Non-Compete & Restrictive Covenants in a Business Sale
When you buy a business you are buying its goodwill — a seller non-compete is what protects that goodwill from walking out the door.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
A buyer of a business almost always requires the seller (and often key people) to agree not to compete, not to solicit employees and customers, and to keep confidential information secret for a period after closing.
These covenants protect the goodwill the buyer paid for, but their scope and enforceability are negotiated and vary by state.
Topics to check
A buyer wants a non-compete broad enough to protect the goodwill it bought — covering the actual business and markets, for a meaningful period (often several years in a sale-of-business context), within a sensible geography. A seller wants it no broader than necessary so it can work again.
A non-compete that is too short or too narrow (for example, one year within a few miles) may leave the buyer’s goodwill unprotected.
Covenant not to compete (Cornell LII Wex)Non-solicitation covenants stop the seller from poaching employees and customers; confidentiality covenants protect trade secrets and customer data. These are often more durable than non-competes and are important even where a non-compete is hard to enforce.
Confirm the covenants cover the right people (the seller entity and the individuals who actually hold the relationships).
Courts scrutinize non-competes for reasonableness, and the rules vary significantly by state — covenants given as part of the sale of a business are generally enforced more readily than employment non-competes, but limits still apply, and some jurisdictions restrict them heavily.
Because enforceability is state-specific and evolving, confirm the covenant’s reasonableness and the governing law with counsel.
Key takeaways
- A seller non-compete protects the goodwill the buyer paid for.
- Sale-of-business non-competes are generally enforced more readily than employment ones.
- Scope, duration, and geography must fit the business actually bought.
- Non-solicitation and confidentiality covenants matter even if a non-compete is weak.
- Enforceability varies sharply by state — confirm with counsel.
Official resources
Legal-review notes
Guide confidence marker: Needs lawyer verification.
- Non-compete enforceability is highly state-specific and changing; confirm with counsel for the governing state.
- Scope, duration, and geography must be tailored to the business and the goodwill protected.
Frequently asked questions
How long can a seller non-compete last?
In a sale of a business, multi-year non-competes are common and are generally treated more favorably than employment non-competes, but the duration must still be reasonable in light of the goodwill protected. The enforceable length varies by state.
Are non-competes enforceable everywhere?
No. Enforceability varies significantly by state, and some jurisdictions restrict non-competes heavily. Covenants tied to the sale of a business are usually treated more leniently than employment non-competes, but limits and governing law matter.
What is the difference between non-compete and non-solicit?
A non-compete restricts the seller from competing in the business; a non-solicit restricts the seller from poaching the business’s employees or customers. Non-solicits are often more durable and are valuable even where a non-compete is hard to enforce.