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Updated August 05, 2022

A business sale non-compete agreement is between a buyer and a seller that agrees, in exchange for the sales price as consideration, agrees not to engage in the same business for a defined duration and geographical area. Its main purpose is to preserve the goodwill of the business being transferred to the buyer and safeguard its protectable interests.

Is it Legal?

A non-compete related to the sale of a business is legal in every U.S. state and territory .

Table of Contents

By Type (2)

Simple Version (2 pages)

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Comprehensive Version (4 pages)

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Requirements (4)

  1. Consideration . Must include that the sales price will be used as consideration in the agreement.
  2. Geographic area . It can be written for specific jurisdictions (cities, counties, etc.) or within a specific radius (e.g. 50-miles). Most states require that the business being purchased must have a presence or be operating in the non-compete areas.
  3. Time period . Most states have a requirement of no more than 2 to 5 years .
  4. Scope of work . The limitation must be specific and cannot be a broad ban on an industry. For example, the non-compete cannot broadly restrict the seller from ‘practicing medicine’ if purchasing a medical office. Rather, it must be for a specific practice such as ‘pain management’ or ‘physical therapy’.

Non-Compete Clause

If a clause is to be mentioned, such as in a business purchase agreement , the following should be written:

Non-Compete . The sales price, for the business mentioned in this agreement, shall act as consideration towards a non-compete covenant that the Seller shall be legally bound. It is understood by all parties that the Seller is knowledgeable of proprietary information, including trade secrets, which could be harmful to the success and continuation of the business after the sale. Therefore, in order to protect the fiduciary interests of the Buyer, the Seller agrees not to compete under the following terms:

  • Scope of work . For the specific business or practice of: [SERVICES] .
  • Term . For a period of [TERM] after the sale of the business.
  • Geographical areas . Strictly for the areas of: [JURISDICTION] .

How to Write

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I. The Parties

(1) Effective Date Of Non-Compete Sale. The date when this agreement’s conditions of sale obligate both the participating Signature Parties must be named in the First Article (“I. The Parties”) on the first available empty line.

(2) Buyer Identity. Both Parties behind this agreement will need to be attached to their roles. The Buyer or Purchaser of the Business, who shall also enjoy the non-compete conditions below, must be identified in the Buyer section. This requires the legal name of this Party, therefore should the Buyer be a formally organized Entity such as a corporation, then its entire legal name must be presented. Once this name has been produced on the first line of the “Buyer” section, continue to the second blank line where the mailing address of the Buyer must be recorded.

(3) Seller Identity. The Seller of the concerned Business must be attached to this role. This must be the Party who has the right to enter this agreement and sell the Business being discussed. Locate the first line of the “Seller” section then produce a report on the full name of the Business Seller. As with the Buyer, this will usually be a formally organized Entity and will require a presentation of its entire name including any abbreviations and status suffix that became a part of its legal name when it was registered in the state of its formation. This area will also require that a production of the Seller’s mailing address is made on the second blank line available.

II. Consideration

(4) Business Entity Name . Now that both Buyer and Seller have been named, the Business that will be sold through the successful completion of this agreement must be identified. Article II will handle this task. Furnish the “Business Entity Name” line with the full name of the Business that shall be purchased from the Seller by the Buyer.

(5) bbin电竞官网官方永久 of Incorporation. The name of the bbin电竞官网官方永久 where the Business that is being purchased was formed should be submitted to the “bbin电竞官网官方永久 Of Incorporation” line in Article II.

(6) Purchase Price. On the third line in Article II, record the total dollar amount that the Buyer must pay the Seller to obtain ownership of the Business. This will be known as the formal “Purchase Price” of the Business for the remainder of this agreement and will, thus, include the amount the Seller requires in exchange for complying with the non-compete conditions that will accompany this transaction.

III. Term

(7) Start Date Of Non-Compete Sale. The first calendar date of the term of this agreement should be defined in the Third Article. The start of this effect may be prompted in any number of ways however the first two options in the Third Article are the most common. If the Buyer and Seller wish this agreement to begin as of a specific predetermined calendar date, the first checkbox (labeled with the words “Date Of”) must be selected or marked. Additionally, the calendar date that will require the conditions of this sale to be followed must be documented in the space available.

(8) Immediately Upon Sale Of Business. If both Parties are intent on this agreement’s conditions being placed in effect as soon as both have signed it, then the second checkbox must be selected from Article II.

(9) Other. While one of the two previous options will satisfy the intent of many Business Sellers and Business Buyers, there may be additional circumstances or conditions that must be in place for some terms of effect to begin. If this is the case, then select the third checkbox statement (labeled as “Other”). Naturally, it should be considered mandatory that when this selection is made to define when the conditions of this transaction become effective, the exact requirements, prompting event, or date to define when this agreement’s effect takes hold must be documented on the empty line following “Other.”

(10) Date Of Agreement’s Termination. Once the conditions of this agreement begin to obligate the Business Seller and the Business Buyer behind it, a definitive manner of its termination or expiration must be determined then reported. If this agreement shall come to an end or terminate as of a calendar date determined by these Parties, then mark the first checkbox in the “End Period” section in Article III and report the intended termination calendar date that will release both Parties from the requirements of this document on the space after “Date Of.”

(11) Countdown To Termination . If it is preferred by the Business Seller and Buyer that the effects of this agreement may go into effect on the date (or manner) defined in the “Start Period” then continue for a predetermined number of months. Select the second checkbox statement and produce the number of months making up this agreement’s lifespan on the blank space provided.

(12) Other . If the conditions this transaction requires will terminate in a way that cannot be defined above, then “Other” must be selected from the “End Period” section and the way and/or calendar date defining how this transaction’s effect shall end must be reported to the space available.

IV. Geographical Areas

(13) Applicable Non-Compete Regions. Article IV requires that a defined geographical area where the non-compete conditions this document engages and applies to this transaction is defined. Largely this will depend upon the laws of the bbin电竞官网官方永久 where this agreement will govern, industry standards, and the desired intent of both the Buyer and Seller. Furnish the boundaries of this geographical area or areas to the space available in Article IV. The conditions of this document will apply to the physical area within the boundaries defined. This may apply to streets, neighborhoods, cities, counties, and even states depending upon the nature of the transaction and what is allowable by law.

V. Non-Compete

(14) Non-Compete Protections. Article V shall seek the exact restrictions that the Business Seller must observe according to the timeline or term this agreement imposes and in compliance with the restrictions listed here.

VI. Non-Solicitation

(15) Employees. The professional relationships that can be forged between the Business Seller and the Employees of the Buyer can result in some breaches of confidential information (whether intentional or unintentional) with costly results to the Business Buyer. If these Parties agree that this agreement should act as a safeguard against this scenario, then the first checkbox in ArticleVI must be marked or selected. This statement will strictly forbid the Business Seller from developing and maintaining relationships with Employees, Contractors, and other such Parties that are known to provide a valuable service or product to the Business Buyer.

(16) Customers. Article VI will also provide the option to restart the Business Seller from associating with the Business Buyer’s “Customers” (i.e. Clients, Patrons, certain types of Social Media Influencers, etc.) by selecting the second checkbox statement.

VII. Purchase Of Release

(17) Can Purchase A Release. In some cases, being bound by non-compete conditions that have been legally imposed can still have long-term damage on an Entity’s ability to survive on the market. To allow the Business Seller to buy a release from the non-compete requirements set above in exchange for a dollar amount that is submitted to the Business Buyer, select the first checkbox in Article VII. The dollar amount that the Business Buyer will require to effectively terminate the non-compete requirements of this paperwork must be documented in the space following the dollar ($) symbol.

(18) Cannot Purchase A Release. If the Business Buyer will not allow the non-compete conditions to terminate prematurely and requires this agreement to remain effective for the entirety of its predetermined lifespan, then select or submit a mark to the second checkbox statement in Article VII.

IX. Governing Law

(19) Jurisdiction. The bbin电竞官网官方永久 where the courts would be required to judge and enforce this agreement when needed must be identified with a submission of its formal name on the blank line found in the Ninth Article.

X. Additional Terms

(20) Required Conditions And Terms. The previous articles have detailed the basics required by a majority of Business Sales that must be accompanied by non-compete protections, however, there may be additional agreements made between these two Parties that both wish enforced by this agreement and have not been discussed. Should there be any additional conditions that must be imposed by or upon either or both of these Parties then, use the space in Article X to document each such additional requirement or obligation.

XI. Entire Agreement

(21) Buyer Signature. The signature and printed name of the Business Buyer must be submitted to the first signature area provided.

(22) Date. The exact calendar date when the Business Buyer provided his or her binding signature must be submitted immediately upon signing this document.

(23) Seller Signature. The Business Seller must enter this agreement with his or her signature and printed name. This act may be performed by a Signature Representative elected by the Business Seller if the Seller is a formal Entity (i.e. LLC, corporation, etc.)

(24) Date. The calendar date at the time of the Seller’s signature must be documented where requested