A seller non-compete protects the goodwill you just bought. It's a promise from the seller not to start or work for a competing business, and not to solicit the customers or employees of the business you purchased, for a set time in a defined area. Non-competes tied to the sale of a business are enforced far more readily than employment non-competes, but only when the scope, duration, and geography are reasonable, and enforceability still varies by state.
When you use a non-compete
A seller non-compete is standard in almost every acquisition and is usually built into the purchase agreement or signed as a companion document at closing. Without it, nothing stops the seller from cashing your check on Friday and opening a competing shop on Monday with the relationships you paid for. The non-compete works hand-in-hand with your transition plan and the purchase agreement your attorney drafts, see our purchase agreement basics guide.
Enforceability varies by state, flag this early
A handful of states sharply limit non-competes (California is the notable example, though sale-of-business non-competes get different treatment than employment ones). Duration and geographic reach that a court considers "reasonable" also differ by state. Never copy a non-compete blindly, have a local attorney confirm it's enforceable where the business operates.
The seller non-compete template
NON-COMPETITION AND NON-SOLICITATION AGREEMENT
This Non-Competition and Non-Solicitation Agreement ("Agreement") is entered into as of [Date] by and between [Seller Name] ("Seller") and [Buyer Name / Buyer Entity] ("Buyer"), in connection with Buyer's purchase of [Business Name] (the "Business") pursuant to that certain Asset Purchase Agreement dated [Date] (the "Purchase Agreement").
1. Background & Consideration
As part of the purchase of the Business, Buyer is acquiring the goodwill, customer relationships, and competitive position of the Business. Seller acknowledges that Buyer would not complete the purchase without this Agreement, and that a portion of the Purchase Price, specifically $[Amount] allocated to this non-compete, constitutes valuable and sufficient consideration for Seller's covenants below.
2. Non-Competition
For a period of [2 to 5] years from the closing date (the "Restricted Period"), Seller will not, directly or indirectly, own, manage, operate, control, be employed by, consult for, or otherwise engage in any business that competes with the Business within [defined geography, e.g., a [50]-mile radius of the Business's location / the counties of [___] / the state of [___]] (the "Restricted Territory").
"Competes with the Business" means providing [describe the core products or services of the business, e.g., "residential HVAC installation and service"].
3. Non-Solicitation of Customers
During the Restricted Period, Seller will not, directly or indirectly, solicit, divert, or attempt to solicit any customer or client of the Business, including any customer Seller served while owning the Business, for the purpose of providing competing products or services.
4. Non-Solicitation of Employees
During the Restricted Period, Seller will not, directly or indirectly, solicit, recruit, hire, or attempt to hire any employee or contractor of the Business, or encourage any such person to leave the Business.
5. Non-Disparagement & Confidentiality
Seller will not disparage the Business or Buyer, and will keep confidential all non-public information about the Business, including customer lists, pricing, methods, and trade secrets, and will not use such information to compete.
6. Reasonableness
Seller acknowledges that the duration, geographic scope, and activity restrictions in this Agreement are reasonable and necessary to protect the goodwill and legitimate business interests Buyer is acquiring, and are supported by adequate consideration.
7. Blue-Pencil / Severability
If any court finds any restriction in this Agreement unenforceable as written, the parties intend that the court modify (or "blue-pencil") the restriction to the maximum extent enforceable rather than void it, and that the remaining provisions stay in full force.
8. Remedies
Seller agrees that a breach would cause irreparable harm for which money damages alone are inadequate, and that Buyer is entitled to seek injunctive relief in addition to any other remedies, and to recover reasonable attorneys' fees incurred in enforcing this Agreement.
9. Governing Law
This Agreement is governed by the laws of the State of [State], where the Business operates.
Agreed:
_______________________________
[Seller Name] · Date: __________
_______________________________
[Buyer Name], [Title], [Buyer Entity] · Date: __________
| Term | Common range | Notes |
|---|---|---|
| Duration | 2 to 5 years | Long enough to protect goodwill; overly long terms risk being cut down |
| Geography | The Business's real service area | A radius, set of counties, or state, must match where it actually competes |
| Scope of activity | The specific business bought | Restrict the actual line of business, not "any business anywhere" |
| Consideration | Allocated $ in the price | Assigning value to the non-compete strengthens enforceability (and has tax effects) |
How to use this template
- Tailor the scope to reality. Restrict the actual line of business in the area it actually serves. Courts strike down non-competes that reach further than needed to protect what you bought.
- Pick a defensible duration. Two to five years is the norm for a business sale. Don't overreach for ten, you may lose the whole clause.
- Allocate consideration to it. Assigning a dollar amount in the purchase price allocation supports enforceability and has tax consequences for both sides, get CPA input.
- Include the non-solicits. The non-compete stops the seller from competing; the non-solicits stop them from taking your customers and staff. You want both.
- Confirm state enforceability. This is the one document where "it worked for my friend in another state" can be worthless. Have a local attorney review it.
This template is educational and not legal advice. Non-compete enforceability, reasonable duration, and geographic scope vary significantly by state, and some jurisdictions restrict these agreements heavily. Have a qualified attorney licensed in the relevant state draft and review any non-compete before you rely on it.
Frequently asked questions
Usually, yes. Non-competes tied to the sale of a business are treated far more favorably by courts than employment non-competes and are enforceable in most states when the scope, duration, and geography are reasonable. Rules still vary by state, so the terms must be tailored and reviewed by a local attorney.
Two to five years is common and generally viewed as reasonable for a business sale. It should be long enough to protect the goodwill you paid for but no longer than necessary, overly broad terms are more likely to be struck down.
A non-compete stops the seller from running a competing business. A non-solicit stops them from poaching the customers or employees of the business you bought. Acquisitions usually include both, since those relationships are a big part of what you purchased.
It needs consideration, which in a sale is typically part of the purchase price. Allocating a specific dollar amount to the non-compete strengthens enforceability and affects the tax treatment for both buyer and seller, coordinate the allocation with your CPA and attorney.
Related guides & templates
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Last updated: July 2026 · Reviewed by the Acquisition Ace team