Noncompetition Agreement - Business purchase and sale
About this form
The Noncompetition Agreement - Business Purchase and Sale is a legal document designed to protect the interests of both buyers and sellers in a business transaction. This agreement restricts either party from engaging in activities that would directly compete with each other after the sale is finalized. It ensures that the purchaser receives the full benefit of the acquired business and its goodwill, while also safeguarding the seller's retained business interests. This agreement distinguishes itself from other forms of noncompetition contracts by being specific to business asset transactions, making it crucial for both parties to maintain their respective business values.
What’s included in this form
- Definitions of key terms such as "Confidential Information," "Retained Business," and "Territory."
- Non-competition clauses outlining restrictions for both the seller and purchaser post-transaction.
- Non-disclosure obligations to protect confidential information exchanged between the parties.
- Injunctive relief provisions allowing for legal action in case of breach of agreement.
- Terms regarding the governing law and jurisdiction applicable to the agreement.
Situations where this form applies
This form should be used when a business purchaser and seller agree to a transaction involving the purchase of assets, and there is a need to prevent either party from competing against the other following the sale. It's essential when the business's goodwill is at stake, and both parties wish to protect their interests for a specified duration after the closing date.
Who this form is for
- Business owners who are selling their business assets and want to ensure the buyer does not compete with them afterwards.
- Buyers purchasing a business who need assurance that the seller will not engage in similar business activities that may affect their investment.
- Legal professionals assisting clients in business sales and purchases, ensuring compliance with competition laws.
How to complete this form
- Identify the parties involved by entering the names and addresses of the purchaser and seller.
- Fill in the date the agreement is being made, as well as the transaction closing date.
- Define the confidential information and retained business accurately to protect both parties' interests.
- Specify the restrictions on competition, including duration and territory, as agreed upon by both parties.
- Include provisions for any necessary legal remedies, including the jurisdiction under which the agreement will be governed.
Notarization requirements for this form
This form does not typically require notarization unless specified by local law. It is advised to check state-specific requirements to ensure compliance with regulations.
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Make edits, fill in missing information, and update formatting in US Legal Forms—just like you would in MS Word.
Download a copy, print it, send it by email, or mail it via USPS—whatever works best for your next step.
Sign and collect signatures with our SignNow integration. Send to multiple recipients, set reminders, and more. Go Premium to unlock E-Sign.
If this form requires notarization, complete it online through a secure video call—no need to meet a notary in person or wait for an appointment.
We protect your documents and personal data by following strict security and privacy standards.
Common mistakes to avoid
- Failing to clearly define the terms of non-competition, leading to ambiguity.
- Not including specific details about the territory in which the non-competition applies.
- Overlooking the need for both parties to sign and date the agreement before it is valid.
- Neglecting to consult legal counsel if any of the terms may be too broad or restrictive according to state laws.
Benefits of completing this form online
- Convenience of downloading and completing the form at your pace.
- Access to professionally drafted templates that are compliant with state laws.
- Editability, allowing customization to fit specific needs and preferences.
- Secure storage of your documents with the ability to save and retrieve them easily.
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FAQ
Typically, the only way to fight a non-compete agreement is to go to court. If you are an employee (or former employee) who signed such an agreement, this means you must violate the agreement and wait to be sued. It may be that your former employer has never sued another employee to enforce the non-compete agreement.
The noncompete agreement typically prohibits the seller from working in or being otherwise affiliated with businesses in the same or similar industries as the business being sold. If the agreement prohibits the seller from working in other, unrelated industries, it is likely to be considered unenforceable.
Thus, the non-compete agreements you negotiate with your employees and/or independent contractors will survive a sale or merger and the company acquiring your business will be able to enforce the terms and conditions of those agreements.
A noncompete agreement involving the sale of a business typically provides that, in exchange for a specified payment (which may be part of the sales price), the seller will promise not to go into a similar type of business within a certain geographic area for a specified period of time.
In certain circumstances, it is possible to find non-compete contract loopholes that may void the contract. For example, if you can prove that you never signed the contract, or if you can prove the contract is against the public interest, you may be able to void the agreement.
In general, in a business acquisition, a seller will be taxed at ordinary income tax rates to the extent of the purchase price allocated to a non-compete agreement or provision. Because ordinary income tax rates are almost double long-term capital gain tax rates, sellers often want to minimize this treatment.
Non-Compete Unaffected if Company Maintains Existence If the acquisition is a stock purchase and the acquired company (we'll call it Company B) maintains a separate existence, the non-compete is unaffected.
