If you are buying a business, you need to make sure the seller agrees to a no compete agreement.
I remember a story from a Warren Buffet book in which he writes about purchasing a furniture store. He failed to get a noncompetition agreement from the seller, so she ended up setting up a competing business across the street. While that had little impact to Buffet’s finances, it could ruin a smaller investor.
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TEMPLATE
NONCOMPETITION AGREEMENT
| DATE: | (Date) |
| PARTIES: | (Name of seller (member/shareholder – “employee” i.e. John Doe)) |
| (Name of purchaser – i.e. ABC, LLC) |
WHEREAS:
- Pursuant to an Agreement of Sale dated XXXX, (the “Sale Agreement”) the Purchaser has purchased the assets of the business of NAME OF BUSINESS, a corporation/limited liability company, etc. organized under the laws of the State of STATE(the “Seller”).
- The Former Employee is the majority shareholder or member of the Seller and has been employed by the Seller as its president, CEO, manager, etc.
- In consideration of the Purchaser’s purchase of the Seller’s assets, NAME OF SELLING PARTY (the “Employee”) has agreed to restrict his/her right to compete with the Purchaser in order that the Purchaser will receive full value of the purchase.
AGREEMENTS:
1. AGREEMENT NOT TO COMPETE
The Employee contracts and agrees that for a period of five years from the date of this agreement, the Employee will not, directly or indirectly, as a proprietor, partner, shareholder, lender, employee, independent contractor, consultant, or in any other capacity engage, compete, or interfere in the TYPE OF BUSINESS business within the State of STATE/City of/Within 100 miles of, etc., including the hiring of former employees of the business, contacting clients, discussing trade secrets or anything else in the scope of the TYPE OF BUSINESS.
2. PURPOSE
This agreement is for the benefit of the Purchaser and future successors or purchasers. The Former Employee acknowledges that amount of the detriment imposed on the Employee by the limitations contained in this agreement are not disproportionate to the benefit received by the Purchaser.
3. CONSIDERATION
As consideration for the Employee’s agreement not to compete, the Purchaser purchased the assets of NAME OF BUSINESS, including the Employees agreement not to compete pursuant to the Sales Agreement dated XXXXX.
or
As consideration for the Employee’s agreement not to compete, the Purchaser will pay to the Employee the amount of $XX.XX one year after the date of this agreement and a like amount in subsequent years after the date of this agreement, until the term of this agreement expires.
Above was a 1 page sample of the template. The entire template is 3 pages.
Through PayPal, you can order a Word document file of the template for $2.99. That way I never see your credit card information, just make sure your PayPal email address is correct. Checkout will be at the bottom of this page.
While there are numerous non-compete agreements online for free, what is your time worth? It took me over 2 hours to build this simple document from online research and past experiences., I would prefer to purchase one and save the time.
I am a licensed CPA, but not an attorney. I cannot customize to your specific needs, you need to research your specific State laws and possibly consult with an attorney. I am not liable for any losses you may suffer, so do your due diligence!
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