How Does A Non-Compete Agreement Protect Me When I Buy A Business?

If, for example, an insurance agency is buying another insurance agency, and they have their book of clients and their customer list, it is important to have a non-compete in place, because if you do not, the owner or the employees of the selling company can go out and start a competing business by contacting those former customers. It is important not only to have what we call a non-solicitation agreement in those situations, but also a non-compete that prohibits the owner and other key employees from operating the same kind of business within a certain area.

How Does A Non-Compete Agreement Protect Me When I Sell My Business?

The seller is actually not protected by the non-compete, but instead is restricted from operating the same kind of business within that same area. Another aspect, when we talk about non-competes in the buying or the selling of a business that is important is that unlike non-competes in the employment context where, for the most part, courts are going to say, “One year or two year and maybe a 3-year obligation is reasonable”. When it comes to the selling of a business, there are many cases in Texas that hold there does not have to be any time limitations. It can be a limitation forever, which restricts the former seller from starting a competing business within a certain geography. So, that is a distinction between those two different kinds of non-competes.

How Does The Non-Compete Agreement Differ From A Non-Solicitation Agreement If At All?

A Non-Compete Agreement prohibits the seller and any key employees from working in a certain industry within a certain location, whereas a non-solicitation prohibits the seller and any key employee from contacting either customers and/or other former employees.

Do I Need An Attorney To Draft And Review A Non-Compete Agreement?

It is always practical and helpful to have someone who deals with these issues on a regular basis to draft these agreements. It is not only important in the drafting of the document, but it is also important so business owners understand fully how they have a better chance to actually enforce these agreements, should there be any issue in the future.

Additional Information On Non-Compete Agreements In Texas

There are several important factors. Ones is confidential information. Employers often do not identify what is confidential during the employment relationship. Employers really need to think through the process of what is it that they are giving their employees to make this agreement enforceable. Another important factor is the fact that employers sometime think a non-compete agreement is required when really a non-solicitation agreement would satisfy their goals. Most courts find that it is easier to enforce a non-solicitation agreement versus a non-compete agreement. If you have a judge who is more inclined to enforce a non-solicitation agreement, it might mean that a former sales employee still goes to work for your competitor, but they will not be able to reach out and contact their former customers. This may be would a company needs and it is less restrictive than a non-compete agreement.

For more information on Protection Offered By Non-Compete Agreement, an initial consultation is your best step. Get the information and legal answers you are seeking by calling (281) 277-3066 today.