Posted by Jennifer M. Settles, Esq.  September 7,  2026

Non-Compete and Non-Solicit Clauses in a Business Sale: How Far Is Too Far?

When someone buys a business, they’re buying its customers, its goodwill, and its momentum—and the last thing they want is for the seller to walk out the door, start a competing business next week, and take all of that with them. That’s why nearly every business sale includes non-compete and non-solicitation clauses restricting what the seller can do afterward. These provisions are standard and reasonable in principle, but they’re also heavily negotiated, because the question of how far they can go has real consequences for both sides.

Why These Clauses Exist in a Sale

In the context of selling a business, restrictions on the seller competing are far more accepted by courts than the same restrictions in an ordinary employment relationship. The logic is straightforward: the buyer paid real money for the business’s goodwill, and that goodwill would be worthless if the seller could immediately compete for the same customers. So when you sell, expect to agree not to compete with the business you sold, and not to solicit its customers or employees, for some period. The fight is over the specifics.

Non-Compete vs. Non-Solicit

These are related but distinct. A non-compete restricts the seller from engaging in a competing business at all—the broadest restriction. A non-solicitation clause is narrower: it doesn’t bar you from the industry entirely, but prevents you from going after the business’s specific customers, or from poaching its employees. A deal may include one or both. Understanding which restriction you’re agreeing to, and how broad it is, matters enormously for what you can do next.

The Three Dimensions: Scope, Geography, and Time

Whether a restriction is reasonable generally comes down to three factors. Scope: what activities are prohibited—does it bar your entire industry, or just the specific business you sold? Geography: how large an area does it cover—the city, the state, the country, the world wide web? And time: how long does it last—one year, three, five? A restriction tightly tailored on all three is far more likely to be enforceable, and far less likely to unfairly hamstring the seller, than one that’s sweeping on every dimension.

A Fourth Dimension: Who the Restriction Binds

Scope, geography, and time get most of the attention, but there’s another dimension that catches sellers off guard: exactly who is bound by the restriction. A well-drafted non-compete from the buyer’s perspective often reaches beyond the individual seller to cover family members, affiliated entities, and businesses the seller controls or has an interest in—precisely to prevent the seller from doing indirectly, through a spouse or a related company, what they can’t do directly. For the seller, this means a restriction can actually limit not just your own activities but those of people and entities close to you, so it’s essential to understand who the clause actually binds before you sign, and to push back if it sweeps in family members or ventures that have nothing to do with the business you sold.

How Far Is Too Far?

Even in a sale, restrictions aren’t unlimited. Courts generally enforce non-competes tied to a business sale only to the extent they’re reasonable – meaning no broader than necessary to protect the goodwill the buyer purchased. A restriction that’s wildly excessive in duration, covers a geography far beyond where the business operated, or bars activities unrelated to what was sold can be challenged, narrowed, or in some cases struck down. What’s “reasonable” depends on the facts and on the governing state’s law, which varies considerably.

For Sellers: Don’t Sign Away Your Future

If you’re selling but plan to keep working—maybe in a related field, or eventually starting something new—these clauses can effectively box you in for years. Before you sign, think hard about what you realistically want to do next and negotiate accordingly: narrow the activities covered, limit the geography to where the business actually operated, shorten the duration, and explicitly carve out anything you legitimately intend to pursue. A seller who ignores these clauses can find their next chapter blocked by a contract they signed without thinking it through.

For Buyers: Make It Enforceable

Buyers have the opposite concern: a restriction that’s too aggressive can backfire by being unenforceable, leaving you with less protection than a reasonable clause would have provided. The goal isn’t the broadest possible language; it’s language that actually protects the goodwill you paid for and will hold up if you ever need to enforce it. Tying the restriction carefully to the business, the market, and a defensible time period is what makes it real protection rather than a paper tiger.

The Bottom Line

Non-compete and non-solicit clauses are a normal and fair part of buying and selling a business—the buyer deserves to protect what they paid for. But “how far is too far” is a genuine negotiation, turning on the scope, geography, and duration of the restriction and on the law that governs it. Sellers should guard their future flexibility, buyers should aim for enforceable protection rather than overreach, and both should recognize that the right answer is almost always a carefully tailored clause rather than a sweeping one.

If you’re buying or selling a business and non-compete or non-solicit terms are on the table, getting the scope right protects your interests on either side of the deal. Schedule a free consultation to talk through what’s reasonable—and enforceable—for your situation. Contact us at www.jsettleslaw.com or (602) 617-3938.

About the Author   Jennifer M. Settles makes business owners’ lives easier. As a fractional General Counsel with 25+ years structuring M&A deals, commercial contracts, corporate governance, and complex real estate transactions, including over two decades as lead in-house transactions counsel for major corporations, she brings big-firm firepower to the founders, dealmakers, and growing companies who need it most. Clients describe her as knowledgeable, refreshingly direct, and relentlessly focused on their best interests. Jennifer offers white-glove, direct-access service and transparent, predictable fees. Learn more or schedule a consultation.