The people who keep building it move to the new company’s payroll. |
| 2. The accounts | Hosting, code storage, domain, app store listing, payment processor and AI model keys sit in the old company’s name | New accounts in the new company’s name, then move the data and close the old access |
| 3. The customers and data | Users signed up under the old company’s terms, and the product may use the old company’s customer data | New terms from the new company that users accept, and no copying of the old company’s customer data without permission |
The code. Your employees wrote it for the company, so the company owns it under the work made for hire rule in US copyright law. Contractors are different. Their code belongs to them unless they signed an agreement giving it to the company. Fix that first, because the company cannot transfer what it does not own. Our guide to IP assignment cleanup for employees and contractors walks through the paperwork. Then sign the transfer itself. A dated, signed agreement with a price turns an open question into a record.
If anyone else owns part of your company, they have to agree to the transfer. A co-founder, an investor or a partner can say the product was the company’s chance, not yours to take. Get their written approval before you sign, and check your own invention agreement with the company too.
The accounts. This tie is boring, and it takes the longest. A product built inside a company runs on that company’s hosting bill, card and logins. Some of those services may not allow sharing. Mayer Brown, a law firm, notes that software is often licensed for internal use only, and using it to serve another company can need the vendor’s consent. Read your vendor terms before you plan the move.
The customers and data. This is the tie a buyer’s lawyer asks about. If the new product’s first users came from your old customer list, the buyer will ask whether you are taking its customers. If the product processed the old company’s customer data, that data may not be yours to move. Put the new product’s users on their own sign up, under their own terms, as early as you can.
The order to carve out the product before selling the business
Here is the order I use. The month counts are my working plan, not an industry standard. A product with few ties can move faster.
| When | What you do |
|---|---|
| 9 to 6 months before you go to market | Hire a tax advisor. Get an outside value for the product. Form the new company. Decide who moves with the product. |
| 6 to 3 months before | Sign the transfer at the appraised price. Move the people. Open new accounts and move the data. Put new users on new terms. |
| 3 months before, up to launch | Close the old access. Prepare your company’s numbers without the new product, plus one page that explains the split. |
| During the sale | Nothing left to move. Answer buyer questions with the signed papers. |
That plan fits inside a normal SaaS exit timeline, as long as you start it first.
If you run out of time, there is a fallback. It is called a transition services agreement, which is simply a contract where one company keeps serving the other for a set time after the sale. In your case, the old company, now owned by the buyer, would keep hosting or supporting your new product. Mayer Brown notes that the side providing the services wants out fast, and that extensions can come at higher prices. You would be paying your buyer to keep your own product running.
What a buyer sees when the split is done
A buyer will notice the new product in your history. That is fine. What the buyer judges is how it left. A transfer signed months before the sale, at an appraised price, with the people and accounts already moved, reads as normal housekeeping. A product still moving while the buyer checks your company reads as the seller taking value out of what it is selling.
In 2026 I talked with 2 founders in this spot. One moved a new AI product into a separate company before taking the main services business to market. The other had built a newer platform inside the company being sold, and the question of who owned it came up in the middle of the sale. The first founder started the sale with that question already answered. The second had to answer it while buyers were checking the company.
Questions that come up after the sale are slower still. In the same SRS Acquiom study, claims that went all the way to court or arbitration took a median of 15 months to resolve. That is 15 months of your sale money in dispute while you try to build the new company.
6 rules for keeping the new product
- Move it before any buyer sees your numbers. A buyer who has seen the product has already priced it.
- Put a price on the transfer, set by an outside appraiser. A price you picked yourself invites the IRS and the buyer to pick another one.
- Get written approval from every other owner. A co-founder or investor who did not agree can claim the product later.
- Move the people with the code. A product nobody in the new company can maintain is not separated.
- Show buyers your company without the new product. Add one page that explains what moved, when, and at what price.
- Read the non-compete before you sign it. Make sure it does not cover the market your new product sells into.
Cut the 3 ties, the code, the accounts and the customers, before a buyer sees your company. Move the product while its value is low, at a price an outside appraiser sets, and keep the signed papers ready for the buyer’s questions.
Frequently Asked Questions
Can I sell my business and keep one product?
Yes. Move the product into a separate company before you go to market, with a signed transfer at an appraised price, and leave it out of the numbers you show buyers. A buyer can also agree to leave a product out of the sale, but that is harder once it has seen the product in your numbers.
How is intellectual property separated when you carve out a product?
The company that owns the code signs it over, or licenses it, to the new company in writing. Under US copyright law, a company owns the code its employees write for their jobs, so the transfer has to come from the company. Code from contractors needs a signed assignment to the company first.
What is a transition services agreement?
It is a contract where one company keeps providing services, such as hosting or support, to the other for a set time after a sale. It covers separation work that is not finished when the sale closes. Extensions can cost more, so finish the move before the sale when you can.
Is moving a product out of my company taxable?
Often, yes. A sale to your new company creates a taxable profit, and section 311(b) of the tax code treats a corporation handing the product to you as a sale at full market value. A C corporation pays tax on that profit at the 21% federal rate, and in an S corporation the profit flows through to you. Moving the product while its value is low keeps that tax low.
Next Steps
Building something new inside the company you plan to sell? A value assessment shows what buyers would pay for the core business on its own, so you know what you sell and what you keep.