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Home > Business Law > Non-compete Agreements in the Sale of a Business

Illinois Non-compete Agreement Lawyer in a Business Sales Setting

Buyers of existing businesses aren’t merely purchasing the name and physical assets owned by that business. They’re also purchasing the intangible assets of the business, like its name recognition, intellectual property, and customer base. As such, buyers have a right to know that the value of the assets they purchased won’t become diminished or valueless by the prior owner starting a new business in the same market space. With that said, sellers of Illinois businesses also have the right to earn a living after selling their business. When restrictions on future endeavors go too far, sellers may have a right to challenge these restrictions in court. It is important to distinguish the scope of a non-compete on the sale of a business from non-competes imposed on employees of a business. Non-competes in the sale of a business are permitted to have a much broader scope. The business owner sold the intangible assets of the business, so it is only fair that the former owner isn’t permitted to take the assets back by opening a new competing business and talking to the same customers whose accounts were just sold. If you need any further assistance in a non-compete agreement, don’t hesitate to contact a lawyer from our Illinois firm.

Advocating for the rights of sellers and purchasers in connection with the sale of a Chicago-area business

The Chicago area business lawyers at Pluymert, MacDonald, Hargrove & Lee are seasoned and knowledgeable practitioners in drafting reliable and enforceable non-compete agreements governing business sales. Our Des Plaines and Hoffman Estates attorneys have years of experience representing both buyers and seller. We are expert in balancing the interests of buyers and sellers to create a non-compete agreement that will hold up to challenges and reflect the realities of the transaction. Contact the offices of Pluymert, MacDonald, Hargrove & Lee today to discuss your non-compete agreement in the sale or purchase of a business.

What makes a non-compete agreement valid in Illinois?

Non-compete agreements are often a critical component of a contract for the sale of a business. These agreements state that, in exchange for a benefit or for payment—whether it’s a portion of the sale price or a separate amount—the seller agrees not to go into a similar business within a designated geographic area for a certain time period post-sale. These agreements often include restrictions on the seller’s ability to use or share certain intellectual property items sold by the business, such as trade secrets, or to solicit customers of the business being sold.

Non-compete agreements in the context of the sale of a business are typically permitted to be more broad than those covering individual employment. However, Illinois courts will not enforce non-compete agreements that place unreasonable limits on the seller after the sale. The factors include:

  • The scope of the restriction: The seller can be restricted from working in the same field as that occupied by the business being sold to the extent the seller would be taking back assets that were sold, but can’t be restricted from working in completely unrelated fields
  • The geographic area covered by the restriction: A restriction that restricts the seller from operating anywhere in the country would only be upheld in cases where the business that was sold had a nationwide reach. Generally speaking, the restrictions have to match the scope of the business sold.
  • The length of time that the restrictions are in force: Illinois courts have previously held that restrictions on business sellers may last for five years.

In the event that restrictions imposed by a non-compete agreement are not sufficiently supported by payment or some other benefit, or are clearly excessive, courts may determine that the agreement is unenforceable. Illinois courts don’t formally “blue-pencil” an overbroad agreement—striking out the unenforceable portion. Illinois law requires that the provisions be upheld as written or nullified. However, the court decisions reflect that judges typically use a more reflective process, finding ways to resolve ambiguity or using a sliding scale to evaluate enforceability, based on the facts of the case.

You can reduce the chances of future litigation on your non-compete agreement by obtaining experienced and detail-oriented legal help in drafting an Illinois business sale non-compete agreement, such as that available from the Hoffman Estates and Des Plaines business lawyers at Pluymert, MacDonald, Hargrove & Lee.

Call our Business Lawyers for Help with Non-Compete Agreements in Greater Chicago

If you need trustworthy, professional, and knowledgeable legal guidance on Illinois non-compete agreements, contact the Chicagoland offices of Pluymert, MacDonald, Hargrove & Lee in Hoffman Estates at 847-310-0025 or in Des Plaines at 847-298-5030.

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