by Rachel Fields
You're retiring and selling your business to a new owner. A good deal of the value of your business is your reputation, your know-how and your contacts. Because you will still have all of those even after the sale of your business, the new owner will not want you as competition. He or she doesn't want you to go into the same type of business at a different location. Chances are you'll be asked to sign a non-compete agreement to prevent you from doing just that. And since you plan to retire you may think, why not? But, what if you turn out to be one of those people who just can't stand retirement? You may find yourself wanting to go back to the business you know best.
For that reason, you should carefully consider any non-compete agreement you sign when selling your business. A non-compete agreement usually prevents you from working in a certain field, in a certain geographic area, for a certain period of time. You should try to limit these as much as possible. For instance try to limit it to your not owning the same type of business, while still letting you work in the same type of business. Also try to draw the geographic limitation as narrowly as possible. You may want to relocate in a different part of town where you will not necessarily draw the same customers as your old business. This will depend on what type of business you are in. If you owned a coffee shop, chances are your old customers aren't going to drive 30 miles out of their way for their morning cup. On the other hand, if your bakery has a reputation as the place for a bride-to-be to order her wedding cake, 30 miles is not going to be far enough away. Try to limit the time frame as well. Consider how long will be a reasonable time for the new owner to get established. Try to limit the time frame on your non-compete agreement to a year or two at most.
Most courts won't uphold or enforce non-compete agreements when the restrictions are too broad anyway. This is because they don't want a person's ability to earn a living to be unreasonably restricted. Even so, it is better to have an agreement you can live with and avoid the risk of going to court.
- Are You Sure You Want To Retire? You Might Want to Limit Your Noncompete Agreement You may find yourself wanting to go back to the business you know best.
- Choosing the Best Structure for Your Business There are four basic types of business entities, each with its own advantages and disadvantages.
- Due Diligence: What Should You Expect and What Should You Do Due diligence is the process by which a potential buyer checks out everything about your business to find out as much as possible about what he or she is getting into before the deal is closed.
- Laws That Might Affect the Sale of Your Business If you're contemplating selling your business, you should try to become familiar with the various laws that could come into play.
- Stock and Stockholders Stockholders are the ultimate owners of a corporation.
- Tell your Buyer About Your Business's Problems Believe it or not, it can actually help you sell your business.
- What is a Sole Proprietorship? Thinking about starting a business by yourself? Read on!
- What Should Be In A Letter Of Intent? When you've located a serious buyer for your business, the first step to continuing negotiations is the letter of intent.
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